Avalara is a company comprised of tax experts who deliver affordable, scalable sales tax solutions. We often recommend them to clients, but our reason for posting today is a recent paper they published called “Is Your ERP Investment Paying Off” in which they proffer a few practical tips for measuring ROI in your ERP. The full paper can be accessed here.
They point out that ERP is a major investment, so companies naturally want to justify the expense with better returns. But while those companies pay close attention to costs and timelines, they often “fail to conduct any future value assessments on how their ERP impacts day-to-day operations.”
In fact, only about two-thirds of companies ever calculate that ROI according to a recent survey. Avalara breaks it down simply, by noting that measuring ERP typically involves answering 3 key questions:
- Where can I save money?
- Where can I save time?
- Where can I save resources?
Then they provide a few simple practices to follow to stay on track. Their first 3 are worth noting, we thought, and we’ll share them today:
1. Make a compelling case. When you first implemented, you had support from key stakeholders. When assessing ROI, stay the course. Get buy-in from management, come prepared with your process defined, be specific about what you’re trying to accomplish and how it will impact the business. And we would add: Find where improvements have been made, where they can be made, or where other companies have done so, and use those as a basis for extracting more compelling ROI going forward.
2. Take your ERP to task. In other words, where can you be performing better, and where can your system help you identify and correct the shortcomings? Avalara’s examples include:
- Minimize redundancy or improve transactional accuracy
- Better integrate siloed business divisions into the process
- Identify areas where the business could be more competitive
- Comply more easily with tax rules and regulations
We suggest you start with measured baselines, so you can work on improving performance statistically from there. It doesn’t have to be complicated at all. In fact, keep it simple: seek out a very few key performance indicators (KPI’s – actionable and measurable) and use your system to monitor progress against them over time.
3. Drive towards specific goals. Avalara notes that most companies fall down in measuring ROI by being too general. Like our KPI tracking tip above, be sure you’re measuring specific goals, and that you are not being unrealistic. Here again, their examples make it easy to understand what you might look for in your own firm:
- Fill orders faster
- Shorten the time it takes to get invoices paid
- Ensure accuracy of sales tax applied to purchases and invoices
- Automate pricing updates and marketing promotions
- Increase on-time shipments
- Reduce product to market time
Prioritize your list, then focus on the areas where you expect the most, quickest bang for the buck. Again, you’re keeping it simple. After all, most of the best ideas and solutions usually are, aren’t they?