When should you step up to an ERP?
Not all the big fish in a pond use an ERP platform, but it can be an essential tool for SMEs wanting to scale.
- The big attraction of ERPs is having a single database for all information; the drawback is that they are expensive and involve a learning curve for staff.
- SMEs may find that accounting software and third-party applications can do the job they need, but not always.
- A rising volume of inter-entity transactions is one sign that your organisation could benefit from an ERP.
When Amy Turner started at South Australian food distributor Pro Seafoods, she had fish on her mind. A lot of fish.
“We were managing 800 tonnes of sardines and 120 tonnes of prawns a year through spreadsheets. You couldn’t do more (volume) with that approach while still maintaining quality and customer service,” says Turner, now Pro Seafoods’ chief operating officer.
Originally a tiny, two-person enterprise, Pro Seafoods had experienced a burst in demand and tripled its staff to six. However, its systems were a brake on growth.
The business’s sales manager spent four hours a day writing up sales orders, invoicing customers and sending emails to cold storage facilities. That chewed up time better spent on the road, building relationships.
Pro Seafoods could maintain its operations by using spreadsheets to manage inventory, sales tracking and logistics, and MYOB AccountRight for invoicing, purchasing and finance.
“But if we wanted to bring on more product lines and increase quotas, we couldn’t do it with that environment,” Turner says.
Pro Seafoods hired Turner to find a better way. She spent six months reviewing processes and making small improvements to increase efficiency. For example, the company reduced typing errors by adding dropdown selections to the spreadsheets.
She then created a shortlist of suitable ERPs (enterprise resource planning) software by speaking to colleagues in the IT industry and talking to sales reps from ERP software companies.
She wrote detailed requirements and reviewed proposals and software demonstrations. She looked at pricing and return on investment. After four months, she’d trimmed the list of potentials to two. She then handed over copies of the company’s AccountRight file to see how much custom development would be required.
After a six-month selection process, Pro Seafood signed with Wiise. The ERP went live two months later in July 2018. It took another six weeks for staff to become comfortable with the new software.
The sales manager now spends 10 minutes per sale updating customer information on his laptop rather than 30 to 45 minutes. “He can spend three-quarters of his day generating business rather than sitting there doing admin tasks,” Turner says.
Since the ERP went live, the business has added two more boats, increasing its prawn tonnage from 120 to 350 tonnes.
“When the opportunity for the second and third boat came along, [previously] we’d have had to hire another staff member. Instead, we grew with the same number of staff,” Turner says.
Her advice for others considering a move to an ERP is to jump early. “Do it before you really need it. If you want to grow to that next level you need an ERP.”
Picture: Amy Turner, Pro Seafoods’ chief operating officer.
“Do it before you really need it. If you want to grow to that next level you need an ERP.”
The big questions about moving to an ERP
Determining when, and if, you should upgrade the system that underpins your operations is a vexing and consequential decision for a growing business.
New systems have a learning curve and teething problems. The move inevitably will involve disruption and possibly downtime. And the company will need to increase revenue to recoup and justify the cost of investment.
The big attraction of ERPs is having a single database for all information. But the balance of power between accounting software and ERPs is shifting. Third-party inventory applications that integrate with Intuit QuickBooks Online or Xero have become quite powerful, adopting features previously reserved for ERPs.
This allows small to medium enterprises (SMEs) to squeeze a couple more years from their current accounting software and delay the move to a more expensive system.
There is no clear demographic that marks out which SMEs are ready to jump up to ERP, says Matt Paff, managing director of Value Adders, a Sydney-based consultancy that advises on ERP and other software.
“It’s more a psychographic [segment] around a business’s aspirations and what they value from a systems perspective,” he says.
In other words, a business is ready for ERP when it is ready to break out of the small-business “chrysalis” and develop into a larger entity. Ideally, adopting an ERP permanently removes a major limitation to growth.
Practical signals that you need an ERP
Mindset aside, there are several practical indicators that an SME has outgrown its accounting software.
The first is a rising volume of inter-entity transactions. ERPs use a single database to handle multiple entities, whereas small business software is designed to manage the finances of a single entity.
This gives ERPs a number of advantages. The finance team doesn’t have to constantly log out of one MYOB or Xero file and into another, a scenario that often leads to errors.
By recording multiple entities on a single database, ERPs make it much easier to handle inter-entity transactions. When an accountant creates a sales invoice in one entity, the ERP will automatically create a bill in the receiving entity.
“In the Xero or QuickBooks world that’s two transactions. In the ERP world that’s a single, four-sided transaction,” Paff says.
ERPs also generate consolidated reporting across multiple entities.
While accounting software add-ons such as Spotlight Reporting and Fathom can also report across several entities in Xero or MYOB, the options are limited. They can’t do group BAS statements, for example, Paff says.
A major advantage of an ERP’s single database is that it creates a common list of products, suppliers and customers shared by all entities. This can immediately solve the issue of managing stock on hand held by different entities or locations.
And updating the email address on a customer record only requires one edit in an ERP, rather than updating every entity’s accounting file.
A single platform also makes it easier to see a customer’s full history in one place. An ERP will show how many products or services they have bought, their payment history, how often they open your marketing emails and any outstanding support tickets.
That sort of unified view of the customer is also possible with CRMs (customer relationship management systems) that collect information from accounting, helpdesk, inventory and other software. However, it’s much easier in an ERP.
Finally, having a single system appeals to business owners who want only “one throat to choke”. If there’s a problem with any aspect of their operational platform, the software company responsible is one phone call away.
Taking a component approach to software
Sometimes it doesn’t suit a business to move to a single ERP. In trying to do everything, ERPs rarely do any one thing extremely well. As a result, the component approach to system building, often sold as “best of breed”, still exists in enterprise.
Sage, for example, sells Sage Intacct which handles complex, multi-entity accounting and relies on integrations with the Salesforce CRM and other specialised tools for other functions.
Upgrading one department at a time can often be easier for an SME.
The best time to upsize financial management is when you need to report information to different stakeholders, says Nunzio Giunta of CFO advisory Giuntabell, which sells and supports Sage Intacct in the not-for-profit sector.
“When you have multiple stakeholders that want information in different ways, Xero and MYOB don’t have that dimension structure to cater for that,” Giunta says.
For example, if a not-for-profit organisation has a program that requires $2 million in funding, it may get $500,000 from the government and $200,000 from a charitable fund. The government may require reporting on the total funding of the project, with a selection of 10 categories from the chart of accounts. The charitable fund may just want to acquit the $200,000.
Financial management tools can capture data in multiple dimensions and then report on any combination of those dimensions. The tool can map account codes to a custom report for each funder and maintain it for the lifetime of the program.
This means you don’t have to export the information to Excel and manipulate it into the correct format each time you want to view a report. These dimensions include locations, departments, projects, grants and strategic objectives.
Financial management software also has the ability to blend financial data with non-financial data. This is extremely important for management, who typically want the ability to track outcomes.
“MYOB and Xero don’t have the concept of statistical transactions,” notes Giunta. “These could be the number of meals you provide to homeless people, the number of people with disabilities you placed in jobs. Often this data is stored in a CRM or project management tool.”
Picture: Nunzio Giunta of CFO advisory Giuntabell.
“MYOB and Xero don’t have the concept of statistical transactions… the number of meals you provide to homeless people, the number of people with disabilities you placed in jobs.”
ERP vs SME accounting software
If ERPs are so much more powerful, why aren’t all businesses using them? Well, with power comes complexity. Compared with an ERP, small business accounting software is far simpler to use because there are many fewer options. It also tends to have a much more attractive user interface – the intended user is an untrained business owner rather than a qualified accounting professional.
And then there’s the cost. Small business software is much cheaper – by a factor of 20 or more.
The shift of ERPs to the cloud has led to a dramatic fall in price, especially as you no longer have to buy dedicated servers to run them. However, an SME will typically spend $25,000 to $50,000 or more a year to run an ERP. This is a tough pill to swallow after paying $840 to $1200 a year for accounting software.
Especially as those highly useful bank feeds you find in accounting software are not included in an ERP. They need to be bought separately through third parties, and they aren’t as good as the ones supplied by Xero, MYOB and Intuit.
“With ERP, for 100 times the price you don’t get 100 times the features. You might get one extra feature that you really need. That’s something people find hard to reconcile,” Paff says.
Picture: Matt Paff, managing director of Value Adders.
“With ERP, for 100 times the price you don’t get 100 times the features. You might get one extra feature that you really need.”
But ERP software companies are narrowing this gap. Several years ago, Oracle NetSuite released an SME-targeted program called SuiteSuccess with cut-down versions of its ERP.
The SuiteSuccess Financials First package includes the finance module and pre-defined user dashboards and analytics. It also bundles business consulting in the form of best-practice processes gleaned from its existing customers’ operations.
Businesses can ascend a “stairway” of modules starting at finance then adding people, planning and asset management; project management, procurement and inventory; e-commerce and fulfilment; and email marketing and advanced planning.
When accounting software muscles up
In the meantime, small business software companies are trying to hang onto their customers for longer. In the US, Intuit sells QuickBooks Advanced for US$1800 a year, or double the price of its SME package. While not a true multi-entity ERP, QuickBooks Advanced includes modules for business analytics and insights, batch processing of invoices and expenses, and automated workflows.
Intuit acquired the advanced inventory application TradeGecko late last year and is selling it under the name QuickBooks Commerce for between A$708 to A$10,668 a year, depending on the plan.
MYOB has sold server-based ERPs for years and now sells a cloud ERP, too, called MYOB Advanced. MYOB positions it as the natural progression for medium companies that outgrow MYOB AccountRight.
(Xero has talked about targeting larger companies, but to date it hasn’t released anything to suit.)
Often it’s the complexity of operations that determines the system, not the size of the company. Investment companies that turn over ridiculously large amounts of money may have simple accounting needs, Paff says. “I know of clients with billions of dollars in their balance sheet that are using Xero.”
What you need to know about ERP and financial management software for growing businesses
The table below outlines some of the key facts users need to know about popular enterprise resource planning (ERP) and financial management software for growing businesses. The options listed here are by no means exhaustive. A product’s inclusion should not be regarded as an endorsement by Chartered Accountants Australia and New Zealand. Information included in this guide has come from the relevant vendors or associated websites. Prices may be subject to change.
|Product||Cost (for base package)||What are the available support options?
||What modules does it include?
||Does it offer multi-entity automation?|
|SAP Business One||A$99 per user per month.|| After-sales support is handled primarily by an SAP Business One Partner.
This has a direct escalation path to SAP as and when required.
|Accounting and financial management, purchasing, inventory control, sales and customer relationship management, project management, operations (manufacturing and service) and human resource management. SAP Business One includes mobility features, built-in business intelligence/analytics and has embedded machine learning functionalities.
||Yes, through the Intercompany Integration Solution.
|SAP Business ByDesign
||A$29,244 per annum.
||SAP Support provides support services, covering the complete lifecycle.
Available 24/7, 365 days a year.
|Finance, customer relationship management, human resources, project management,
procurement, supply chain management. Localisation: Available in more than 130 countries.
|Organisational management (OM) is the central source of organisational information in SAP Business ByDesign. If you are operating across countries, SAP Business ByDesign allows for multiple companies in multiple countries with multiple sets of books to be in the same system at the same time.
|Wiise ERP and accounting software
||Subscription packages start from A$49 per user,
|Support is offered by certified Wiise Partners. Wiise also has a how-to library
for customers, and an email option for raising urgent requests.
|Financial and multi-entity management, intercompany consolidation, fixed assets, integrated payroll and timesheets, cash flow and inventory forecasting, bank feeds and reconciliation, inventory management, manufacturing and production, warehousing, landed costing and budgeting, project and job costing, integrated payroll and timesheets, multi-company payroll, service management, pre-built reports and customer relationship management.
|Sage Intacct/Sage Australia
||From A$11 per user per month (charged annually in
advance). Price depends on number of users and
functional capabilities required.
|Sage Intacct is supported by a local network of resellers who offer phone
support, online support ticketing options and community support forums.
|Project management, contract management through to resource management.
||Currently only for US-based entities where USD is the base currency.
|Oracle NetSuite Enterprise Resource
|Subscription price tailored to customer needs/
Available to all NetSuite users:
|Financial and multi-entity management, customer relationship management (CRM),
order management, contract management, forecasting and planning, inventory management, manufacturing management, supply chain management, ecommerce and retail management, services resource planning (SRP), project management and accounting, professional services automation (PSA), resource management, fixed asset management, revenue recognition management.
|Oracle Fusion Cloud ERP
||Subscription price tailored to customer needs/
|24/7 online support from myoraclesupport.com and delivered by Oracle’s support organisation around the world. Additional support can be provided by Oracle Managed Cloud Service for SaaS and with consulting offerings.
||A full platform of integrated modules including ERP, supply chain management, human capital management, customer relationship, inventory management, forecasting and planning, manufacturing and production and more.
||MYOB Advanced starts at A$110 per month for a full access licence for one standard user, plus implementation costs which vary depending on the level of complexity and scope of work required to be carried out. Bundle pricing is available.||MYOB Advanced features in-product help. Support is also available via
certified MYOB Advanced partners. MYOB Academy has ‘how-to’ videos
|CRM, field service, financial management, planning and forecasting, project management, supply chain and distribution management, inventory management payroll, fixed assets, manufacturing and construction specific editions, human capital management, workforce management (launching in April).
||Functionality due to be delivered in May 2021 release.
|Epicor for Care, Epicor for Manufacturing and Epicor for Distribution
||Epicor for Care: price on request. Epicor for Manufacturing: 10 users for A$3800 per month. Epicor for Distribution: 10 users for A$3000 per month.
||Support is included in the SaaS annual fee. On-premises deployment is charged at 20% of the perpetual fee per year. (Extra service fee if Epicor performs on-premise software upgrades.)
Epicor for Care: Financials (general ledger, accounts payable, accounts receivable), billing and funding, CRM, service planning, care planning, client record.
Epicor for Manufacturing: Core financials, core operations, asset management, landed cost/container tracking, advanced material management, supplier relationship management, quality assurance, advanced planning and scheduling, material requirements planning, manufacturing execution system, project management, expense management, CRM, multi currency and site management, wireless warehouse, data analytics, enterprise content mgt, CADlink.
Epicor for Distribution: Core functionality includes web-based application that includes financial management, CRM, order entry, pricing, inventory management, purchasing, warehouse management, reporting and analysis. APIs available.
|Yes. Epicor specialises in automating end-toend business processes.
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Choosing an ERP
ERPs are the central nervous system of a business. And in a time of AI and technical innovation, they can be a smart move.Find out more about ERPs