Thinking of replacing your ERP system and don’t want to spend the money or experience the organizational pain? The following three important steps allow companies to extend the life of their ERP for years.
Companies consider replacing their existing systems with a new ERP when important financial information is not readily available. Profitability cannot be generated quickly and at the right level of detail. This often occurs when business models change after the original ERP was implemented. The chart of accounts was not designed to support new reporting requirements.
For example, an oilfield services company may want to measure profitability by basin. There's a high probability information can be captured within the existing systems environment with a redesigned chart of accounts. Therefore, a new ERP may not be needed and the company can upgrade the system with a new chart of accounts instead. The effort to redesign the chart of accounts requires mapping, and data conversion may seem daunting. However, the cost associated with this effort is far less than implementing a new ERP solution.
Organizations typically find most issues with their ERP are due to data quality issues. It's a common misconception a new ERP will automatically improve data quality. This might include cleaning up supplier master records, asset information, and customer data. For example, a drilling services company that grew through acquisition found their asset records to be inconsistent, preventing the company from measuring profitability by asset. Trying to generate a combined P&L for equipment that came from acquisitions with different asset numbering schemes is difficult. The company went through an asset data quality improvement initiative and was able to get management the asset information required within six months.
The master data cleanup process can also allow companies to add information to enhance reporting. Equipment information can include sub-assets, improving accounting for depreciation. Production decks can be corrected to improve lease operating cost reporting.
Most ERP general ledger modules don't provide robust reporting and consolidations functionality. Accounting and Finance typically generate consolidated financial and management reports in Excel. Excel is an error-prone and manually intensive effort. A reporting tool can be used to consolidate information across systems. Better, merging operational and financial data into one report becomes possible.
A reporting tool would allow the VP of operations to track asset utilization alongside profitability by location or line of business in a timely manner.
If these three steps don't address the critical business needs, a new ERP might be inevitable. We recognize inefficiencies exist in all companies, and root causes include improperly implemented systems, processes, and controls. We encourage clients to avoid expensive and unnecessary IT projects. Instead, we help companies implement right-sized solutions to address critical needs. Contact us at info@trenegy.com to learn more.
Trenegy is a non-traditional consulting firm based in Houston, Texas.