Why Spend Money On ERP?

Why should you spend money on ERP?  If you’re looking to upgrade from a retail business software package like Quickbooks, you may need to spend anywhere between $30,000 to $200,000.  When you compare that to the box of software you picked up at Office Depot for $200, you may wonder why you should even consider spending that much money on software.

The rising costs of shipping, insurance, employee benefits, supplies, and other operating costs can bury many small and midsize businesses.  Without a plan to manage and reduce these costs, it becomes impossible to grow your business or increase your profitability.  Costs are more likely to increase than decrease if you do nothing to manage them.

The knee-jerk reaction to reducing costs is to look for quick, cheap alternatives.  Get a cheaper benefits provider, find a cheaper staff, use cheaper materials, etc.  Unfortunately, these choices typically lead to unhappy employees, unhappy customers, or both.  Even if you increase your profits in the short term, you sacrifice market share and revenue in the long term which is far more dangerous to your business than increasing costs.

The better alternative is to seek out opportunities to reduce your existing costs while maintaining or increasing your capacity to generate revenue.  One of the best ways to do this is to place a high value on your employee’s time.  If one employee is spending 30 minutes a day on a task that could be automated, 130 work hours are wasted each year.  What projects could your business accomplish with an extra 130 work hours annually.  If that employee costs $30/hr then the business is wasting $3,900 annually.

Now take a closer look at your business processes.  How much time do each of your employees spend doing tasks that could be done more efficiently.  When you examine the time that they spend on their computer, this can be easy to identify.  Particularly when it comes to slow computer programs, old hardware, or manual reporting and record keeping in Excel.

As you examine these processes, document what you find.  Add up the lost time and you might be surprised how quickly you get to the cost of installing and maintaining quality IT infrastructure and ERP.  You may find this documentation incredibly useful when you decide to spend money on ERP.

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