In my 28+ year career, I have seen countless ERP system implementations and accounting system implementations. While some have been very successful and made a huge difference in the company, I have seen disasters. Millions of dollars spent over budget. Complete failure for the system implementation. This is one of my “hot boxes” when I hear consulting clients, coaching participants, colleagues, and companies in my network considering new systems. If you follow my steps on how to lead an ERP system selection process, then you will save thousands to millions of dollars depending on the size of your company.
The biggest disaster was with a company that did not follow any of the steps listed below. Their original budget of $8 million went to over $30 million, and if that wasn’t bad enough, they lost nearly half their revenue because of that bad system implementation.
Reasons For Selecting a New ERP System
Before I go into how to lead an ERP system selection process, let’s look at some reasons for selecting a new ERP system. I will use the term ERP to include accounting systems as well (although they can be two different things). But they do have common challenges and I refer to them as one in this blog. There are many reasons why you may be shopping for a new system. Some reasons include:
- Buying your first system
- Outgrowing your current your system
- Entering a different industry through growth or acquisition
- Wanting better technology
There are many reasons why you may be shopping for a new system.
The system selection process and system implementation process can be very expensive – thus tying up you cash flow. Learn about other ways to improve your cash flow.
Mistakes Made During ERP System Selection Process
Over the years, I have seen or been involved with so many different systems being implemented. While I am not an implementation expert by any means, I have been involved with enough of them that I feel very strong about the right way to implement a system. When I have seen failed system implementations, they all have many common variables. So, I came up with my list of “must haves” for a system implementation.
As a financial leader, you need to be spearheading the ERP selection process. You want to make sure it is done right because it is well documented that a system implementation gone wrong can cost millions of dollars of over run and precious time.
11 Tips on Avoiding a Failed Implementation
Critical items that will spare you from a failed implementation:
- Do not set arbitrary dates for “Go Live”; be flexible
- A new system is NOT an I.T. project. This is a very common mistake made. Do not allow your I.T. Manager to serve as the project manager. They will have some involvement, but it must be measured.
- Go through a System Selection Process
- After you select a system, make sure the implementer blue prints your process and system, and you sign off on it
- Be open to changing how you operate/process; if you do not, then you will want the system to fit your process and this will cost you dearly in customization fees
- Have a designated Project Manager that represents your interest, not the software company’s
- Avoid customization; remember, you will pay up front for customization, and you will pay again when ever there is a update in version or technology because now you are stuck with a customized system
- Test the system, and process thoroughly in a sandbox environment; do not proceed until the system does what you want
- Consider running parallel old system and new systems for at least 1 or two closes
- Provide substantial training to your employees
- Be prepared to change your go live date
Go Through System Selection Process
There are many firms that do the system selection process for you. They come in and evaluate your requirements for this system. Then they narrow down the choices from dozens to a handful. This not only helps the company not get overwhelmed by the number of choices, but it also helps the company find solutions they may not have known to look for. These system selection firms are experts in this field. If you want to do it right, then hire an outside firm. It is worth every penny and will likely save you a lot of money in the future.
Assign a Project Manager for ERP Implementation
Because this is a huge undertaking, it cannot be managed by someone who a) does not represent your interest, b) is in your I.T. department, and c) does not understand your operation and processes. This can be someone for your organization, but you might have to hire someone from the outside.
Run a Blue Print / Test Before ERP Implementation
The Blue Print designed represents your operations and process, so you must fully understand it and sign off on it. This is part of your contract for the new system. Once you sign off on it, the burden is on you. Test your new system in a sandbox environment. This testing can also be incorporated with training your staff. Making errors in the sandbox environment will not affect your business. Errors post Go Live will affect your business.
Be Open to Change
While you are working with the system selection firm, you may not check everything off your list. While it’s tempting to just say customize it, it may be better (and less expensive) to change the way you do things to fit the system. When you customize these systems, you increase the chances of it breaking when there are updates, requiring more support, and being harder to adjust when you need it to.
By customizing your system, you are significantly increasing the cost of the implementation and future maintenance of the system. Be open to change how you do things today and try to adapt to the system.
Provide Expensive Training
Now that you have invested in the system and started the actual implementation, you need to provide extensive (and expensive) training for your team BEFORE YOU GO LIVE. The training should be on site, not remote. They will always offer remote training because it is cheaper, but it is not the same as on site training. The last thing that you want to run into is not investing in training and no one using the system. This training will not be given in a couple hours; it will probably take weeks. Invest in it to get the greatest return on investment. Or you risk them using the system and making mistakes because they were not properly trained. I have seen way too many examples of systems implemented and little to know remote training.
Run 1 or 2 Closes Parallel
What I recommend to every client and company implementing a new system is to run 1 or 2 month end closes parallel. This will help avoid disasters by getting rid of the existing system prematurely and smooth out any kinks or breaks in the new system. I always get the same response, “this is a lot of work and will cost me more man hours”. Yes, it will. But you will avoid a blow up in the future.
Running 2 systems for 2 months can be costly – restricting your cash flow. To find other ways to improve cash flow when leading an ERP implementation, click the button below to download our 25 Ways to Improve Cash Flow whitepaper.
Be Flexible with the “Go Live” Date
Many times, the CEO or another executive driving the investment sets an arbitrary “go live” date. I have seen many cases where a CEO wants to launch the new system January 1 and has 50 people working around the clock… That’s a sure way to create a disaster. Have a goal, but do not have a hard deadline because there will always be something you did not plan for.
I recently spoke to a CFO of a successful company, and she was telling me about their recent new system implementation. I was ready to hear another horror story. She told me it was a great experience. They had no real big issues and stayed with in the budget and timeline. I asked her to please tell me what they did to be successful. She basically listed the items 1-11 above. It is a coincidence that I have listed those items for years now. But it proved my point.
Implementing a new ERP system is expensive, so if you’re company isn’t cash rich, then you may need to improve cash flow in other areas of your business to keep you afloat. Download our 25 Ways to Improve Cash Flow whitepaper and start making a big impact on cash flow.