Moving from accounting software to an ERP (integrated business management system) is a considerable expense for any SME and the cost versus value equation is one that any business owner will prioritise when making the decision.
As each business has specific needs and requirements as well as costs they are carrying due to inefficiencies, the first priority is to get expert advice from a business partner who takes the time to listen and understand your business needs. Their experience will guide you through the entire process of selecting and implementing the right solution.
“To make an informed decision about your budget you need to be walked through all of the factors that will affect costs and understand the cost implications of the different solutions available. Then you need to evaluate the cost versus benefit for a sound long-term investment,” says Sean Fowles, new business sales representative of Seidor.
Implementing an integrated system has initial costs such as licensing fees, integration with the company’s existing systems, any possible customisation and employee training. Other fees to bear in mind include computer hardware, annual maintenance, upgrades and ongoing end-user training. It is important to get a comprehensive breakdown of all current, future and/monthly costs from your technology partner to make sure no unforeseen or unplanned costs arise.
Factors that will determine the budget required for an Enterprise Resource Planning (ERP) system:
Some of the main factors that will determine the budget required for an ERP system are:
- The number of users and their roles
- Infrastructure requirements
- The size of the stock list (for businesses carrying stock)
- The complexity of projects (for project-based or service businesses)
- The complexity of operations (for businesses with multiple entities or subsidiaries)
Fowles explains how each of these factors affects the budget
The number of users by role
The user count is one of the defining factors of the total ERP investment requirement. Knowing how many users you will have and what tasks each of them will have to perform, serves as a market segmentation guideline to find suitable ERPs to choose from. Different software providers have different types of features or user settings available and there are often different pricing structures depending on the number and types of users in an organisation.
A larger business may need more user licensing but not all users would require the same access to perform their tasks. Super users have more access to the ERP system and its various functionalities and their user licensing will subsequently be more expensive. They can grant authorisations or control the access of other users to information stored in the system. Other people may only need access to certain areas of the system or tools that interact with the system, such as barcode scanners used at a warehouse. Process users in specific roles can operate with limited licensing which is costed according to the roles they are assigned.
According to Fowles, small businesses can choose between perpetual licenses or subscriptions. Prices for using SAP Business One to manage a transport business, for example, will be based on the number of users and not the number of vehicles in their fleet. Additional licenses can be added as the business grows and employs more users.
The need for infrastructure will depend on how the software is used and where it is housed. Some companies prefer an on-premise option, where the server is kept at their premises and will require hardware and maintenance. Other may prefer to house the software in the cloud, which does not require any hardware or ongoing maintenance costs.
Fowles says that as connectivity becomes more reliable and more businesses allow for remote working, businesses are now generally moving to cloud-based rather than on-premise systems. He says that cloud-based systems are becoming increasingly affordable and users can interact with the SAP Business One ERP system for as little as around R1000 per user per month.
The size of the stock list (for stock carrying business)
The size of the stock list of a business that carries stock will impact the time required to ensure that all data and variations of stock groups, valuation methods and cost structures are accurately captured and configured in the ERP system.
The complexity of projects (in a project or services business)
Project and service-based companies may have existing projects on the go that need to be brought into the ERP solution. Preparing these projects for import according to the configuration can require additional project time.
The complexity of operations (of multiple entities or subsidiaries)
Many small to medium-sized businesses have sister entities with which they trade. It takes time to prepare for shared services and to make sure that the ERP system accounts for all scenarios and inter-company transactions.
Beware the cost of not choosing a quality solution fit for your business
“Unfortunately many businesses that have outgrown the use of basic accounting software packages and need help to better manage their operations, first try to patch their existing solutions with plug-ins or add-ons instead of moving onto an integrated ERP system. They end up with varying data sets which results in more complex migrations when they eventually move to a single integrated system,” says Fowles.
Although making the change to an integrated ERP earlier is more expensive, it will save significant time and cost in the long run as very few solution additions are required when you have a quality solution such as SAP Business One. The core solution can expand to suit the changes in the organisation as the business grows.
“Over the years we have helped many small to medium-sized businesses to carefully manage their budget and we have been privileged to know that our clients have seen a return on investment from implementing SAP Business One,” Fowles said.
One of these clients moved from another well-known ERP system to SAP Business One and completed a project at half the cost of their project on the first ERP system. Fowles said planning the project with a solution specialist ensured that this project-based business was able to avoid unnecessary expenditure.
SAP Business One gives small businesses more control over their operations as well as greater insight into their business to make informed decisions based on real-time information. “Our clients can grow and scale their businesses significantly following the implementation of our user-friendly solution,” Fowles concludes.
Written by Sean Fowles