Selecting an enterprise resource planning (ERP) system is a pivotal decision for any business. It entails careful examination of various factors, including features, costs, deployment models, and the reputation of the vendors, as they will be involved long-term. Although conducting a comprehensive assessment requires time, the resulting benefits in operational efficiency, cost savings, streamlined data integration, real-time decision-making capabilities, and support for future expansion justify the investment.

ERP software explained

Before delving into the ERP selection process, it is essential to understand exactly what the software entails. ERP systems are comprehensive business management software products primarily focused on accounting and operations. They allow organizations to consolidate various business processes into one integrated system. ERP software has emerged as the preferred solution for expanding businesses that are aiming to sustain and enhance their competitive advantage.

Understanding ERP evaluation

Evaluating an ERP system shares similarities with selecting a car or computer. One must assess if it offers the necessary features, if it is within budget, if other users are satisfied, and if the manufacturer offers reliable service.

Likewise, selecting an ERP solution involves assessing and comparing various systems to discover the optimal fit for each business. This process considers factors such as features, budget, technology compatibility, and vendor support. Through meticulous ERP evaluation, businesses can pinpoint the ideal system to streamline operations, boost productivity, and foster both immediate and future growth.

Evaluating and establishing ERP requirements

An ERP system effectively coordinates numerous business functions and processes within a unified platform, ensuring seamless integration of activities and data across the organization. This fosters enhanced collaboration across departments. Considering the significant company-wide impact of an ERP system, it is essential to establish an internal team comprised of stakeholders from various business areas to craft an ERP requirement checklist prior to considering any system or vendor. This evaluation team typically includes top management, project managers, and department heads from accounting, sales, procurement, marketing, and IT. The team’s initial task is to engage its respective departments in evaluating their goals, required features, and practical use cases.

With individual needs identified, the internal team can reconvene to consolidate inputs and develop a comprehensive list of ERP requirements. This stage also involves defining and documenting the expected return on investment (ROI) and the projected timeline for realizing these benefits. Addressing these aspects during the evaluation phase makes ROI measurement easier in the future.

Top ERP evaluation criteria

When choosing an ERP system, it is crucial to weigh numerous factors, as this decision will shape every facet of a business for the foreseeable future. While specific critical requirements may vary from one business to another, it is imperative to ensure that an ERP system is thoroughly vetted before purchase. A few things to take note of include:

1. Gather business requirements

   Create a clear and thorough list outlining ERP requirements, utilizing all available resources to ensure its excellence. Engage with production workers, purchasing managers, executive management, customers, suppliers, and salespeople to gather insights. Prioritize the entire list once every consideration is documented.
   
   Reach a solid consensus on which requirements are deemed essential (“must-haves”). The subsequent tier should encompass items beneficial to the company, although not mandatory. Any other listed items fall into a lower category, considered merely “nice-to-have.”
   
   Share the priority list with contributors to verify agreement and make updates if necessary. Assess if any points from the second tier warrant elevation to the first tier based on a compelling case. Much of the evaluation process relies on the assumption that the requirement list is optimized.
   
   Utilize a shared ERP requirements document to facilitate this process, breaking down desired features into specific functionalities. Pay attention to specific functions, such as the automation of recurring transactions in the general ledger (GL) and the software’s capacity to calculate amounts for GL transactions based on the rules. This detailed approach provides a comprehensive understanding of a system’s functionality and how it aligns with a company’s requirements, whether through out-of-the-box features, customization, or third-party integration.

2. Define customer relationship and account management needs

   Make sure that the customer relationship management (CRM) module enables users to access customer information through various custom views, such as products, geography, and account type, among others. Additionally, a proficient CRM module should facilitate seamless access to essential ERP data from any device at any given time.

3. Keep the budget in mind

   Determining the budget for an ERP system is crucial. If there are limited funds, strict selection criteria is imperative. According to Software Path’s 2022 ERP Report, the average expenditure per user for an ERP system is approximately $9,000, underscoring the substantial investment involved and highlighting the long-term nature of ERP selection. Since ERP systems typically have a lifespan of a decade or more, ongoing maintenance and support costs, along with related infrastructure expenses, must be factored into the budget. The decision today will have cost implications for future budgets. decision today will have cost implications for future budgets.
   
   ERP budgets can vary based on factors, such as business size and industry. Establishing a budget from the beginning will allow a business to figure out which selection criteria are essential, and which are nice-to-have options, so they can identify the most suitable software solution for their unique organization.

4. Select an option with ideal system integration

   An ERP system should not only streamline disparate business processes but also seamlessly integrate with any existing systems and applications that a company wishes to maintain. Ideally, the new vendor should provide connectors that facilitate smooth integration, ensuring real-time synchronization for up-to-date data exchange among systems.

5. Seek an option with scalability

   Effectively managing the initial scope of an ERP software implementation is vital to mitigate risks and ensure successful outcomes. While envisioning future enhancements is natural, it is crucial to evaluate ERP vendors based on how their technology aligns with current and future business strategies. Consider how the software will facilitate and support the organization’s future plans including expansion, entering new markets, or merging with another entity. It is essential that the chosen technology aligns with the organization’s strategic direction.

Set your ERP system up for success with Citrin Cooperman

In your journey to select the best ERP system for your business, remember that success lies in careful consideration and strategic planning. Citrin Cooperman’s Digital Services Practice is here to help you through the ERP selection process.

Contact us today so we can help prepare you for a successful ERP selection and implementation. With our proven track record and dedication to client satisfaction, we help to ensure that your ERP implementation is seamless and efficient. that your ERP implementation is seamless and efficient.