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ERP Costs – Building a Case for ERP

Published on: April 19, 2022

in: Company News, Enterprise Resource Planning (ERP)

When it comes to building a case for a new enterprise resource planning system, ERP costs must be considered. To accurately estimate costs, companies should conduct a cost-benefit analysis of the ERP system before they go ahead and order it. Yet many companies fail to do so.

Here, we share with you the reasons why a cost-benefit analysis is so important and tips to make yours worthwhile so you can estimate ERP costs accurately.

What Goes into ERP Costs?

It depends.

We know you don’t want to hear that answer, but it’s the truth—ERP costs really do depend on multiple factors. So, sit down and consider the following as you begin your ERP cost-benefit analysis.

  1. Base price or the acquisition cost of the software. This is the basic, out of the box price for the system. This price varies on whether you choose from on-site, cloud, or hybrid ERP.
  2. Hardware: If you choose on-site software, you may need to upgrade the hardware in your company to ensure the new ERP system runs smoothly.
  3. Customization costs: Few systems can be installed without any customizations. Consider the cost of a consultant or group who can customize your system so that it provides the functionality you need.
  4. Additional software: Do you need additional software? Consider whether you need to upgrade other software that works in conjunction with your ERP system, such as productivity suites. You may also choose to add additional software to your ERP such as business intelligence, CRM, or human resources software.
  5. Data management: Importing and reconciling data from legacy systems takes time and effort. You may need to outsource this task.

Other fees may include a license fee, which may be charged by the user or from the system use, staff time to manage the system, and training time.

Cost-Benefit Analysis

Now that you have a basic idea of ERP costs, performing the cost-benefit analysis is the next step. Adding an ERP system to your business provides many benefits. You’ll need to quantify these benefits as part of your cost-benefit analysis.

Benefits of adding an ERP that can be quantified in a cost-benefit analysis include:

  1. Improved reporting: Companies that are currently using spreadsheets to provide reports will find that running reports from an ERP system saves them considerable time and effort. Instead of managing multiple, separate reports or manually keying data into a spreadsheet, the ERP system can provide many levels of reporting without wasted time or the potential for errors that manually prepared reports have.
  2. Easier data management: Managing data through an ERP is much easier than trying to work with multiple data sources. Data flows into one central repositor, which can then be accessed or shared by multiple employees.
  3. Enhanced efficiency and timesaving: You’ll wonder how you ever managed without an ERP thanks to the enhanced efficiencies and timesaving benefit you’ll find using it. Automating A/P and A/R processes alone can save hours.
  4. Simple integration with other systems: Most ERP systems integrate with other systems, including e-commerce sites, warehouse management systems, office productivity suites, and more. By adding ERP to these systems, you’ll have more powerful tools at your fingertips to save time and effort.

Estimating the hours saved or the benefits of faster accounts receivable collection may be challenging, but when offset against the costs of the ERP, you’ll find that a new system virtually pays for itself.

Would you like to learn more about cloud ERP? We’ve put together this video to help you understand the system and what it can do for you. Watch: Do More with Fewer People.

Mindover Software

Mindover Software is a software reseller with a broad range of accounting, ERP, finance, customer relationship management, and other software products, including Acumatica software. For more information about Acumatica or other software needs, please contact us or call 512-990-3994.