Financial Systems

3 Caution Areas for System Implementations: a Leadership Perspective

I have been a part of several system implementation projects – from Sage X3 to SAP. Software implementations can be the most impactful projects that a team can deliver an organization. Even smaller IT projects can have significant impacts, such as delivering a detailed income statement in a minute when it used to take a full day of manual labor.

As you start a system implementation process, many items can arise for consideration. The technical details can sometimes feel overwhelming, but as I look back on several implementations, common themes emerge. Customization, clear necessities and employee bandwidth and capabilities come to mind as areas for additional caution and focus.

Customization is a slippery slope for any system implementation.

The common mindset in the first pass is that we are in charge, and the software should do what we tell it to do. However, that perspective can become an Achilles’ heel very quickly. The best approach is to find common ground with the software and adjust business processes more frequently than the software.

In my last implementation, the structure for taking order deposits was overly complex for the ERP system. Internally, the team was overly focused on matching the present structure without enough thought on the true business need. The company spent a lot of time and money building out the structure with exceptions for so many different rationales. The product type, payment type of the customer, the inventory status, freight, partially available inventory and the timing of the inventory availability were all considered and built into the software.

But the deposit customization triggered all kinds of issues within the ERP system that were not easy to fix.

Too much customization – particularly adjustments to the core software – can create three major long-term issues:

  1. Significant customization requires great initial expense in money and time. The effort will eat away time that could be better used on testing and other support for the project.
  2. Customization often causes unforeseen issues and impacts. Despite best efforts, it’s common that customization causes issues – even once you are live – that are again costly to fix.
  3. When you upgrade the software in the longer term, the customizations will likely return as problematic again, in that they cause additional issues and expense.

My advice here is to proceed carefully and consider what customization is truly necessary for the business. The value of any customization must outweigh the longer-term effort to maintain the customization in the ERP.

Be clear about necessities for a successful system implementation.

It’s important to recognize when you have undeniable requirements that are needed in the backbone of your business and its systems. Successful implementations require a lot of analysis to determine requirements and then proactive project scope management. Various requirements and improvements create the foundation and rationale for the project, and these items must be scoped out with a proper team that holds roles across the organization. This approach will allow the system to meet the organization’s needs over the life of the software. 

One of the implementations that I worked on came to an impasse over automation of revenue recognition for annual software maintenance contracts. The company was moving systems to the corporate enterprise resource planning (ERP) tool of SAP. Our SAP structure from corporate didn’t have the capability to automatically allocate the revenue. The contracts all had different start dates, and we needed the consistency and accuracy of an automated system.

There was a lot of debate on the need. However, we had the capability in the company’s prior ERP software, and our moving to a manual process in Excel would have been a major downgrade in accounting controls. This was a time when we had to lay on the tracks and say it was a requirement, and we couldn’t move forward without it. It allowed the team to step back and find a way to use Project Systems to build an automated structure. Without the pressure, we would have lost an important automated process that the division needed for accurate accounting of revenue.

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Consider the impact of the system implementation on your employees.

Every implementation I have been a part of has had significant impact on the employees – even to the point of medical leave for stress. In many ways, implementations give capability, speed and accuracy to your employees. However, the road there sometimes has challenges. A large part of an implementation is to determine what your employees can and can’t do as part of an implementation and where experts need to be called in. Even many highly trained personnel only have limited experience with implementations. Keep in mind that the implementation is also a full-time job on top of the full-time jobs operating the business. The right experiences, capabilities and capacities should always be considered during an implementation to maximize results and minimize employee impact.

For a specific example, one of the implementations that I worked on caused significant distress to our division’s Accounting Manager. In addition to changes including a new division President, the added weight of the implementation was too much. For most employees, including the Accounting Manager, days, weeks and months were already filled with work. The added analysis and support for an implementation was the straw that broke the camel’s back, and she eventually left the company.

The environment of added stress and different types of work are too much to overcome in many implementations. It is better to bring in resources trained, ready and capable of supporting the workload. It will also help you avoid the challenges inherent in managing time commitments between the implementation and the ongoing activities.

Set the stage through thoughtful implementation.

I hope these insights provide useful in evaluating the best approach for an implementation at your company. It’s important to recognize not only the technical fit of an ERP system, but also the impact that choices may have on your company’s ability to grow. Getting these items right can help you build the structures that will allow your company to grow and optimize processes for several years. And who knows? By then, your company may have outgrown its ERP solution and warrant another implementation. And you’ll be ready!

You can visit the services area of our site to learn more about our financial systems services. And we invite you to contact us if you need dedicated external support resources for your system implementation or optimizations efforts. We’re here to help!

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About the Author

Bob has 25 years of finance and accounting leadership experience serving companies from the Fortune 500 to the middle market. Prior to 8020 Consulting, Bob led finance and accounting as the Vice President of Finance for Ardmore Home Design, a high growth wholesale luxury furniture company. He has leadership experience with TechnipFMC (oil and gas equipment and technology), Panasonic (in-flight entertainment and communication), Hawker Beechcraft (general aviation) and Ford Motor Company. Bob also worked with the CapAnalysis Group as a litigation consultant supporting attorneys and clients with finance, accounting and economic analysis. Bob holds an MBA in Finance and Accounting from the Ross School of Business at the University of Michigan and a B.S. in Economics from the W.P. Carey School of Business at Arizona State University.

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