Choosing the right Enterprise Resource Planning (ERP) system is one of the many challenges construction companies face. Choosing the wrong ERP system can potentially hold a company back, however, the right system can substantially propel a company forward—especially in the areas of cash flow and profitability.
What can the right ERP system do for you?
When considering whether an ERP system is right for your business, it’s important to think of whether it can handle the day-to-day and cash flow needs of your business.
Some questions to ask yourself:
- Can you quickly and efficiently, process payments and record transactions?
- Do you know, timely, of the company’s cash flow?
The right system may be costly, but it could also create efficiencies by taking out mundane tasks such as data input and using the salaries for higher-level work, which will reduce salaries by eliminating the lower level work. The right ERP system goes beyond just an accounting system; it becomes a platform to run your business by implementing project management and checks and balances along the approval process. Having access to timely information and reporting, and being able to quickly identify areas of weakness, provides you with an opportunity to better manage cash flow eliminating the need to draw on a line of credit with interest. For instance, a contractor can bill timely work performed, resulting in timely payments to their subcontractors, material, and labor for which their expenses have already been incurred. In this way, the owner finances the project, not the contractor. Additionally, the probability of change orders decreases significantly.
How to choose a new ERP system?
Selecting an ERP system can be a costly decision—which is why it’s important to take your time, go through the process, and look at different systems, then prioritize the needs of the business. While considering the needs of the business, the future outlook for the business is also vital. If the plan for the company is to continue to grow, then you need to look into an ERP system that will function effectively and efficiently at the growth level you anticipate. What is needed out of an ERP system that you aren’t getting now? Why aren’t you getting it? Is it a user function or can the system not handle anymore? One of the deficiencies in the industry is a lack of communication between the field and office. An ERP system can integrate the project management into payroll and accounting departments and facilitate beneficial communication within your company. For contractors, for instance, it’s important for them to know the remaining costs on a project, to completion, and the out-of-scope work so that management can make appropriate decisions on a project-by-project basis in a timely manner. An ERP system can make this information more readily available when used properly, which facilitates important communication in order to fully understand each project.
Challenges during implementation
After selecting the correct ERP system, the next challenge is implementation. The first step to successful implementation is to assemble a team from within the organization who will oversee the implementation. Consider whether a consultant or project manager will be needed to help fine tune and customize the product into what is necessary for the company’s needs. One of the other challenges is getting buy-in from the rest of the organization and get them committed to using the new system to its fullest capabilities, rather than defaulting back to old habits and conveniences. One feasible solution is to incorporate the end users into the selection and implementation process so they have input for customization and can fully see improved end results. Additionally, it will take time to train end users on the system’s capabilities before the system goes live.
These points could be the difference between a successful ERP system and implementation and an unsuccessful system and implementation. While this can be a stressful time for any business, especially one with a lot of moving parts, it’s important to take the appropriate steps and measures to selecting and setting up an ERP system.