Getting ROI from ERP
In the world of business, there is no getting past the fact that at the end of the day, the aim of the game is to turn over a profit. For this reason it’s vitally important to keep track of your expenses and try to quantify what benefit your expenses are producing for your company to identify what is most effective and point out areas which could be improved or cut.
Some tools such as ERP (enterprise resource planning), CRM (customer relationship management) systems and project planning software, however, can be hard to quantify in terms of ROI however since they’re management tools, thus much of what they provide isn’t directly visible in sales.
Things to compare in these types of tools are workforce productivity, customer satisfaction levels, client retention rates, sales team conversion rates, reductions in admin errors and then associate values to these things. The ease of doing this depends greatly on the type of industry you work in and the kinds of benefits your system provides.
For example, in food distribution software, being able to see warehouse stock levels, sell by dates and storage requirements for perishable good can save vast sums of money just in stopping loss of stock, whereas rental inventory software helping to keep track of stock levels and contracts is still providing a very important service for the business, however won’t provide the same kind of direct ROI.
Whatever your business model, identifying where management tools might help improve your business and make it more efficient is the first step towards calculating ROI, then of course you need to benchmark your current performance in these areas. Typically you will then need to use the new system for a decent period of time before your staff will be fully up to speed with any changes in the process. The more intuitive the system is, the faster your staff should get there.
An important way to maximize the cost effectiveness of an ERP or CRM system is to find a solution that fits the scale of your company. While a larger company may benefit from an in house management system taking advantage of their already existing IT department, smaller businesses or those without their own IT departments may find it more cost effective to outsource their business management systems to third party, hosted cloud services. Indeed this can even be more cost effective for larger companies wanting to avoid the large upfront capital investment of an in house system.
And of course, if you want to see return on investment, it’s imperative to have a system which works with your business and not against it. Keep in mind all your business processes and try to find a business management solution which is tailored to your business. This shouldn’t be too tricky since there are a myriad of companies working on business management tools at all levels tailored to all different verticals, even some tailored to very niche businesses such as window cleaners!
Will is a data analyst who works with online rental software and writes about business management software, big data and data analysis.