According to a recent survey of more than 1,000 companies by the Institute of Chartered Accountants in England and Wales, 12% of companies have experienced a ‘business critical failure’ of their accounting packages over the past two years.
The benefits an integrated enterprise resource planning (ERP) system can bring are well known and regularly publicised by the software vendors themselves – greater visibility of financials and inventory, more accurate accounting, faster invoicing and reduced operating costs. The first decision is to choose the right package, as options vary from complex ERP software from vendors such as SAP and Oracle to simpler offerings from Sage.
Accantia Health and Beauty switched from SAP to Sage Line 500 because it offered a more straightforward solution. “Our core business is marketing and selling our products,” says Simon Pinks, group financial controller at Accantia. “Financials is just a cost of doing business. We were looking at the simplest installation we could do.”
Meanwhile, malt supplier Muntons chose SAP because it was the only solution that could handle the complex task of tracking and grading the different types of barley, a crucial element in the company’s commercial success.
Broadly speaking, the simpler accounting packages in the ICAEW survey, such as Sage Line 50 and Exchequer Enterprise, tend to achieve the highest user satisfaction ratings compared with more integrated offerings such as Oracle Financials and SAP R/3.
But while simplicity may reduce the chances of a package going wrong, it doesn’t offer the same scope for deriving business benefits. “Take into account user satisfaction by all means,” says Paul Booth, technical manager at the ICAEW’s faculty of IT. “It is an important factor, but it is not the only consideration.”
The first rule of making ERP work is to make sure that management is committed to it. They must reinforce that commitment throughout the company so that everyone knows it is a priority. “Engage the top team and ensure the transformation is considered an essential project,” says Peter Lumley, member of the management group at PA Consulting.
Another key issue is to agree the scope of the project and stick to it. It may sound obvious but it’s something that many companies have overlooked to their detriment. “Our systems integrator, Logica, came up with a 50-page document about how the system would need to be set up, and we integrated that into our contract,” says Roger Barker, finance director of Muntons. “Both parties signed every page.”
Obviously, this helps ensure that IT suppliers do what they’re supposed to, but it also helps to focus minds at the company installing the software, making sure they don’t get distracted.
“There is a danger we might see a bit of functionality within SAP we didn’t know was there and decide to switch it on. But that will cost more and push our deadline back. This contract makes us ask, ‘Do I really need it’?”
For example, Muntons does business in many currencies, and the treasury management software has a module that calculates future currency requirements automatically – a nice thing to have. But Muntons decided to leave it out and review the situation once the main system was working. “We still haven’t installed it,” says Barker. “So it probably isn’t that important.” Certainly not worth delaying the project.
Another pitfall with ERP is customisation. Each business is unique, so a standardised software product is never going to be a perfect match. The trick is to know when to change the software to match the process, and when to match the process to the software.
Homebase, for example, customised its SAP ERP system to adapt to the demands of the horticulture industry. Plants become available when they have finished growing, which depends on the seasons. “That is quite different from the normal manufacturing process, where you can be more proactive.” says Darrol Radley, head of the SAP implementation at Homebase.
Accantia, meanwhile, changed nothing. “We agreed that if any code needed to be changed, it had to be approved by the MD. And I knew he would not approve anything,” says Pinks.
“The work involved is staggering,” says Barker. “When you have achieved success, don’t forget to celebrate.”
The survey, IT in Business, is available at www.icaew.co.uk.
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