Get a grip on your ERP investment
Determine your ERP budget without surprises afterwards.
A new ERP system requires investment. But how do you determine a realistic budget?
Many manufacturing companies underestimate the total costs. They focus on licenses, while implementation, data, and management are often an afterthought—the result: blown budgets, overruns and delays.
In this guide, you will discover how to draw up a realistic ERP budget and avoid surprises.
After reading, you will know:
- What costs are involved in an ERP implementation?
- How to realistically estimate investment, risks, and return.
- How to justify your budget to management and stakeholders.
Why investing in an ERP is important
For small and medium-sized manufacturing companies, investing in an ERP system could be a game-changer. But how much should an organisation invest in a new system?
In this document, we discuss the key considerations when drawing up an ERP budget. By making the right financial choices, you can select the supplier that best suits your company and lay the groundwork for sustainable growth.
Reasons to invest in ERP
Investing in an ERP helps companies to:
- Replace outdated systems
- Streamline processes and save costs
- Tap into new markets
- Grow and achieve higher profits
- Comply with laws and regulations
A well-planned ERP investment can streamline processes, reduce costs and create a stronger foundation for sustainable growth.
The investment process for ERP
Investing in an ERP system is not something you do lightly. Take the following steps to make sure you make the right decision:
- Analyse your business:
• Determine any automation needs and redundant business processes, and the improvements you hope to make. - Make a cost estimate:
• Technical costs: Hardware, software, maintenance and security.
• Data costs: Migration and validation of legacy systems.
• Personnel costs: Training, change management, and support. - Calculate the cash flow, cost savings, and ROI:
• Calculate what the investment must yield in terms of savings on labour, faster order process turnaround times, and improved efficiency. - Conduct a risk analysis:
• Consider cloud solutions to minimise cybersecurity risks. - Draw up an implementation plan:
• Establish a timeline, budget, and measurable goals for the system’s go-live.
Pricing models: cloud-based (SaaS) versus on-site
Both on-site and cloud-based ERP systems are available, each of which offer different advantages and disadvantages.
On-site:
- Benefits: Permanent license and predictable costs.
- Disadvantages: High initial investment, lack of flexibility and scalability, and low level of security.
Cloud-based:
- Benefits: Lower startup costs, subscription costs based on usage, flexible scalability, and improved security through economies of scale.
- Disadvantages: Dependence on supplier stability.
Cloud ERP can offer lower start-up costs and greater scalability, while on-site systems generally require a larger initial investment.
Conclusion
SMEs are increasingly preferring cloud-based ERP solutions due to their flexibility and lower costs.
There are various ways to finance the purchase of an ERP. Your company’s management must decide whether this investment should come directly from company funds or be financed (partially) from other sources.
A deliberate process for determining your ERP budget is essential if you want your new software to launch successfully. Because such a system integrates, manages, facilitates, and automates all of your business processes, it is crucial to conduct thorough research into the various systems and suppliers.
Worksheet: Setting up your ERP budget
Whether you choose an on-premise or cloud-based solution, a clear understanding of all potential costs is essential when selecting, purchasing and implementing a new ERP system. Hidden fees and unexpected expenses can quickly lead to budget overruns, disrupt project timelines, and negatively affect your business.
Download the PDF version of this guide to access a comprehensive worksheet designed to help you identify hidden costs and build a fully informed, well-supported ERP budget.