How to Calculate the ROI of an ERP System
Posted on: July 19, 2016 | By: Craig Thompson | Microsoft Dynamics AX/365, Acumatica, Microsoft Dynamics GP, ERP Selection
Making the decision to implement a modern ERP software like Acumatica Cloud ERP or Microsoft Dynamics ERP Softwares, is a big step in any organization. A well planned ERP project is often a significant investment of both time and money, however when done correctly with the right partner support, your business should start seeing results almost immediately.
Like any big investment, it's important to analyze the cost benefits so that you know just how this project will affect your business. Before you take the plunge and implement a new ERP system like Acumatica ERP, consider both the tangible and intangible assets of your upgrade. No matter what project you are starting to invest in, seeing a high return is important. But how do businesses calculate the ROI of a new ERP system so that they can be confident in their decision to upgrade? Below are 4 key factors to consider when calculating your ROI.
IT Costs
While cutting corners to save money during your ERP system implementation may seem attractive, some expenses are a better investment than others. At Logan Consulting, we understand that every company has a unique set of budget/cash flow considerations to keep track of and phasing out the entire project at once may not be feasible for everyone. If this is the case, we highly recommend that the ERP implementation project is integrated in phases to help minimize the cost. While cost is an important factor, it doesn't have to be make or break.
The cost of your ERP implementation should be budgeted to cover software, training, subscription, personnel and charge management costs. These are also generally the easiest factors to calculate. Often the investment is greatly outweighed by the tangible and intangible assets now available to your business. Don't sacrifice the quality of your ERP implementation project for cost effectiveness. Training and effective planning are crucial for getting it right the first time around.
Tangible Assets
Understanding the tangible and quantifiable benefits that a new ERP system can bring your business is crucial for determining which business solution is your best fit. A new ERP system could help improve inventory planning and control as well as cut waste and improve procurement and AP processes. You will also be able to fine tune your allocation of worker time to reduce overtime costs. Scheduling and production planning will be enhanced through better scheduling. The possibilities for improvement through the integration of a new ERP system are endless.
Intangible Assets
Two straightforward factors to help calculate your ROI are improved workflows and improved accounts payable operations. While intangible assets are less obvious to measure, they are just as important for calculating the ROI of an investment as tangible assets.
Implementing the right system will reduce the errors that come with unorganized methodology and increase accuracy as well as enhance audit and compliance processes. Increase your ROI by lowering audit and oversight costs as well as enhance audit and compliance processes, no matter what your industry. Your ROI will also increase with lower oversight and review costs, making your demonstration of quality control boost your reputation among your customer base. Customers appreciate a company that is able to follow up on their word with a shorter shipment cycle and managers appreciate improved accounting control. It's a win, win.
Risk
While there is obviously risk that comes with any large investment, the benefits that a modern automated ERP software system greatly lessen the risk that accommodates such a large investment. Is investing in a new system too risky? Or is your dated ERP software prone to crashing, leaving you data-less? Older systems are unpredictable, which is why a properly implemented ERP upgrade could actually help increase productivity within your organization. In fact, when implemented correctly, ERP actually has the ability to decrease the likelihood of budget overruns and slow adoption times. The best way to combat risk and increase your ROI is to be sure you have an experienced and thoughtful support system to guide you every step of the way.
Logan Consulting is a Chicago based Acumatica partner dedicated to helping businesses find their perfect ERP match. Our partners are trained and knowledgeable in Dynamics ERP software systems like AX and GP, Acumatica and QAD, as well as a wide variety of industries. Every integration is customized for your organization to make sure your ERP project goes right the first time. To schedule a consultation or request a demo, contact us here.
