Enterprice resource planning (ERP) cost savings are often espoused as one of the great benefits of ERP systems, but they aren’t always quantified. This blog posts seeks to illuminate the savings you can expect from implementing an ERP system and why your ERP expenses would be worthwhile.
What is an ERP system?
Enterprise Resource Planning (ERP) systems form the backbone of global businesses and charities. They can bring accounting, customer relationship management and HR processes all under the same roof, giving a unified view of all these processes.
NetSuite ERP is an example of a cloud-based finance system. What it means is all the physical hardware is owned and managed by NetSuite, where a client organisation just adopts, not adapts, NetSuite's software.
NetSuite has reams of benefits; from ERP cost savings to effective forecasting and scenario planning NetSuite is an effective tool in a finance team’s arsenal.
ERP Cost Savings
Quite often “efficiency gains” can be a nebulous term which is used to handwave at benefits, but an ERP system such as NetSuite has gains which are quantifiable. Succinctly put, you would expect an ERP system to deliver savings by reducing the time spent on administration, reducing errors, fostering collaboration and through the automation of key processes.
If you want to discuss how these savings could apply to your organisation, contact us.
Single source of truth
Within a cloud ERP system like NetSuite, a significant source of ERP savings come from the data sitting as a single entity within the cloud.
In a legacy finance system, such as spreadsheets, budget holders and departments would send their spreadsheets to the finance team who would then have to manually piece these files together.
This laborious, and often error filled, process would use a significant amount of the finance team’s time.
A single source of truth completely cuts out the time spent formatting and chasing up spreadsheets because budget holders and departments can instantly put their data into the finance system.
This not only significantly reduces the cost of vital administrative processes but gives your finance team the opportunity to further lower costs through financial planning and scenario modelling.
Single piece of software
ERP solutions are not just effective accounting software but can be used for other business processes. Inventory management, customer relationship management, ecommerce and more can all sit within the same system as the financials.
This reduces your organisation’s back-end complexity, reducing the time spent on administration. The other advantage depends on the exact software and ERP system used, but you could potentially save money on software licenses if the software is all under the same roof.
Automation
An ERP system like NetSuite can maximise organisational efficiency by automating workflow-driven tasks. This can include reporting, budgeting and non-financial tasks. This delivers savings because your organisation can spend more time on what matters and less on these administrative processes.
Financial planning and budgeting
After implementing an ERP system like NetSuite, your finance teams can move away from formatting spreadsheets and start financial planning. An ERP system is uniquely positioned for financial planning because, if used properly, it contains all financial and non-financial data.
This allows for analysis into long term trends, informing strategic decision making and more effective provision of resources. An ERP like NetSuite also has advanced data visuals capabilities, further informing decision making.
Inventory management
Because ERP systems were originally designed for manufacturing, they are excellent for keeping track of inventory. This could mean integrating ecommerce capabilities into NetSuite, allowing both financial data and inventory to automatically adjust when stock is bought.
Not only does this save time because there is no manual bookkeeping, but errors are kept to a minimum, further driving cost and time savings.
Even if you organisation is not involved in manufacturing, keeping track of inventory is an great way to reduce waste and drive efficiency. Suppose you run a charity which manages several food banks.
By having a view of the inventory of all food banks, you can shift supplies to banks that have higher demand and away from the banks that have excess supply, helping those that need it most whilst minimising food waste.
Procurement and Purchasing
Not only can procurement be made cheaper and more efficient through the workflow automations available within an ERP system, but the KPIs and analytics capabilities make procurement decision-making a breeze.
Procurement assessments can be evaluated through your ERP system’s tools, allowing for effective and cost-saving decision making.
For example, if you ran a care home which purchases bed sheets, an effective ERP system could allow you to track both the cost of the sheets but also the replacement rate, allowing you to quantify the cost of the sheets per day.
Using this information, the care home might decide to invest in more expensive, but sturdier, sheets which do not need to be replaced as frequently.
Manage growth
Cloud based ERP systems are favoured by rapidly growing SMEs and charities for good reason. Quite often, these enterprises realise they are outgrowing their old system but have neither the money nor infrastructure to support an in-house ERP solution.
What a system such as NetSuite offers is a cost-effective ERP solution because there is no cost from creating digital infrastructure and zero costs in maintaining hardware for the ERP solution. In the long term, this solution drives savings because ERP modules can be added to the core system when needed.
An organisation with ten employees can make do without a dedicated people management platform, but at one hundred employees having the people management platform within the ERP system is prudent.
Supply chain optimisation
For organisations with complex supply chains, having complete visibility and analytics capabilities makes for a powerful tool when evaluating the different parts of the supply chain. By being able to track the costs throughout the supply chain, areas for improvement can be swiftly identified and fixed.
Production planning within an ERP system is particularly powerful because the data used in the planning stage is based on real time demand data inventory levels and resource availability.
This helps reduce production bottlenecks, reduce downtime and improve overall production efficiency, leading to cost savings.
Compliance and risk management
ERP systems can help ensure compliance with regulations and standards, reducing the risk of penalties and fines. As all data is secured safely in the cloud, all updates to financial and non-financial data are logged.
This increases transparency and reduces the risk of fraud. This reduction of fraud risk can save an organisation funds in the long run.
The most widely used ERP systems are noted for their security and stability, meaning you can put your mind at ease about the risk to your own and customer data.
Measurements and reporting
A particularly powerful aspect of ERP systems is that they allow for the analysis of non-financial metrics. Whether it is ESG data, like CO2 emissions, or manufacturing data, such as order cycle times, the ability to store these metrics alongside financial data makes for effective decision making.
Not only can these metrics be observed, but the effect of changing these variables on costs can also be analysed. An ERP system allows an organisation to shift from measuring key outcomes to using these measurements for organisation process transformation.
Conclusion
Exactly which savings an ERP implementation will bring varies on your organisation's size, complexity and operations, but in our experience the biggest savings are felt in the finance team's processes.
With an ERP system, finance teams no longer dread account reconciliation with an ERP system and are instead able to experiment with financial planning and scenario modelling which can deliver huge benefit.
If you want to find out more, please don't hesitate to contact us. We can give you a free demo and quote so you can assess whether an ERP system is right for you.