Selecting an Enterprise Resource Planning system

Selecting an Enterprise Resource Planning system

Several market leading enterprise resource planning (ERP) software services or products (e.g. Microsoft Dynamics 365, SAP Business ByDesign, Oracle NetSuite, Intuit QuickBooks, Xero Accounting, Zoho Books, FreshBooks, Dolibarr) are available in the market. Certain product features are easy to be predict even by novices. Most of us believe that these features should exist very ERP and it should work the way we expected. Not really!! So, the question arises: how are they different in terms of data capturing, processing, reporting, etc. capabilities.

An ERP system is fundamentally built around a Financial Accounting system that would require at least a Chart of Accounts (CoA) as its foundation. In simple terms, you could view a business from Balance Sheet (BS) and Income Statement (IS) perspective. Obviously, many people would expect that there must be some establish norms or standards that all the software vendors must be using. No doubt, they are using internationally accepted principles for recording transaction data. But, the core difference starts right here (in CoA) within many ERP software suites. How flexible is the ERP system that allows structuring the CoA according to your business requirements? Please check this first before making a buying decision. You accountant knows it very well.
  1. Dashboard & Reporting - Many product vendors have integrated their application modules related to custom dashboards or reports creation already. But, customization capabilities might be available only in higher editions. Some software vendors keep it separately in their Business Intelligence or Analytics tools. Basically, they provide you minimal dashboards or reports in their standard package and advanced capabilities requires additional subscription. 
  2. Banking Integration - After the standardisation of bank statements happening all over the world using .PDF file formats, majority of software vendors have subscribed to your country’s Banking Networks to be able to import the bank statements such that it could be imported easily into accounting system and transaction could be matched in the books. Believe me, it saves lot of time and keep you in sync always. It's truly a remarkable capability. However, you should try to connect with all the bank accounts so that each transaction could be matched correctly. In a Digital Age, a new problem has started emerging recently due to payment gateways, distributed catalog, and accountings of metered services.
  3. Inventory Management - Some software vendors have very basic implementation for inventory system integrated already. However, these basic capabilities do not serve a manufacturing or subscription business needs. These inventory systems were designed to be used by a trading business. Depending on the nature of your business activities (e.g. manufacturing, trading, digital content) and associated sales channels (e.g. offline stores, franchisee, online eCommerce, digital content subscription) our exceptions from inventory systems differ drastically. Some vendor’s software won’t allow you to even classify the inventory accounts (e.g. resale items, expired goods) properly. Majority of items as simply treated as products. But, we don’t sell products only nowadays. Also, multi-channel sales capabilities (e.g. POS, IVR, eCommerce) are missing. We have started selling some of our products through eCommerce operators or stream digital content through content networks. These inventory systems are too aged for such models.
  4. Sales Data Processing - Typically, the customer invoicing & payment collections data handling is covered by most of the software vendors. But, some ERP systems are weak in handling product returns, refunds, credit notes, etc. Even worse, some do not allow you to customise the accounts receivable (AR) transactions (e.g. domestic, foreign, interests). Some are very weak in subscription-based transaction handling. In a Digital Age, every customer is expecting metered-services, but your accounting system is not ready. Therefore, you are forced to buy another software to  managing customer’s subscriptions. That’s one reason many payment gateway service providers (e.g. 2Checkout, PayPal) started getting into software business too. Payment Solution created another layer of software to be able to manage subscription-based transactions that is completely independent of your corporate accounting system. When such transactional data is fed into your accounting system, a matching exercise becomes headache again because the product or service catalog, pricing, invoicing, payments, etc. have been handled outside your system. You need transactional synchronization plus paying for software services indirectly.
  5. Purchase Data Processing - Typically, the vendor's or supplier's billing & payments data handling is covered by most of the software vendors. But, some ERP systems are weak in handling product expiry or damaged goods return, vendor credit notes, etc. Even worse, some do not allow you to customise accounts payable transactions (e.g. domestic, foreign, interests). Some vendors restrict you based on transactional currency settings on specific accounts. How could you have single currency when transactions seem to be global? Can you create multiple sub-accounts for a single vendor due to whatever reasons (e.g. geography, currency, tax)? You accounting system becomes a bottleneck. In a Digital Age, you are buying not only physical products, but metered-services too very frequently. But, your accounting system in incapable of interpreting such data. Also, it doesn’t subscribe to such data feeds natively thence you end up feeding such information manually and make a lot of mistakes while recording transaction.
  6. Projects & Timesheets - Majority of contemporary businesses have some service-oriented transactions too. If you are billing on a time and material (T&M) basis to the clients, the accounting system must allow recording and reconciling it with project management system (PMS) and expense management systems (EMS). Many software vendors still keep such key product features as a separately paid-module or extension.
  7. Expense Transactions - Typically, a basic expense management module is included in accounting system, but more advanced level of classification of transactions is required for management accounting. Some software vendors keep it as a separate paid-module or extension. It gets integrated with your PMS too in case you have to offer professional services (PS).
  8. Payroll Processing - Your employees salary, deductions, provident funds, loans, taxation, etc. have an accounting perspective too. Many novices expect it to be part of a human resources management (HRM) system. Not true. Some vendors sell it as independent module to be integrated with your financial accounting and HRM system. Perhaps, one reason is timesheets for your services business.
  9. Tax Management - Many countries are simplifying and unifying their goods & services tax (GST) or value added tax (VAT) handling practices. Your business might be a single legal entity in a given country. However, there might be several geographic boundaries for GST within a country. Some accounting software vendors do not cater to this requirement. Therefore, each GST number forces you to create a separate organisation instance. Basically, you end up having multiple instances of accounting software to be able to manage single business entity due to limitation of the software. Nowadays, tax reporting to the government’s services network is also a key product feature to look into. It makes life much simpler.
  10. e-Way Bill Integration - You could look into these product features to simplify some activities related to logistics, if you have some element of transportation of physical goods involved in your business. Since the government is tightening its hold on movement of goods, they started offering some web services. An integration of your accounting system with such services would help keep everyone in sync.
  11. Multi-Company - In case, one has multiple business entities or different lines of business within the same legal entity that requires different treatment due a number of factors (e.g. GST, products, geographic coverage). Some software vendors are not able to handle multiple companies in the same instance. So, they ask you to create a separate instance altogether, which increases cost also in terms of software subscription and transaction management. Moreover, you are required to aggregate and integrate the data using a single pane of glass. 
  12. Intracompany Transactions - When you exchange money with a logically separate business entity, which is treated like a subsidiary but it not really separate from statutory reporting perspective, you need an accounting system with intracompany capabilities. Many software are missing this key feature. 
  13. Budgets Management - Most of novices would expect it to be a standard product feature, but that fact remains that it is still considered an advanced capability by some software  vendors.
  14. Discounts Management - Sales discounts are common business practice, but many software vendors do not have this feature enabled by default. You need to customise it using customer relationship management (CRM) system and financial accounting integration. 
  15. Commission Management - Sales commissions are very common in today’s business scenario. Many software vendors do not have this key feature integrated by default. It requires software customization or buying additional paid-modules instead of integrated by default with the accounting software.
  16. Cash Register Management - Besides the retail business, majority of the organizations do need this simple capability. It makes life much easier for petty cash handling. But many software vendors do not provide it by default. 
  17. Bank Cheques Tracking - We still handle a lot of bank cheques in our transactions. Many software vendors are missing such a simple capability to be able to track bank cheques. You would incur loss due to lost check in transit, if you do not manage it in properly. 
  18. Multi-Currency - In a Digital Age, when we are selling through multiple channels or buying from multiple sources, how could we imaging doing business without multi-currency capabilities in an accounting system? But, some vendors enable it only in higher editions of their product.
  19. Communication Systems - Nowadays, everybody (e.g. employees, customers, suppliers) is expecting transactional updates through Email, SMS, WhatsApp, etc. so integration with Cloud-hosted PBX / IVR / SMS gateway is expected.
Obviously, there are many more issues, but I have listed just a subset of that here. Please feel free to contact us directly, if you have any queries further.