ERP systems are an excellent investment for your business, but once you've implemented your new system into your company the question of how to measure ROI might be a bit overwhelming.
There are five major areas you need to consider when measuring and anticipating ROI after an ERP software implementation: productivity, IT costs, visibility, risk and the impact of audits and compliance. Let's look at each of these in more detail...
It's extremely important to consider the value of efficient integration and support systems, especially if there are specific areas where your productivity needs to be improved. Data errors caused by non-integrated systems are often very time-consuming and costly and this is a vital element to consider while measuring your ROI.
Personnel, training, software, hardware, the replacement of faulty or outdated systems and related services all factor into your company's IT costs. Of all the elements of an ROI calculation, IT costs are the most straightforward as they are usually fixed and can be easily anticipated relatively easily.
A shiny new ERP system will usually provide superior access to your data and datasets that are more reliable. This will improve the control you have over your finances; and the more you are in control, the greater financial visibility you will achieve. Additionally, better visibility will move data more efficiently throughout your organisation. Information is delivered to the right people more quickly - this is a value you can measure.
The most difficult element of any ROI assessment is risk. You need to consider carefully what level of risk comes with your system. Relying on people-driven processes that hinge on individuals and their skills lead to risks. There are additional risks from unsatisfied customers and revenue leakage, as the poor execution of administration can lead to both. Don't underestimate the potential risk inherent in old systems, which can crash and run into a variety of other problems, such as running unsupported versions of your software. If you have gone to the trouble of implementing a new ERP system, it may be time to update any other systems you may have that are holding you back.
ERP implementation can have a huge impact on your business in very broad ways. These ways are sometimes anticipated, but can also be entirely unexpected. Some of these impacting factors are difficult to measure, but analysing your ROI is the best starting point you can make. You need to bear in mind the specific circumstances, which will vary, so be sure to use your best judgement depending on different scenarios.
The impact of audits and compliance
Improving your repeatable processes and the extent of your controls will have a huge, positive impact on your ROI, increasing it with relative ease through a lowering of the costs of oversight and audits. While your industry will impact on many elements of your business and systems, when it comes to measuring ROI you will find it far easier to follow compliance requirements with an ERP system. The lower your review and oversight costs become, and the more you are able to demonstrate quality controls to your customers, the higher your ROI will become.
Ultimately, ERP projects are tailored to work for your business. If there are any particular issues you'd like to address, a good ERP provider should be able to resolve these for you. At WinMan, we work in partnership with all our customers to help them get the best from their ERP software. Contact us today to find out more.