By understanding your full costs and following these simple tips, you can stay in control of your ERP spending now and in the future.

Everyone knows that Enterprise Resource Planning solutions (ERPs) are a big investment, but not many business leaders realize how much power they have to control their costs.

Want to keep your costs manageable? Use these tips to plan carefully before you begin your ERP project, and you’ll be prepared to successfully control both your short- and long-term expenses with ease.

First, Understand Your Full Costs

An ERP project has both obvious and hidden costs. Gaining the full picture of your total costs is essential for controlling them.

• Obvious costs

Hardware and software costs are obvious. Some ERPs require per-user licensing, which is the cost you will pay for each user to access the system. There can be a lot of complexity in these costs, considering how much system access you want each user to have (e.g., a “power user,” a “report viewer,” etc.).

Most companies these days choose cloud ERP to keep expenses down. This helps them avoid expensive server hardware, storage space to place the hardware, outsourcing or hiring a network administrator, and power and cooling costs to keep it operational. However, it is important to remember that cloud ERP isn’t free. Instead of paying for your own hardware and maintenance, you’ll instead pay fees for the amount of bandwidth and storage space your company consumes.

Other obvious costs would include the consulting fees for implementation, data conversion, and customization.

• Hidden costs

These could more accurately be described as “internal” costs, rather than “hidden” costs because they typically refer to the hours taken from your internal team as you complete your ERP project.

This category includes things like the time you spend researching your ERP options, training time for your staff, the hours your C-suite must spend on project leadership, and the additional training and consulting time you’ll need in the future as your adjust your ERP to meet your evolving business needs.  

Many business leaders overlook these costs since they don’t need to pay “extra” for them – after all, salaries are still salaries whether your staff is spending time on customers or an ERP implementation. However, if you want to control your costs effectively, you’ll need to consider these expenses the same way you would any other opportunity cost: while your employees are focused on getting comfortable with your new ERP, they will have less time to devote to sales, customer service, or operations.

Get a deeper look into your potential hidden costs:
Access the “7 Hidden Costs of ERP” White Paper

Next, Reduce Those Costs

Obvious costs have obvious cost-saving solutions:

• Carefully manage user licenses or rely on our personal favorite option: choose an ERP that lets you have unlimited user licenses at no additional cost.
• Limit your storage and bandwidth use by carefully selecting how much historical data you want to import into your new ERP.
• Streamline the implementation process by working with an experienced, knowledgeable consultant who knows how to stay on time and in budget.
• Select an ERP solution with an extensive Marketplace that provides secure, always compatible, and always up-to-date add-on solutions. These give you the freedom to tailor your ERP to your unique needs without allocating significant cash to customizations.

Then, there are the less obvious (or “hidden”) ways you can control your ERP costs:

• Choose your partner very Often, business leaders spend appropriate amounts of time diligently researching their ERP options, but then neglect to research their partner options. By choosing your partner as carefully as you choose your ERP, you can avoid scope creep and better ensure a smooth, on-time implementation.

Search for a partner that has extensive experience implementing and supporting your new ERP, as well as significant knowledge about your industry. These two attributes will help them craft a clear and cohesive roadmap that anticipates and addresses potential challenges in advance.

• Right-size your resources by assigning low-level tasks to lower-paid employees. Even with extensive ERP and industry knowledge, your partner can’t possibly know all the unique details of your one-of-a-kind business. It is a smart idea to pair your most knowledgeable and experienced team members with your ERP partner during your implementation to ensure efficient information sharing, bur make sure those expert team members of yours are doing high-level work

Your team will inevitably have some tedious tasks to accomplish during the implementation, and you can save money by making sure you assign those lower-level tasks to your lower-paid, in-house team members.

• Separate out “must haves” from “nice to haves.” It can be easy to get carried away with bells and whistles when you see all the exciting possibilities your new ERP offers. But implementing too many bells and whistles at once can make for a confusing training experience. This can result in processing delays that frustrate your staff and your customers, and it can leave you struggling with increases in your OpEx and

Again, an experienced partner can help here. Through asking smart questions and applying deep ERP knowledge, your partner can assist you to identify what features and capabilities you need right now – and which ones you may want to wait on. Sometimes, you may be able to save money by bundling additional solutions into your initial subscription, so make sure to ask your partner to help you assess the pros and cons of that approach.

• Look for a long-term partnership. Some partners focus only on implementation. Others extend their services to support, while yet others will act in an advisory capacity to help you understand your ongoing tech options. While implementation-only shops can be cheaper at the outset, partners that perform all three of these services will be significantly more cost-effective in the long run. Not only will their knowledge of your business make your support resolution times faster (which saves you on support costs and reduces your downtime), they can also help you navigate the constantly evolving landscape of the ERP world.

Instead of having to keep abreast of new advanced and relevant Marketplace solutions yourself, you can leave all that to your partner. They will make sure you have all the information you need to continue to make smart, confident, cost-effective decisions over the decades that you use your new ERP.

Finally, Calculate Your ROI

As we said earlier, ERP solutions are a big investment. The numbers may be higher than you expect. So, how can you tell whether you face reasonable or “out of control” costs? You can calculate your ROI.

In fact, one of the best ways to control your costs is to properly understand your ROI.

Typically, a cloud ERP investment should offer a 5–7-year return, which makes the task of benchmarking your costs relatively easy. Simply figure out if your project falls within the expected payback period, and then adjust accordingly.

However, like all things, this is easier said than done. To help you, we are providing the white paper, “ERP Project Justification: Return on Investment (ROI),” which gives you a detailed list of costs you should factor in to your calculation as you’re figuring your total ROI.

Of course, if you have any questions after you read the white paper, we encourage you to reach out and ask our experts for assistance.

Access the ROI Calculation White Paper

 

 Accounting Business Solutions is a respected accounting and business management software solution provider. We provide experienced sales, consulting, implementation, training and support services for small to medium-sized companies located in south central and southeast Texas.