• Software Return on Investment

When investigating a possible ERP Software purchase, some companies try to use the anticipated return on investment (“ROI”) as a tool to justify the project, select a vendor, and / or measure the project’s success. One sees this more with larger companies and projects, though, and in the SME space ROI is seldom discussed. In many ways this makes sense, as it can be difficult to quantify some of the expected benefits, particularly when the ERP project is part of a strategic plan to aggressively grow the company. I have had many discussions (OK, disagreements) with other accounting professionals over the validity and usefulness of trying to build the ROI model for an ERP Software implementation that results in an annual spend of, say, less than 0.5% of revenue.

There is however one simple way to ensure that a company maximizes its ROI on its investment in ERP software, assuming the implementation was at least moderately successful. Use it properly. Seems rather obvious, but it is in fact surprising how many companies implement new software, and then continue to use old methods and work around the new system. Reasons for this are manifold, and include inadequate involvement of management in the project, insufficient internal project management, training gaps, and perhaps most of all, lack of follow-through after the initial implementation (more on this later).

Here are some examples of how companies may not use the new ERP system properly, taken from my personal experience:

  • Continue using printed reports instead of interactive online / on screen data – such as performing collections using printed aged listings and handwritten notes instead of the purpose-built collection tools embedded in the new system (this one seems to be commonplace in the SME arena)
  • Continue manually keying data (drawn from the ERP system) into Excel spreadsheets, rather then spending the trivial amount of time required to learn how to link Excel sheets directly to the ERP data
  • Use external, non-integrated software for functions that the ERP System can (and should) handle – areas such as Contact Management and B2B eCommerce

In the SME space, there are usually one or two main triggers (pain points) behind the decision to implement ERP software, and much of the focus during implementation tends to be on those triggers – quite rightly. For this reason, following up on other areas of efficiency 2 – 3 months after you go live on a formal, scheduled basis, with a focus on using the system properly, will be the simplest way to maximize your return on investment.

Managing Business Growth with Software