Why you may be running an ERP evaluation
An ERP is a centralized system designed to integrate, manage, and automate core business functions. By consolidating data from departments such as finance, billing, and sales, ERPs enable teams to automate their workflows in a unified platform and ultimately operate with greater efficiency and insight.
As businesses grow, new complexities arise that make scaling difficult:
- Disparate tools adopted over time lead to data silos and redundant processes.
- Greater data volumes make it difficult to report on key metrics in real time.
- An expanding customer base increases the complexity of billing and revenue recognition.
These growing pains are often particularly impactful for finance and accounting teams, as they make it more difficult to provide leaders with a clear picture of the business’s financial state and maintain financial compliance.
ERPs help solve these challenges by providing a centralized system in which finance and accounting teams can automate complex workflows and run accurate financial reporting as the business continues to scale.
ERP evaluation criteria: things to look out for
Implementing an ERP requires significant investment of time and resources, so it’s important to partner with a vendor that meets all of your finance and accounting needs—now and in the future. Here are five things to look out for in your ERP evaluation:
1. Does the ERP support your finance and accounting processes?
ERPs should support all core finance and accounting operations, including billing and sales tax, vendor payments, cash management, account reconciliation, reports, and financial planning.
ERPs should also provide automation that allows you to execute these processes with reduced manual work, as well as analytics to power financial reporting. Finally, it’s important to ensure your ERP supports all compliance processes across tax, invoicing, and financial reporting, as well as any currency requirements you may have. If you don’t have a current sales tax process in place, consider evaluating both simultaneously to facilitate a seamless integration.
2. Does the ERP integrate with your existing systems and technology?
One of the primary values of an ERP is to unify data from multiple systems. To do so, it must provide a wide range of integrations that can solve your finance, accounting, and payment use cases. If you offer in-product self-serve checkout, ensure your ERP integrates with your self-serve checkout solutions.
It’s also important to evaluate whether these integrations are native or third-party built, and whether the ERP provides an open API that can be used to add new integrations.
3. Does the ERP support your customer pricing model?
ERP systems typically offer subscription-based pricing, either monthly or annually. Subscription rate is often dependent on number of licenses, level of access, and modules selected. Certain ERP vendors offer support for usage-based pricing, or other consumption metrics such as transaction volume, data storage, and API calls. You’ll want to make sure the ERP you select supports the way you price your products and bill your customers, especially if you require support for dynamic pricing models that are common for SaaS use cases, including metering and usage-based billing.
4. Can the ERP be configured to your needs?
Every finance and accounting team has its own processes, and it’s important to make sure your ERP can be configured for your unique use cases. Specifically, your ERP should support custom fields, custom objects, and any company-specific accounting workflows. You should also be able to customize views, objects, and workflows to fit your accounting needs.
Additionally, consider the level of custom integration that could be needed for your business, including evaluating whether your ERP supports an open API or provides an event-driven notification model for sending web requests to external systems (e.g. webhooks).
5. Does the ERP provide additional modules that will allow you to expand in the future?
You may want to begin your ERP project with core finance and accounting modules and expand to additional modules in the future, for example Customer Relationship Management (CRM), Project Management Software, or BI/Analytics.
Leading ERPs additionally offer a competitive marketplace of apps available to support specialized functions. In these circumstances, it’s important to ensure that your ERP offers the functionality that you expect to incorporate over time, and that you’ll be able to expand at a reasonable cost.
Questions to ask vendors in your ERP evaluation
There’s certainly a lot to consider in choosing the right ERP for your finance and accounting needs. Here are 10 questions you’ll want to make sure you ask vendors in your ERP evaluation, grouped by category.
Connectivity
- What third-party integrations do you support for various accounting use cases (e.g. tax, revenue recognition, pricing)?
- What payment gateways are supported, and how do you support international currency conversion?
Core functionality
- How do you support SaaS-based pricing schemes (metering, usage-based billing)?
- What tools are available to automate workflows in the ERP, especially with cross-functional internal workflows?
- What invoicing templates are available in the ERP, and are those invoice templates compliant with local country-specific invoicing regulations?
- What transaction types are supported in the ERP (invoices, subscriptions, credit notes, sales orders, quotes, vendor bills, etc.)?
- For manual invoicing, what tools are available to automate emails with customers and send reminders?
- How do you support self-serve customer checkout flows?
Security and reporting
- What reporting and analytics functions are available in the ERP?
- What is the security posture of the ERP to keep data secure and safe?
Best practices for your ERP evaluation
Once you have a good understanding of what to look for in an ERP vendor, you can begin to evaluate potential solutions. But before you engage any vendors, here are a few best practices that will help you assess all vendors equally and set your evaluation up for success.
Involve the right stakeholders
As your ERP will be an integral component of your finance and accounting stack, it’s important to include all of the right stakeholders in the evaluation process. For finance workflows, you’ll obviously want to include the appropriate stakeholders from finance and accounting teams. To ensure that your ERP supports your billing infrastructure, you’ll want to involve stakeholders from Billing, IT, and Engineering.
Finally, if your product offers a self-serve checkout flow, bring product and core engineering stakeholders into the evaluation process so that they can confirm the ERP supports the product financial data backend.
Define an evaluation process
Before you engage any ERP vendors, define a clear evaluation process. This may include questions to ask, stakeholders to involve, features, integration requirements, and desired timelines. Establishing your evaluation process before engaging vendors will make it easier to evaluate vendors equally and ultimately choose the best solution for your needs.
Calculate ROI
As you progress through your ERP evaluation and select a shortlist of vendors, calculate the approximate ROI for each option. For ERP costs, review the proposed subscription/license fees and any implementation, training, or customization costs required to operationalize the ERP.
To calculate ERP benefits, consider the impact that ERP automations will have on your current finance and accounting workflows, and how to reduce the risk of errors, penalties, and compliance violations.
Selecting which ERP vendor to partner with is an important, consequential decision. As sales tax compliance experts, we partner with comprehensive and modern vendors like Rillet, NetSuite, and Sage.
