How to Calculate ROI on your ERP and How to Avoid Hidden Costs - ERP Cloud Blog
 
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ASC Partners

How to Calculate ROI on your ERP and How to Avoid Hidden Costs


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ERP (Enterprise Resource Planning) solutions are at the heart of many successful businesses. As not all ERP solutions are the same, and because they represent a significant investment in time and resources, it’s important to know upfront what the costs will be and how to realize a positive ROI (Return on Investment) on the ERP solution you choose.

Cost overruns, hidden fees, or other unforeseen expenses can quickly derail your ERP project. So, it’s essential to accurately calculate the time and resources needed and the ROI that you can expect.

To help you with your ERP selection project, Acumatica has developed a guide:

ERP Project Justification: Return on Investment (ROI)

ROI

Your ERP project must be able to pay for itself and bring significant benefits to your organization. It’s important to calculate the direct and indirect costs of making any changes to your business equipment or processes. Make a careful evaluation not only of the cost of the ERP software but also the non-monetary benefits that will drive your business in the long run. These direct and indirect costs include costs saved, costs avoided, higher revenue, and increased profits.

Benefits contributing to your ROI should include:

• More efficient regulation of resources
• Increased visibility of supply and demand
• Improved management and organization of workflows and production schedules.
• Efficient management of materials, equipment, and personnel

There are also indirect benefits that will greatly improve your organization’s climate:

• Increased productivity due to employee job satisfaction
• More reliable processing because of stable scheduling
• Improved marketing analysis and data use

Hidden costs to watch out for

Once you know the benefits of proceeding with your ERP project, you’re ready to ask your ERP partner for a price. You’ll want to know the cost of the hardware, software, implementation, and training. You’ll also want to know if there are any hidden costs that are going to crop up unexpectedly and throw a wrench in your budget.

Unforeseen costs might include:

• Additional time: it may take more time than planned to implement the solution and configure it to your needs.

• Additional training: employees will require training in system use, development, and       documentation.

• Future tailoring: As your business grows and changes, so will the way your ERP can help streamline your business processes. Customization or updates may require additional time and retraining.

These are three of the less obvious costs that may get overlooked during your ERP selection and implementation process. Talk to your implementation partner about other possibilities. Being aware of the possibility of cost overruns is the best way to avoid them when possible.

As you close in on your final ERP decision, it’s important to have the advice from an experienced partner. If you’re ready to move up to a full-service ERP solution such as Acumatica Cloud ERP, contact our experts at ASC.

By ASC Partners, asc-partners.com

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