It’s a generally accepted statistic that a company will change their accounting or ERP system once every 7-10 years due to growth, increasing complexities, new management, poor initial ERP selection, etc. No matter what the reason behind the change or whether you’re embarking on your first ERP project or you’ve done this before, ERP project planning, especially budgeting is mission critical. There is no easy way to estimate how many users you’ll need or what type of investment you might need to make in a business system but here are some suggestions based on our experience working with companies in a wide variety of industries to help you with your budgeting while you build a business case for next generation ERP.
For anyone who is setting out on their very first ERP project, moving from QuickBooks or another entry-level accounting system, we wrote a white paper just for you! Read it here. It will walk you through everything you need to know about ERP project planning as a first-timer.
ERP Project Planning & Budgeting Tips
ERP Budgeting Tip #1: Consider 1 user per every 2 employees. This can be 1 user per every 4 employees in environments such as manufacturing where employees such as laborers often do not need direct access to the system or in industries like professional services where many employees will simply access a time entry system as opposed to the full project-based ERP system.
ERP Budgeting Tip #2: Consider that most companies should spend at least 1% of their annual revenue on a new business system. This means that a $1 million business should expect to spend $10,000 on a business system (software and consulting) while a $10 million business should budget closer to $100,000, and a $100 million business should budget $1 million to purchase and implement a new system.
ERP Budgeting Tip #3: Most companies across industries average at least $100,000 per employee. If you’re looking to budget your ERP system by employee size then plan on spending about $1,000 per employee on a new business system. This is actually a great way to look at the investment. Since most companies keep their business software for close to 7-10 years, this means your initial investment is about $120 per employee per year or $10 per employee per month.
ERP Budgeting Tip #4: You can purchase less expensive software and you can find less expensive implementation resources but this is very risky. Since this is a major capital investment that you don’t want to do again for another decade – it’s best to do it right the first time and a failed ERP implementation has killed many companies. Budget appropriately and do not sacrifice the success of your project because you short-changed the implementation.
Once you’ve formulated a plan and begun to budget, making sure you choose the right ERP system is the next major obstacle to make sure you dont end up replacing your system any earlier than you need to. There are plenty of blogs, white papers, videos, and other research on our blog and others to help you learn what to look for in an ERP system, what questions to ask your vendors, checking vendor references, how to make the most of your ERP demo, etc. The white paper below though is different- it focuses on the mistakes other companies make and how you can avoid making them. Click below to get started.