Upgrading finance capabilities is a major focus for many companies. In recent years, the strategic move has been to focus on data-driven decision making, with finance and transactional data becoming a major source of strategic analytics.
Various reports and analysis form the basis of strategic decision making and rely on accurate and timely recording of transactions. The accuracy and recording of transactions typically occur within the main enterprise resource planning (ERP) system and integrated infrastructure (such as other software and systems). Often, as a company conducts additional analysis and reporting (such as through advanced analytics), it finds that corporate processes, software and system infrastructure, team member capabilities, and organizational configurations are not set up to support high-level analysis and decision making. This is a common scenario in many organizations, as new correlations are identified or performance measures are refined based on where the data can be obtained. These can be incredibly onerous and high-touch processes, with risks to accuracy as well as whether the reporting is consistent from one period to the next.
Many traditional transformation methods will look to identify pain points in the current ERP system to set the stage for corporate investment in a new ERP system or new module. But what if replacing the ERP is not an option? Grant Thornton Finance Transformation Principal Thomas White said “often, companies target the ERP as the main source of efficiency issues. But for many companies, replacing the ERP is not an option. There are many reasons that the organization will not take on a new ERP. These can include lack of financial resources, project sponsorship, major resistance to organizational change or a low current risk appetite.” Instead, the focus should be placed on the pain points and capabilities the company seeks to achieve. “These pain points and capabilities are opportunities for improvement. They should be prioritized in an agile way that allows for benefits and point-in-time adjustments along the way.”
Grant Thornton Finance Transformation Managing Director Ron Gothelf agreed. “As companies evolve, they become less efficient and effective over time. Modernizing finance functions should look at the existing ERP system as just one piece of the whole. Great strides can be made through adjusting operating models, streamlining processes, enabling staff and implementing new technologies.”
Why not replace the ERP?
Fully replacing an ERP system takes significant time and resources to research, select, plan, implement, measure results and conduct change management initiatives. Risk and requirements significantly increase based on the system size, configuration, number of interfaces and number of end users. In the midst of implementation, issues such as lack of end-user acceptance, integration, configuration or compatibility may be prioritized over initial performance challenges.
“Ultimately, if the solution is not directed toward addressing the pain points or capability requirements, the investment may not meet the return. In many cases, there are other efforts that can be undertaken that can provide companies with benefits for less risk and expense than replacing their ERPs,” said Gothelf.
How can you modernize without replacing the ERP?
To modernize without replacing the ERP, “the same tenets apply,” White said. “Look at key areas that require additional capabilities or are causing major pain points and review them against the operating model of people, process, data and technology. This informs the solutions, which can be prioritized and implemented in a controlled, cost-effective manner with less disruption. That provides companies with substantial returns and gains within a few short months.”
“In my experience, there could be many reasons for why the process has become inefficient over time,” Gothelf said. “In several instances, the ERP was either not initially set up with the appropriate business unit structure or chart of accounts, or the company’s evolution over time through acquisitions and divestments changed from the initial structure in the ERP. This caused significant issues at period end, when the data needed to be manipulated to meet company reporting needs and regulations.”
What role does emerging technology play?
In some instances, emerging technology has enabled capacity and new capabilities that can support strategic decision making using faster reporting on more timely data.
Grant Thornton Finance Transformation Director April Theros said she has supported many such clients. “Often, companies do not use the full capabilities of their current technology, or are not aware of other solutions that can bring significant results. Depending on the pain points, or the additional capability the company is looking to build, there are cost-effective approaches to take. This starts with utilizing capabilities even within the current ERP system that have not been implemented.” Some caution should be taken with this, she noted. “Often, there are organizational, people, process or data factors that need to be considered when utilizing current capabilities. For example, if the company wants to enable functionality within the system that was not previously incorporated, there may be some organizational considerations, such as impact to internal controls, or there may be processes that need to be adjusted accordingly.”
Grant Thornton Digital Transformation Partner Tony Dinola agreed. “A large factor here is that the solution needs to fit with the company’s technology infrastructure,” he said. “Many solutions can be quickly implemented, but better solutions provide longer-term benefits and are based on IT’s approach to modernize or streamline.” Each organization is likely to have unique business requirements and underlying infrastructure that is important to consider when making any technology investment. That said, a thorough evaluation of the problem statement and compatible solutions on the market is a very important step in any transformation, whether that be a new ERP application or emerging technology such as robotic process automation, process orchestration, optical character recognition or data analytics solutions.
“If a company decides to implement new technology, the ideal method would be to implement one that can meet multiple pain points of capabilities,” Gothelf said. “And pick a pilot project that can enable fast results and return on investment. This will allow for greater efficiencies over the technology’s use, since people like to use applications that they are familiar with.”
“The bottom line is that companies should focus on the improvement opportunities themselves,” White said. “There are many cost-effective options to consider that can improve operations before taking on a major ERP implementation initiative. The traditional approach for some of these old systems would be to totally replace them. Now, given all of the new technology and approaches, there are other options for modernization besides replacing the ERP.”
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