Choosing the right ERP system
Choosing the right ERP (Enterprise Resource Planning) system is as tricky as it is strategic. These tools can be complex and expensive, so it pays to make the right choice. Thankfully, other businesses have been through this process already. The best guide you can have is the experience of other companies who've gone about it before you.
This was the theme of our recent CFO Connect meetup. Once a month, we get top CFOs together in the same room to learn from their triumphs and mistakes. And on the 6th of March 2018, it was all about ERP.
Sébastien Delétang and Raphaël Fauveau, CFOs of Habiteo and Digimind respectively, shared their ERP strategies and past experiences. They went over essential points such as the advantages of various platforms, what criteria to base your choice on, what budget to allot, and lots more. In short, everything you need to know to get a clear overview!
About our experts:
- Sébastien Delétang was Finance Director of Sopharma before foraying into more tech-based companies (Aldebaran Robotics and Wynd). In February of 2017 he became CFO of Habiteo, a platform that digitises real estate developers. They just closed their third funding round of €6 million and are getting ready to expand internationally.
- Raphaël Fauveau knows all the ins and outs of the entrepreneurial ecosystem. Having worked as Finance Director at Fotonauts (SF) and NUMA, and having founded Trendipop, it was in early 2018 that he joined Digimind, the leading provider of solutions for Social Media Monitoring, e-reputation and strategic monitoring. Founded in 1988, this startup now has more than 150 employees across several countries.
What is ERP and under what circumstances should it be implemented?
ERP stands for “Enterprise Resource Planning”, and usually means a management tool made up of various modules (purchases, sales, payroll, accounting, stock, e-commerce etc.) that allows you to centralise, monitor, and standardise your entire information system.
Basically, a hub for a company’s day-to-day information. Implementing this sort of software solution can really make life easier for your teams, help you optimise overall performance, and streamline costs. It’s a must-have for any CFO.
Does every new business need an ERP system?
Probably not. ERP goes hand-in-hand with growth. Small businesses tend to handle things themselves using specialised software or basic Excel spreadsheets before implementing ERP as the business grows and becomes more complex. For Raphaël, it’s time to take the plunge “when it starts to get messy and account reconciliation become a headache!”
When should you adopt ERP?
Thanks to their broad experience, Sébastien and Raphaël know how to recognise the right moment to implement ERP in terms of a company’s growth.
"Aldebaran has been around for 10 years already and employs 300 people. When I joined the company, we needed an overall picture of the company’s state of play in real time,” Sébastien explained. As a smaller structure, it’s different for Habiteo. But the company is undergoing rapid growth and has set its sights on the international market. “ERP is an absolute necessity to bolster our development,” Sébastien said.
For Raphaël, the need arose when problems popped up. "When I joined NUMA, there was no AFD and no accounting system in place. Accounting was outsourced to Quadratus. We were having problems integrating all of our software and our systems (expense reports, HRIS). We needed ERP to pull the various strands together.”
At Digimind, once the company had gone as far as it could using Excel, it was time to implement ERP. Excel was the only tool they used for administrative and financial management but “even though it’s great for starting out, Excel’s major flaw is data reliability. There’s no option to run the numbers in a tangible way. With yearly growth of 20-30% comes a rapid increase in the amount of data to be processed. There’s a lot more at stake, which meant it was was no longer an option to continue without ERP,” Raphaël explained.
What are the advantages of ERP system?
The big benefit of integrating an ERP tool is that you'll finally have a bird's eye view of your business in real time.
But there are a few more precise end goals to keep in mind. These include:
- Support in setting up subsidiaries and/or international expansion
- Having an interface to integrate your existing software tools and systems (between Salesforce, Jira, Zoho, etc)
- Making up for Excel’s weaknesses in processing large volumes of data and being able to check the numbers, giving Finance Directors a clear overall picture of margins and consolidated data
- Time savings on monitoring and reporting
- Closing process facilitation
- In short, it’s time to adopt ERP when a growing company starts to feel the need to structure the financial side of the business more clearly!
How to choose the right ERP platform?
The ERP business software you select matters significantly. It's a big decision, and one you'll want to get right the first time.
The most important criteria are:
- An ERP system that works to your specifications. It’s best to do an audit of any software already in place and to note down what features you’ll need. “You don’t get the same features across all software tools,” Sébastien pointed out. For example, lettering and bank reconciliation can be an issue.
- An ERP tool that works in both directions, so you can both send and receive data.
- Flexible and customisable ERP. This will allow the company to configure it themselves and make changes to predefined elements if needs be (e.g. adding modules). “You need to be able to foresee the future, for example whether you’re going to set up subsidiaries. If you want to improve your long-term vision and work out what your future needs will be, it helps to check out more advanced companies,” Raphaël added. The most important factor of course is how ERP fits with your existing software. If you have a back office, don’t worry, all ERP systems come with an API, so they can be adapted to several accounting systems (if the ERP system you’re looking at doesn’t, then don’t go with that particular one!).
Which ERP system is best?
Since there’s no shortage of software options, narrowing down your choice can be tricky. Especially since each company’s needs are unique so they all require different solutions.
At first, Habiteo considered Numm, which is a French outfit. Then they were tempted by Sage Live: "It’s new and it’s got a smooth interface. But it’s still under development so there are some modules and features it doesn’t have. For example there’s no fixed asset management or non-auxiliary account lettering,” Sébastien explained. That’s why it’s so important to make a list of all the features you need!
It’s also the reason they went with Financial Force, which they’re currently testing. For their billing system, they opted for Zoho, which doesn’t work with Salesforce so they needed an ERP system that would integrate smoothly with both. “The advantage is that there’s no API to set up, just a few additional accounting fields but other than that you’re looking at the same interface as with Salesforce.”
The experience Raphaël gained at NUMA has allowed him to form an opinion on three other solutions: Unit4, Divalto and Netsuite."Unit4 is very powerful and has a smooth interface. Divalto is also powerful but with a less user-friendly interface.We ended up opting for Netsuite, not just for the price and the interface, but also because it’s a suitable option for internationalisation. It can interface with Zoho and Lucca. Its operational consolidation is interesting but there’s no legal consolidation and one of its weaknesses is deferred revenue management and accounts receivable management,” Raphaël explained. Out of the options available to them, it was the multi-layered estimate system, which allowed them to activate specific modules such as revenue recognition (€5,000 to €6,000€ a year), that swayed them in the end.
Tip: you don’t need help to pick out an ERP system (unlike integration). You can just keep an eye out, ask around, or do an internet search!
How much budget should you allocate for ERP? What’s the ROI?
It’s hard to know what budget you’ll need to allocate. ERP is a module-based tool that depends on your specific needs.
With Financial Force, you need to take into account a basic yearly subscription (around €12k with 3 users) and around €2k a year per additional user, plus €5k to €6k a year for each additional module. Then there’s an integration cost of between €20k and €25k. It’s a big investment but nobody can deny the advantages it brings.
As Raphaël said: “without ERP, a lot of time is wasted and we underestimate the time spent on monitoring margins, reporting, and accrued revenue. ERP is never perfect but it does get a CFO a few steps closer to the dream of having reports appear at the click of a button.” With all the time it saves, you can afford to hire an additional accountant or financial controller.
Tip: When speaking with salespeople as you consider the various solutions, both of our speakers advise that you avoid sharing how much you’re willing to pay. “Always wait to hear the pitch and then negotiate!”
What do you need to know about setting up ERP?
1. You’ll need an ERP integrator
Data migration from your company’s various IS to your ERP system of choice, and connecting the latter to your payroll / HRIS or expense report software tools will be carried out by an integrator. For a less pricey option, you can export and then manually import through CSV.
During the ERP integration process, the integrator will spend around a third of the time defining specifications. To make sure you stay on schedule, you need to check on how the project is moving along at regular intervals: this means daily calls and weekly team meetings.
Tip: To choose the right integrator at NUMA, Raphaël asked Netsuite to put him in contact with another client and it was the AFD of LRQDO who swayed him towards Datavalue.
2. Come to a clear decision on insourcing accounting
If you decide to insource accounting, be sure to take that into account when you’re defining specifications. Some ERP systems, like Netsuite, are particularly suitable for this.
With the right ERP system, it’s easier to manage accounts internally because certain steps are automated. That’s what Raphaël went with for overseas NUMA subsidiaries: an external accountant took care of ERP data entry.
When Sébastien was at Aldebaran, accounting was done internally in France and externally for subsidiaries in Asia and the US. “If you decide to outsource part of your accounting process, be aware that you’ll need to train in the external accounting firm and that will take a certain amount of time. This can be a long process and every time you modify the software it’ll be more complicated to manage,” Sébastien said.
How long will it take to set up?
Allow for two to five months including the time it takes to define specifications. Raphaël’s advice is to set aside a specific amount of time (in the summer), once your ERP is in place, to test the two processes together (the old and the new) before migrating fully.
At NUMA they gave themselves a year to make the transition. In terms of setting a timeframe, the idea was to have Netsuite set up by September to be sure to have mastered it in time for the end-of-year rush.
At Habiteo, they installed their ERP system at the end of the year to be ready to start the year off on the right foot on the 1st of January. “We opted for that period to be certain we’d have reliable data when we tested it,” Sébastien explained.
ERP can be a real asset for any growing business whose day-to-day management is becoming a handful. Apart from structuring a company’s financial processes, it also gives finance departments an overall picture in real time. Habiteo opted for Financial Force, and Numa went with Netsuite. To make the right choice you need to decide beforehand which features you need most depending on your specific business. The best tool will always be the most flexible and customisable. And when allocating the budget, keep in mind that ERP represents a rewarding investment that will save you precious time and revolutionise day-to-day work for any CFO!