Among all the types of projects that a finance team may be asked to tackle, one stands out with particular notoriety: the implementation of a new enterprise resource planning (ERP) system.
These projects are costly, complex, and risky, requiring careful planning across all aspects of a business. And horror stories are commonplace, from a $1 billion debacle for the US Air Force that ended in cancellation in 2012 to a botched implementation that led to a significant profit fall for an avocado supplier in the quarter after its ERP system went live in 2021.
But far from being worried, Alexandra Barraclough, ACMA, CGMA, financial controller at Sandvik in Sweden, said her experience in this realm was an exhilarating high point in her career.
“I love process improvement. It’s all about value additivity,” she said in an interview with FM. “And when you see the changes — like a task that took two hours, and now it takes ten minutes — I feel like I’ve accomplished something.”
A new ERP system is an upgrade that, despite its complexity and risks, can reap tremendous rewards in productivity, accuracy, and efficiency.
Here’s what you need to know and consider before you begin your own implementation.
Decide if you need an ERP system
Joshua Heavener is a US-based consultant on ERP implementations, and many of his clients are just starting to use the systems.
Heavener looks for a few key signs that a company actually needs to make the move to put in an ERP system. These include the following:
- Staff spend significant amounts of time each week updating spreadsheets;
- Much of the business relies on paper;
- Multiple versions of the same file are in use, leading to confusion and disorganisation; and
- Customers complain about conflicting information.
ERP systems can help with efficiency and automation of a range of business processes and needs — from payment processes to general data management.
But an unplanned jump into a new system can bring dire consequences — and, indeed, much of Heavener’s work as a consultant is with clients whose ERP projects have gone wrong.
“Clients generally have based their recent decisions on past experiences, not fully appreciating the complexity of this new world,” he said.
Choose the right partner
Many businesses can expect to pay substantial sums for an ERP project — about 2% of gross sales for a period stretching from the beginning of planning until six months after the project is done, Heavener said. That timespan will cover at least a year for larger companies, he added.
With a project of this sort of scale, it’s crucial to find not just the right system, but the right partner to implement it.
“You’re going to be with [the third-party partner] for potentially two or three years,” Barraclough said. “Make sure you choose the right one.”
She advised checking with acquaintances in your business network for suggestions. And once you have candidates, make sure to probe their capabilities.
Barraclough suggested preparing a “very specific scenario” — an example of the kind of process that will be automated or otherwise assisted by your ERP — and asking the prospective implementation partner about how they’d handle it.
“Make sure you send it before the demo and you really drill them on it,” she said.
Engage the team
An ERP project can affect the everyday work of people throughout the business. Failing to engage with and understand the needs of those users — whether they’re business analysts or working in accounts payable — can result in disaster.
That means the ERP team has to engage with all functions and prepare the company for change (see the sidebar “Stakeholder Involvement”).
“The first thing you want to do is organise internally and accept the responsibility that this is your project, this is your company … at the end, you’re the ones who have to live with the decisions that are made and use this tool day in and day out,” Heavener said.
Ginnie Basra, FCMA, CGMA, agreed. During an earlier job at a large beverage producer, she served as UK finance lead for an ERP implementation using SAP software.
“If you employ [only] consultants, it’s not going to be as successful,” said Basra, who is now finance director at UK-based catering equipment manufacturer Lincat Ltd., part of Middleby Corp. “You [need to] involve the warehouse … the purchasing team … the finance team.”
A major ERP project could require the part-time or full-time dedication of multiple staff members. The team also will need executive sponsorship and authority backing it.
“Prioritise this over your day-to-day routines,” Heavener said. “You can either prioritise it now while you have the discretion … or else you will inevitably be forced to prioritise it after the fact.”
The goal, especially in the early stages, is to pair staff members who understand the business processes inside out with implementation experts who can document and translate those processes into the world of ERP.
Obtaining buy-in and accountability from all teams is equally crucial.
“I had to talk to all these people and see the processes and how we can smooth the data flow,” said Dileepa Sugathadasa, ACMA, CGMA, CPA (Australia), who is currently a management accountant for the Napier City Council in New Zealand. “And I’d explain, ‘This is what we’re going to do.’ And have the user think about it and respond with feedback.”
Additionally, in the case of a multi-region deployment, Sugathadasa suggested assigning local experts to the project to ensure that the system will properly serve each locality.
“We need a manager and supervisor at the top, and in each and every location you should have someone to support the project,” he said.
Resolve the ‘customised or stock’ dilemma
There’s an inevitable dilemma in most ERP projects: These systems are customisable and extendable, meaning that almost any ERP system can be modified to automate or increase the efficiency of any business process, no matter the company’s peculiarities. But those customisations add cost and complicate future maintenance.
Vendor sales teams “will say that it does everything. But what they don’t say with those customisations is you have to be very careful,” Barraclough said. “Certain processes are very difficult to automate.”
This can create tensions in the implementation process. Users will want the system customised so that it can help them handle all business processes with high degrees of automation, even ones that occur only infrequently.
But at some point, it may be preferable to simply have users continue to handle an occasional process manually, rather than spending time and money customising the ERP.
Basra posed the question: “Who keeps the balance between standardisation and customisation?” She added: “If you don’t customise at all, then your processes are too manual. But if you make too many changes, it becomes a very expensive ERP system to maintain.”
Besides the initial cost, customisations can also require upkeep to remain functional when the broader ERP system receives updates.
Test and train
Testing and preparation will smooth the way for deployment day.
One key task is to clean the data that powers the system.
“If you have a system that’s been in place for 20, 30, 40-odd years, you’ll always have anomalies in the data,” Basra said. That might include, for example, a field that is used inconsistently across a manufacturer’s dataset of thousands of SKUs (stock keeping units) used as identifiers to track inventory.
Under an existing legacy system, users may have found a workaround to that inconsistent data. “ The users become so knowledgeable, they will intervene even if that field is not ticked,” Basra said. “It works fine because that person is aware of what they need to do.”
But the same patchy data can wreak havoc in a modern ERP system. Because the system runs more automatically and relies more closely on the business’s data, any flaws in that data can lead to errors.
To identify and eliminate potential data quality issues, the experts who talked to FM advised assigning a team of users to test the new system in a controlled environment. These tests should focus on executing processes and seeing where the system breaks down. The implementation team also should validate that the new ERP system is mirroring the results of the legacy system when they are supplied with identical data.
“Have ‘super-users’ do the transactions in a controlled environment,” Basra said, adding that any issues they encounter must be logged and prioritised. Ultimately, the project’s steering committee has to make a “go or no go” decision based on the state of all current issues.
And the stakes will only get higher as the launch date draws near, Heavener said.
“A big aspect of this is change management throughout,” he said. “Make sure that the team understands the weight of the decisions and importance of the project. Incentivise them — maybe a financial incentive, or a week off after the hyper-care period.”
Once the system is nearly ready, the end users will need to be trained — a process that Basra said should be held until just before launch.
“You train people once,” she said, “and if they don’t use the system for another week or five weeks afterward, they’ll forget what they learned.”
Proper training ensures users are ready to use the system efficiently and with minimal errors, Basra added.
Learn as you go
For large companies, it may also be possible — and helpful — to deploy an ERP system in multiple phases. Basra’s employers at the beverage company split the project into several phases, setting different launch dates for the finance and manufacturing functions as well as separate, sequential launches for each of five factories in the UK.
“We [started] not with the simplest site, but with a representative plant, which gave us an opportunity to fine-tune as we went along but also to capture our key requirements initially,” she said.
The team grew more efficient as it completed more deployments. Although the first activation of the new system in a manufacturing site took a marathon of nearly 24 hours of work, the final go-live cutover was finished in about five hours — a win that Basra ascribed not just to the phased approach but to the international project’s leadership.
Finally, there’s the question of how to keep the system up and running for years to come. Barraclough suggested assigning some of the people who worked on the implementation project to permanent roles related to the system, if they so desire.
And Heavener offered one piece of advice above all: For all their complexity, including the nascent availability of AI functionality, the ultimate goal is to ensure these systems serve the people of your business.
“The people will tell you what they need, as long as they know you’re there to help,” he said.
Stakeholder involvement
For successful ERP system adoption, businesses need the active involvement of internal stakeholders as well as technical consultants, according to Ginnie Basra, FCMA, CGMA. This involves:
- Executive sponsorship: Having champions sponsoring the project from the top of the organisation demonstrates leadership’s commitment to the project, and they provide an understanding of how the ERP system aligns with the overall business strategy.
- Requirement gathering: Shaping the ERP solution requires the active participation of business stakeholders in the requirements gathering process. Stakeholders also provide insights on business processes, pain points, and desired outcomes.
- Process alignment: Business stakeholders work actively with technical consultants to align existing business processes and identify gaps in the system that can be closed by process changes. Modification to the ERP system should be a final option, not only as it increases the cost of implementation but also because it makes the ongoing system maintenance a difficult and sometimes impossible task.
- User training and change management: Business stakeholders should be involved in the planning and execution of user training programmes. Change management includes communication plans and strategies to address employees’ concerns and resistance. y User acceptance testing: Stakeholders should actively take part in user acceptance testing to ensure that the ERP system meets their functional requirements and expectations.
- Feedback loops: Stakeholders can be actively encouraged to provide continuous feedback throughout implementation. It should be demonstrated how their feedback is incorporated into the system configuration.
Andrew Kenney is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Oliver Rowe at Oliver.Rowe@aicpa-cima.com.
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