The hidden ERP Software problem

February 22, 2012

erp-software-problemUp next in the series on problems with ERP software: the problem that you don’t know about.

I’ve read various studies that suggest the average company uses between 40% and 60% of the relevant functionality of their ERP software – “relevant functionality” being the functionality that, if used, would provide measurable benefits to the company. My anecdotal experience in the small and medium-sized enterprise (“SME”) arena over 25+ years tends to support these stats. If you stop and think about it, this is a staggering thought: most companies, even if they have selected and implemented the appropriate inventory accounting software, are still only realizing around half the measurable benefits! It’s like buying 8 tickets to the Superbowl, then only taking 3 friends with you, and dumping the other 4 tickets.

The reason for this is one simple missing ingredient: follow-on training. When you implement a new ERP system, the initial focus is on addressing key / existing business processes, and managing the key logistical daily functions of the business. This is also the period during which you’re most heavily engaged with the ERP vendor. During this time, any training or advice you receive regarding more advanced automation and data analysis, for example, tends to largely go in one ear and out the other, because it does not relate to the most pressing issues you’re faced with during those very stressful first few weeks.

The ideal time to really capitalize on the advanced benefits that the ERP software offers is some time after go-live, when you’ve mastered to routine daily and weekly functions, and ironed out your logistical business processes with the new system. So perhaps 2 or 3 months after go-live (in the SME environment), you really should be re-engaging with your provider and initiating a “phase 2″ implementation - based on measurable and beneficial “extras” and advanced options. But in the real world, most SMEs are not willing to do so. I’m never 100% certain to what degree this is an attempt at cost saving, versus a defense mechanism against information overload. But either way, it is most certainly a missed opportunity – because if you leave it too long after go-live, the organization becomes entrenched in the current way of doing things, and even if that’s in efficient, it becomes increasing,y difficult to effect change.

Real life example: a company went “live” on our ERP Software around 9 months ago, on the understanding that after 2 – 3 months, we’d show them how to completely automate an Excel analysis tool that they currently spend around 2 days per month manually updating – re-keying data that is already in the software. Well, 9 months later we’re still trying to get this customer to spend around 2 – 3 hours with us, after which that 2 days of manual updating per month will be completely replaced with a single mouse click. And yet they remain “too busy” to schedule that session.

At least the good news (from my perspective) is that this is an exception amongst my customer base.

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Posted by Mark Canes

Problems in the Search for ERP Software: Lack of Time

February 14, 2012

problem-search-erp-software-lack-of-timeLast week we wrote a post about some problems finding the right ERP software. This week we are going to focus on common problems inherent in the search itself. Let’s begin with a story.

You, the CEO/President/VP of Operations/CFO, are extremely busy. You work for, or own, a small business and chances are you are involved in many aspects of daily operations. You understand the importance of keeping the business running smoothly but at times you are too busy fighting fires to make changes necessary to maintain efficiency. So it is a Saturday afternoon and you have found an hour of spare time between helping your children with their homework and finishing up work for a client meeting on Monday, so your turn your mind towards to finding new software. You jot down a couple of vendors, fill out forms on their sites and eventually have a brief conversation with them on the phone. Then your head starts spinning and you figure you cannot continue the process because you are too busy, so you drop all communication. You continue with the status quo, knowing all-too-well that your current software is compounding the daily problems that keep you pre-occupied.

Does this story sound familiar? It is certainly very common from our perspective.

The good news is that, as a small business, there is a way to get around how busy you are – implementing new software! The first step to making the software the search process easier is by understanding how important it really is. Think of it like this: how much help would it be to have another efficient employee at your beck-and-call? A proper software system can be at least that effective – reducing strain on current resources by eliminating manual work, fixing errors, duplicate data entry etc. Thinking of a new software system as a full-time employee can be a very motivating mindset and can help with budget setting. You can spend $35,000/year on a new employee or $30,000 once on a new system. No-brainer decision, right?

It may seem impossible to add another item to your ever-expanding list of things to do, but avoiding “I’m too busy” is crucial to eventually implementing a system (that will save you a great deal of headaches and free up a lot of time in the future). Think of it as an investment in your mental well-being as well as your business.

The 4 steps to avoiding “I’m too busy” are to:

1 Comment | Accounting, Business Technology, ERP Software | Tagged: | Permalink
Posted by Mark Canes

The Problem with ERP Software

February 10, 2012

Anyone who’s used any ERP Software or accounting package for more than a few minutes has experienced some level of what we’ll generically label “ERP Software Problems”. Over the next few months, I’ll sporadically explore some of the more common categories of ERP problems that you may have encountered (or that may be in your future), with a view to providing some insider insight into why these problems arise, and how best to deal with them.

In this first look, we’ll examine what’s probably the largest and most costly ERP Software problem: namely, a poor fit. In this unfortunately common situation, a company has implemented a system that is just not a good fit for their business. This may be due to the software itself being inappropriate, but could also be because the ERP Software vendor was not the right choice.

ERP Software Problem: poor fit

 Why do so many companies end up implementing software that is not a good fit for their business? There are many reasons, but the three that I’ve most frequently seen, and that keep recurring, are:

  • Buying based on price, or with a pre-conceived budget – if you make cost your number 1 (or even 2) decision point, you will choose the wrong solution at least 50% of the time, if not more
  • Lack of understanding of your own business needs and processes. If you have a clear picture going into the decision process, of how your business should look after the implementation, you’ll likely choose appropriate software. If not, you won’t.
  • Sweating the small stuff – a corollary of the above point is that it’s the big things that count in this decision, but if you focus on the small stuff you may miss the big stuff. The more detailed features you focus on, without evaluating how important they really are, the more prone you’ll be to either indecision, or the wrong decision.

ERP Software Problem: wrong vendor

Even if you have chosen ERP Software that is potentially a good fit, if the vendor is not appropriate you’re going to have problems. If you work with a vendor that has no experience in your industry, or one that’s accustomed to implementations at companies that are much larger (or much smaller) than you, then the software problems you’ll encounter may well be related to setup, implementation and training rather than the package itself.

Additionally, I firmly believe that there should be a “meeting of the minds” between you and the ERP Software vendor – a similarity in corporate culture and values – as this will result in a truly positive business partnership.

From the perspective of an ERP Software vendor, I can tell you from many years of experience that the fit between ERP vendor and customer is crucial, and works both ways. As a vendor, I don’t want a customer if we are not a good fit for them, at either the software or corporate culture level – in such situations, everyone loses.

In summary, the starting point to avoiding ERP Software problems is to avoid the wrong software, and avoid working with the wrong vendor.

2 Comments | Accounting, ERP Software, Implementation | Tagged: | Permalink
Posted by Mark Canes

Ensure Proper Training for ERP Software

January 20, 2012

proper-training-erp-software

I get phone calls all the time from managers, consultants and company owners who want to immediately “take the reins” and pilot our software before they have been properly introduced to the system. What is worse is when these same individuals decide they want to minimize software training for their staff as well. The problems with this approach are almost too numerous to mention but I’m going to take a stab at it.

Every Piece of Software is Different

Many people assume that if they are even remotely technically-inclined, that they will be able to pick up any piece of software and immediately be productive with it. This is obviously not possible as everything in life has a learning curve of some degree. As a result of this mindset, we as software providers must spend time convincing buyers that education needs to come first before productive product trials can take place. This goes for some of the most simple and intuitive software out there as well – if you’ve never seen it before in your life, you’ll need time to adjust.

Vendors should offer to take you through the system so that you can use your time wisely if you decide to perform a hands-on evaluation.

Difference in Productivity Levels

An intuitive software package may allow for quick familiarity, but a system’s true power lies in the shortcuts and more complex tasks that may not be quite as obvious. For example, consider a sales order review screen. At the basic level, you open it up and review open orders by sifting through them. More advanced functions would allow you to sort, segment and quickly identify actionable orders. And finally, you can set up automated email reports alerting you to important actionable orders. Without proper training, your staff may never get past working with the basics.

Short Term Pain for Long Term Gain

Yes, paying for things can be painful but investing in your business should never seem painful. Think of training as an investment in long term productivity for your employees. Will they be able to get by without adequate training? Maybe. However, they may spend twice as long working with the software as they need to. The long-run cost savings of properly trained staff cannot be overstated.

Hopefully this post has made it clear how important it is for proper software training. All forms of employee training are important, but ensuring proper training for the system that runs your business and that they work on every day should be at the top of the list.

1 Comment | ERP Software, Implementation | Tagged: , | Permalink
Posted by Mark Canes

Customization: Finding the Right Software for YOU

January 13, 2012

customization-software-customDepending on your industry, it can either be very hard or very easy to find software that is a great fit for you. Some industries are better represented than others but even in well-represented industries there are many businesses with unique requirements that may pose problems for solutions that are designed from a “one-size fits all” perspective.

For example, consider software for wholesale and distribution – on the surface, wholesalers and distributors will share many of the same requirements. However, there are many different lines of businesses or sub-industries within wholesale and distribution with vastly different requirements. Those in the HVAC industry may require servicing & repair management while those in food distribution may be primarily interested in landed cost or lot tracking.

Different modules offered by vendors can accomplish specific tasks required for specific industries, but even at the module level there may be some functionality left to be desired. That is why customization should always be an important consideration when evaluating vendors. Regardless of how well the software works out of the box, you want to be assured that the vendor can accommodate your specific needs – now, and in the future when you make changes to your business/processes.

Although significant customization should be avoided (i.e. the software should do the majority of what you need it to), it should be considered a good option for the small pieces that are very specific for your business. Often these customizations help accommodate the unique aspects of your business that set you apart from your competitors. After all, if this functionality were available out-of-the-box then it wouldn’t be unique to you, now would it?

Ensure that your software solution is customizable to avoid having to drastically change business processes to accommodate your software. Your options are to develop customized software specifically for your business (which can be very costly and often difficult to upgrade) or you can choose to find a software solution that is a fully integrated solution with the ability to be easily customized. Don’t focus on finding the right software for your industry, focus on finding the right software for YOU.

1 Comment | Accounting, ERP Software | Tagged: , | Permalink
Posted by Mark Canes

ERP Software Consulting – It’s not just about the software

January 8, 2012

erp-software-consultingPerhaps you’re thinking of putting in a new ERP system or have already done so. Regardless, you should also be taking a very close look at your business processes. Making a change to your business software can be a big step in increasing efficiency and is the best time to make changes to your overall business processes as well.

Good ERP consultants, especially those that are on the implementation team, do not simply install software and say goodbye – instead, they work with you to take a hard look at your organization as a whole and make changes to improve efficiency. Some changes may be required to integrate the software with your organization while other changes may not be necessary but will greatly improve productivity. Before you select new software you should be thinking about what changes need to be made to increase efficiency so that you know what your requirements are. ERP software consulting (often offered by the vendor) can then help you build upon your requirements and add efficiencies you may not have thought of in the process.

A reputable vendor will often help you work through your requirements at no charge and help you gain an understanding of where you need to be on the software side of things for when you make your selection. This consultation can be used to identify price points for the functionality you require as well as solidify your needs on a functional and software feature basis.

After the sale, a number of consultation services are available such as on-going business support to refine processes as well as the in-depth setup and configuration according to your specific requirements. It may seem like a no brainer that this sort of consultation is offered but stories aboard of botched ERP implementations because the vendor sold their software and offered little support in helping tailor it to an individual company’s needs. Be sure to have a discussion with any vendors you are seriously considering regarding their consulting services and expertise. You should feel confident that they understand your business well and their software will be able to deliver on your requirements.

Hint: it is a bonus if they are able to identify requirements you were not aware of. The same goes for delivering above expectations on functionality.

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Posted by Mark Canes

Software Search/Replacement Process Guideline

January 3, 2012

software-search-replacement-process-tips-guidelineOutlined below are a series of steps you should consider during your software search/replacement. These steps do not have to be followed perfectly for a successful search, however, setting out and sticking to timelines, like those outlined below, are very important for success.

Stage Process Duration
Set Priorities
  • Set aside the time required to make an important decision like software replacement
  • Establish and stick to a timeline to accomplish tasks in manageable stages
 On-going
Evaluate Requirements
  • Perform analysis on business processes
  • Determine what works well with current software and where gaps exist in functionality
  • Establish outline of functionality requirements from a business process perspective (not software function)
  • Determine the required software tier (segment)
 1 month
Research Software Vendors
  • Search industry and software sites to find appropriate software vendors
  • Avoid the use of consultants that are pricey and often biased
  • Select an appropriate number of software vendors to evaluate (typically 6 or more is too many)
 1 week
Contact & Engage with Software Vendors
  • Most software vendors will expect time from you to discuss business processes and requirements
  • Demos should not be expected or offered at this stage – vendors would not know your business well enough to perform a demo catered to you
 2 weeks
Short List Vendors
  • After preliminary discussions with vendors, demos should be performed
  • Shortlist vendors based on what can be shown, not on what is promised
  • Narrow down vendors to a maximum of 3
 2 weeks
Select Vendor
  • Compare vendor demos and discussions with business requirements
  • Consider “soft” criteria such as comfort level with vendor, honesty, personalization etc.
  • Should be completed 2-3 months before desired implementation date at a minimum
 1 week
Pull the Trigger
  • Once a vendor has been chosen as the winner, immediately begin the implementation process to avoid delays
  • Anxiety at this stage is common but largely misplaced – a vendor that has been selected with due diligence is the right choice
 Immediate

If you want more detailed information on the software buying process, feel free to download this Software Buying Guide.

3 Comments | ERP Software | Tagged: | Permalink
Posted by Mark Canes

Accounting Software Outlook for 2012

December 27, 2011

As we all know, the world will end in 2012. That means that this is your last chance to improve your accounting software - buy or upgrade now to avoid the apocalypse rush!

I do have three somewhat serious predictions for 2012:

accounting-software-outlook

  1. The percentage of new cloud computing / SaaS implementations will continue to rise rapidly: this one’s a no-brainer, as we seem to have gone beyond critical mass in acceptance of the cloud by smaller businesses as well as larger companies. In fact, if the trend we saw in 2011 continues apace, then by the end of 2012 a new on-premise implementation will be as rare as a SaaS implementation was a couple of years ago.
  2. Driven to some degree by the affordability of SaaS, more small companies will invest in newer ERP and Accounting software in order to improve efficiency and thereby reduce personnel costs. This may add marginally to the unemployment woes in North America, but in reality many of these investments will fail to pay off due to inadequate implementation planning and spending.
  3. By the end of next year there’ll be a massive reduction in the (already smaller) volume of business transactions reduced to paper and sent by mail. We’ve already seen this to a degree, but the number of companies that (a) can send invoices, purchase orders and confirmations by email, and (b) that are willing to accept emails instead of hard copies, is increasing rapidly. This will mean that accounting systems that cannot easily generate and email these documents are strong candidates for upgrade or replacement in 2012.

Wishing you all a very happy new year and all the best for 2012 (as long as it lasts…)!

1 Comment | Accounting, ERP Software, SaaS | Tagged: , | Permalink
Posted by Mark Canes

Managing Inventory? That’s a negative!

December 15, 2011

In the previous post on negative inventory we debunked the myth that some bnegative-inventory-2usinesses “need”  their software to handle negative inventory. With appropriate inventory management business processes in place, there’s never any real need. But perhaps it’s more expedient to let your inventory management software go into negative quantities in the heat of the moment and correct things later – right? Well – no. Here are a couple of negative consequences of negative inventory.

Firstly, if we sell product that we’ve not brought into inventory, what cost of goods sold is allocated to the invoice? Is it the last cost, or the existing average cost? Well, either way, it’s definitely the wrong cost. Similarly, when you later bring into inventory the quantities necessary to wipe out the negatives, and input their actual cost, how will that affect your updated average cost calculation? What if you pay sales commissions based on gross margins? Review daily sales and gross margin reports. Have margin threshold alerts or exception reports? That all falls apart under a negative inventory scenario.

Secondly, in a properly integrated ERP system, other areas of a growing business rely on inventory quantities for decision making and transaction processing – things like reorder procedures, inventory allocation on sales orders, and backorder management. By not investing a little time and effort to implement good processes, you might well lose the ability to use tools and functionality that would actually save you much more time, on an ongoing basis.

1 Comment | ERP Software, Inventory Management | Tagged: , | Permalink
Posted by Mark Canes

Wholesale & Distribution ERP Software Modules

December 8, 2011

wholesale-distribution-erp-software-modulesAs we mentioned in a previous post, it is important to ensure you are seeking out a system that is well-suited to the industry and space you operate in. For example, we recently covered what to look for in ERP software for food distribution or food wholesale. Now we’ll take a macro-level view and evaluate important ERP software modules for wholesale and distribution.

1. Financial Modules

   Basic    Important
  • AR/AP
  • General Ledger
  • Bank Management
  • Contract Pricing (Price-lists)
  • Landed cost tracking
  • Multi-currency
  • Inter-company accounting
Click here for more Advanced Accounting Modules

2. Inventory Modules

   Basic    Important
  • Order Entry & Invoicing
  • Purchase Order
  • Return Merchandise Authorization (RMA)
Click here for more Advanced Inventory Modules

3. General Modules

   Basic    Important
  • Contact management (CRM)
  • Commission Processing
  • Backorder management
Click here for more Modules/Components

This list should serve as a good starting point for identifying functionality relevant for most wholesale and distribution operations. Proper ERP software should have the majority of this functionality or more to be a true fit for distributors or wholesalers.

2 Comments | Accounting, ERP Software, Inventory Management | Tagged: , | Permalink
Posted by Mark Canes

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