I recently had the pleasure of supporting a client through an Enterprise Resource Planning (“ERP”) system implementation to better manage and streamline their finance and accounting processes. The client had been leveraging an antiquated SAGE system, forcing them to heavily rely on standalone Microsoft Excel schedules to perform over 90% of their quarterly close and reporting processes. The client also had exceedingly complex allocations of its back-office expenses to its business-facing strategy P&Ls. As a result, they decided to invest in ERP customization to ensure a “one-stop shop” for their needs.
During software selection, my strategy was to identify vendor(s) able to handle a customization to support the most complex portion of the client’s business: their back-office expense allocations. By applying this approach, I recommended MS Dynamics 365 as the ERP solution that was all-encompassing for their needs. The client agreed with this recommendation and partnered with a third-party system implementer, AKA Enterprise Solutions (“AKA”), to manage the build out.
When managing a customized build of an ERP system, consider the following best practices:
ERP customization offers the opportunity to improve existing corporate processes – across the board.
Just because a process is being used today does not mean that same process is best going forward. Prior to any ERP system implementation, the first step should be brainstorming with the key users to identify process improvement opportunities and optimize existing processes before they are built in a system environment. Some questions to consider may include:
- Where are the “pain points” in existing processes?
- Are there any unnecessary layers of approval? Can approval thresholds be raised?
- Can allocations or reporting methodologies be simplified?
- Is there a better way to organize the Chart of Accounts?
- What is the tradeoff between building in complexity versus the associated cost? Is that trade off worth it?
Asking these types of questions yielded changes to the ERP implementation project scope. In my client’s particular case, they decided to scrap a complex time allocation process in lieu of a simpler approach, which greatly reduced the scope of customization as well as the cost to implement. On the other hand, the client decided on a more complex, yet more flexible, Chart of Accounts, and they also removed certain approval layers for Accounts Payable invoice payment processes.
ERP customization requires a systematic approach to imparting knowledge to the third-party implementers, who are not experts in the business.
One of the trickiest parts of implementing any ERP customization is reliance on a third-party vendor that is not an expert in the business. This lack of expertise means it’s unrealistic to expect them to build something that will fully support the company’s specific needs.
Since I helped to develop models to support the client’s most complex processes, I was a Subject Matter Expert on the complexities of their business. To ensure the third-party implementer fully understood all contemplated components in a customized build, we partnered using the following knowledge-sharing tactics:
- Model and Reporting Walkthroughs: Using screen-sharing technology, conduct model walkthrough sessions with the third-party implementation team members to impart knowledge of the most complex elements of your models and reports.
- Process Outlines: Create detailed flow charts of key processes, and share them with the third-party implementation team.
- Team Workshops: Schedule group discussions between internal key internal users and your third-party implementation team to review each process in detail.
- Blueprint Document Review: Your third-party implementer will likely create a blueprint document citing the build steps understood to be necessary to create the desired, customized system. Review this in detail and provide necessary edits to your third-party system implementer until all parties agree. This step is arguably the most crucial of the collaboration. Any build changes beyond what is outlined in the blueprint document will increase cost via change orders.
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Always weigh current versus future state while supporting ERP customization.
Just because a complex process can be built as a customization within a system does not guarantee it will be accretive. Consider these factors:
- How much maintenance would be required to keep this process running in the system? For example, would it require adding a ton of new accounts or allocation receivers? How complex would those processes be?
- How manual would the process be itself within the system? Would a user have to perform 20 different steps? Would it just be 2 steps? Would the new process save time?
I always advise my clients to only implement system processes where the maintenance and manual effort would be lower than the current effort to do so.
Crowdsource the best test use cases from the internal team.
In my opinion, the most crucial part of any customized system build is user acceptance testing. This is the phase where the user team utilizes a “skeleton build” of a process within the system to ensure the build is working as expected and is easy to manage.
Once it’s agreed the build-out is satisfactory, it may be costly to make any additional changes. Due to this cost risk, it is imperative to have several specific test cases to ensure the system can handle complex issues. I recommend having brainstorming sessions with the user team to derive three to five special-case scenarios for each process that represent the more complex procedures for those processes.
During user testing, the user team should ensure the system can handle all complex issues to support a process, while also validating that system navigation to execute complex processes is not burdensome.
Use KPIs to measure results in a meaningful way.
What was the overall result of the implemented ERP customization? To address this question, leverage at least a few of the following KPIs:
- How has the length of time to perform a process changed?
- How have the necessary resources to perform a process changed?
- Is a similar or improved level of accuracy maintained after the system launch?
- Is the team happy with the results? Do they find it easy to navigate and problem solve within the system interface?
- Are downstream clients (e.g., executive team members who review reports) satisfied with the results of the system?
By adhering to the best practices above, the KPIs should reflect an overall improvement in automation, a reduction in required client resources, and increased overall client satisfaction.
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About the Author
Jaime has 12 years of diverse finance and project management experience in the real estate, entertainment, video games and technology industries. Prior to joining 8020, Jaime was the Director of Studio Finance and Operations at Activision Publishing, and had previously worked for WB Games, Warner Bros. Entertainment, Mesa West Capital and SL Green Realty Corp. Her expertise centers around FP&A, operational strategy, budgeting and forecasting, cause of change analysis, reporting, cash flow forecasting, asset valuation, process design and financial systems implementations. Jaime holds a Bachelor of Science degree in Economics from the Wharton School of Business at the University of Pennsylvania.