Everyone enjoys shiny new tools, especially in the business world, and for many finance teams, that desired tool to hammer out its problems is typically thought to be a new ERP system. Sometimes it is at the recommendation of a new CFO, an involved founder, or derived from the tears of the finance and accounting teams who spend far too much time on manual processes preventing them from spending more time on impactful work.
The adoption of digital tools and technology capable of automating tedious manual tasks is more than a finance operation workflow improvement. It is fundamental in remaining agile amongst the sea of competition and necessary to keep up with evolving macroeconomic conditions.
82% of CFOs expect to spend more time prioritizing advanced data analytics technologies and tools in Finance. - Gartner Finance Trends Survey
Surely, most modern systems can automate accounting processing and produce basic financial statements, but the product is designed to record what happened in the past rather than plan and analyze future possibilities that fall on the shoulders of CFOs and FP&A professionals to deliver.
In this post, we will break down the essence of an enterprise resource planning (ERP) system, how its general ledger compares to other accounting software and the obstacles and challenges of implementing and using ERPs.
At the core of any accounting software is the general ledger (GL), where transactions are recorded and organized for bookkeeping. Some accounting software vendors offer additional features to manage accounts payable and receivable, as well as invoicing. Quickbooks Online offers multiple packages, and is one of the most commonly used amongst accounting software.
ERP Systems offer accounting tools like a GL, but also include the option to add on a range of other information systems necessary to operate a business. These systems, Like NetSuite, were designed to integrate several business units and operations into a single tool, which was especially beneficial after the turn of the 21st century, when data was entirely housed on-premise and connecting systems together was a difficult proposition.
Some of the ERP Modules include:
Despite the array of modules, many lack the prowess of specialized solutions, with the exception of the ERP General Ledger, which offers more intricate bookkeeping capabilities that other accounting softwares and general ledgers lack.
With the rise of cloud computing, hybrid databases and open APIs over the last decade, companies were no longer restricted to using the collection of ERP modules and could now explore best of breed systems dedicated to each business unit.
We remain tremendous advocates of the accounting prowess of NetSuite and its general ledger, and built an integration for it with data staging, automated reporting, and custom modules for you to plan, budget and forecast at a detailed level. If you’re wondering when migrating to NetSuite or Sage Intacct is appropriate for your business, check out our Accounting Software Upgrade Readiness Guide.
The growing popularity and misconception of ERPs like NetSuite being a Panacea for finance and accounting teams is an industry-wide misnomer. You may have said to yourself or worked with a colleague in your finance function who claims, “if we just had a better ERP system, we could automate so many of these processes and get more done.”
Surely, most systems can automate accounting processing and produce basic financial statements, but the product is designed to record what happened in the past rather than plan and analyze future possibilities that fall on the shoulders of CFOs and FP&A professionals to deliver.
Be prudent in your evaluation of tools and consider alternatives before committing to such a large ticket item like a new ERP. While it can seem beneficial to consolidate systems, the reality is the capabilities of these systems lack their counterparts in the market, and the sum of the parts is, in fact, greater than the whole - and at a more cost-effective rate.
Your operations, sales and marketing business units will lament the idea of moving off their beloved Salesforce, Hubspot, Zoho, or other CRM they use that is an industry leader in functionality.
Some ERP vendors will claim to offer robust budgeting, planning and forecasting tools, but the truth is, many of those tools offer little benefit. ERPs are not intended to consolidate systems and structure financial and operational data for finance teams to slice and dice in robust ways.
Even those ERPs that offer some level of budgeting and forecasting components, do not offer the level of detail and ability to slice -and-dice financial and operational data seamlessly for planning and analysis.To do this efficiently drive the Company forward, finance teams must utilize scalable technology that is appropriately designed for its use cases.
We remain tremendous advocates of ERPs like NetSuite and built an integration for it with data staging, automated reporting, and custom modules for many of our clients to plan, budget and forecast at a detailed level. There are many instances where a finance function can stay on its current accounting software for much longer and leverage FP&A tools without costly upgrades.
Going through an ERP Implementation of Sage or NetSuite? Take a look at our post highlighting six considerations for a smooth ERP implementation and usage.
Let’s consider a timeline of the close process for many companies. As each month ends, it’s followed by a 5-15 day process to reconcile and close the books. Once the books are closed, it takes at least a week or two to produce consolidated reports, key performance indicators (KPIs) and budget versus actual (BVA) variance analysis.
By the time FP&A conducts analysis and offers guidance to how budget owners could adjust course, the current month is already coming to an end, the process repeats itself. Not only is this incredibly inefficient, but it's draining on finance teams, and the frustrations are a leading cause of employee turnover and retention issues.
ERP Implementations at the accounting level can cause workflow roadblocks that hinder productivity. Many ERP implementations take six or more months to complete, with some complex implementations with multiple entities requiring a full year to finalize.
During that implementation period, there are many workflow disruptions and roadblocks that arise for you and your team. You may try to convince yourself that you will just have to power through it and hope there’s a light at the end of the tunnel that will be worth the effort. For many this can be hopeless optimism.
A primary concern that is unavoidable during an ERP implementation is the amount of time your team has to commit to working with the implementer to see the project through completion. The implementer is working with a blank canvas and needs your input to design the system, requiring hours of back-and-forth dialogue and taking valuable time away from your core responsibilities and deliverables waiting for you to complete.
Another potential issue is that you won’t be able to close the books properly or it will take twice as long during the migration process. Not only are you dedicated time to the implementation process, but there’s a likely possibility that items are not reconciled properly due to the migration of your records. It’s a significant risk to the business and finance function if the optimal processes are not in place prior to implementation to ensure your records are available and unobstructed during the migration.
One of the risks after implementation is that you will end up with duplicate records from your previous chart of accounts and your new structure. Unfortunately, not all ERP implementers are created equal, and many are focused on the technical aspect of synchronizing your data and establishing pipelines to feed metrics, without an understanding of how finance teams and your business plans on using the system.
Even after your dozens of meetings spelling out exactly what you want and how you wish to utilize the system, there are always misunderstandings or clarity issues that arise, costing valuable time and compounding implementers’ hourly rates.
Despite popular belief, ERPs are not plug-and-play solutions that can be turned on for full scale use the moment implementation is complete. There is always a learning curve to learn any new technology and implementers are focused on the set up, not seeing through that you and your team can utilize the system effectively.
Once an ERP is implemented, you’re often left on your own without dedicated resources available beyond standard technical support. This is especially problematic when your business has a high level of cross-functional utilization of the new system.
75% of finance leaders list change management for adopting new technologies by employees as the biggest challenge to successfully deploy digital solutions, according to an EY survey of finance executives.
Take a retailer for example, who not only has its accounting and finance team working in the ERP, but also needs its retail locations to input data at the store level. Those store managers, who are familiar with an easy-to-use system, now have to be trained and brought up to speed on the new accounting system, which takes ample time that prevents the manager from carrying out his or her customer-facing duties.
Not to mention, those roles are high-turnover positions, often lasting a year or less, requiring a constant wave of new hires to get up to speed quickly to avoid disruption. ERP training is available, of course, for an additional cost. Those hours are not included in a quote you will receive for implementation and subscription, and depending on the number of users, could exponentially increase your new shiny ERPs total cost of ownership (TCO).
It’s common for executives and business leaders to seek a transformative solution to solve their problems. Unfortunately, there is no single system or tool that can alleviate all of your pain points, which has been the misconception of many classifications of ERP systems.
“I’ve never seen a GL or ERP solve the financial and business reporting requirements that companies have. You need something that is a best-in-breed separate reporting tool to give management what they want and need to run the business.” - Keith Haas, CFO FutureView Systems
Integrating your general ledger and other business systems like your CRM in an FP&A tool, like the FutureView Platform, gives you the best of both worlds for your finance function. You can stay on your current general ledger, saving thousands, and automate any reporting package, while planning and forecasting at detailed level. If saving time and money is of interest, request a demo of our FP&A Platform today.