How to Manage the ERP System Selection & Implementation Process

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Dear CFO,

Our company is looking for a new ERP system. My CEO just informed me that I am leading our ERP system selection process as well as participating in the implementation team once we find the right fit. I’ve purchased accounting software in the past but selecting an ERP system seems like a BIG job. Can you give me some tips to help in the process?

ERP System Searching in Idaho

First, let me congratulate you. Obviously, your CEO believes that you are capable of leading the team through the ERP (Enterprise Resource Planning) system selection. You’re right—ERP system selection and implementation is a big and important task. You’ll need to do plenty of homework to select the best system for your company.

Before you begin, there’s one matter to get out of the way: you need the authority to accomplish the objective. So, the first order of business is to make sure the CEO puts the proper priority on the ERP system selection project and participants (in person or via other communication) in the project management and implementation process. If those who are not direct reports miss deadlines during the selection and implementation process, the CEO must validate your authority. The CEO is also responsible for fixing any business issues that exist from lack of discipline to cash flow issues. Frequently the financial department is responsible for taking the lead in ERP system selection, because the system dovetails into the company performance, and enables the reporting management desires.

Before Starting ERP System Selection

There are a few steps you should take before you begin the ERP system selection. These steps will ensure that you know exactly what you’re looking for once you begin your search.

Coordinate communication with your CEO.
Take steps to ensure you’re consistent in your communication cycle on the new ERP system–setting expectations and keeping appropriate team members in the loop. Be prepared to continue with status updates, both formal and informal throughout the ERP system selection and implementation process.

Obtain or create the current workflows for all company operations affected by the new ERP system.

  • If fancy flowcharts exist, use them. If not, a quick and dirty flow chart draft will suffice – it’s highly likely the processes will change with a new system anyway.
  • Documentation should include the details of who, what and where for each step and identify the data collected. Be sure to distinguish what processes are automated today and which ones are manual; that will assist in defining staff needs and systems required to close gaps.
  • The information included in the workflows will guide the system evaluation, including needed changes and system improvements.

Engage the ERP system selection participants.
These team members are usually selected by the CEO and/or department heads in the project planning process; this includes subject matter experts (SMEs) from each area affected by the proposed new ERP system.


Researching and Finding the Right ERP System

During the research phase, you’ll be setting up metrics, checks, and balances, so you’re sure to be successful in your ERP system selection. This phase of the process is as much about finding the “best” software as finding the RIGHT software for your company.

Needs / Wants / Nice-to-Haves

Define the needs, wants, and nice-to-haves for each area or department. This is a critical step and worth the time. You will want to make sure that, at the minimum, the software meets the absolute needs of each area of the business. The workflows are a good resource for setting the baseline, but think broadly – you are looking for a new ERP system to improve your business. It’s important to find a system robust enough to carry your company forward. Separate out the needs, wants and nice-to-haves:

  • Needs – Elements critical to performing the operations of the business, eliminating significant pain points, or meeting government or internal reporting requirements. Your business will probably have unique needs that may not be available features in off-the-shelf software.
  • Wants – Elements that improve processes or facilitate reporting but aren’t critical to the regular operations of the business.
  • Nice-to-haves – Items that, if the cost/benefit makes sense, could improve some aspects of processing or reporting.

Score System Features

Set up the needs definition as a scorecard to evaluate each need/want/nice-to-have against the various ERP software features. Be sure to weight the scorecard based on the needs; are all the needs of the same value? Is the end-of-day balancing of the same importance as regulatory compliance or daily reporting? If so, they get the same weight but you may find that the needs have several levels of importance within them.

Data Transfer

Decide how much historical data will transfer to the new system. Frequently, data from older systems isn’t as easily transferable. Companies may decide to keep old systems running for a period of time to provide reference or historical information. A corollary of this is setting a timeline and selecting the expected date of transition to the new system.

Data Clean-up

Begin cleansing your data. For any data exported from your old system, this is the time to clean it up. Start tidying up your data for consistency (addresses, naming conventions) and completeness (adding email addresses, phone number, or other missing data). Once the new ERP system is selected, the data available from the old system is mapped to the new system fields and this may highlight additional data element needs.

Demo Testing

Develop “use case” scenarios to test the demos and evaluate how well the software meets your needs. These should be the exact processes that you use in the business on a regular basis. Provide real data (changing names or identifying information). Some vendors will upload your data to the new ERP system so you can test it in a “sandbox” format.

Enlist Subject Matter Experts (SMEs)

Engage the SMEs within your company to set up a preliminary project plan and timeline.  You may wish to use a project management tool or simply list the plan in Excel for the initial run.

  • Brainstorm every task required for ERP System implementation – this should be as detailed as possible.
  • Identify the SME for every task.
  • Put the task list in a sequential order.
  • If the details or steps are significant, consider breaking each into sub-projects. There might be sub-projects for every segment of the business. For example, manufacturing’s project might include renaming the inventory item master, updating bills of materials, integrating machine software, training staff, designing reports and dashboards.

Build Excitement

Start to build excitement for the new system amongst your staff and team. The people factor is critical to the successful ERP system implementation. Keeping your team members engaged, informed, and encouraged is important in the long process of ERP system selection and implementation.


The ERP System Selection Process

Once you’ve identified your needs and done your homework, it’s time for the official ERP system selection. This is a big step as you weigh all the factors—cost, capacity, user-friendliness, and more.

Narrow Down the Field

  • Identify industry software within your budget, if available. Recent hires into the departments may able to shed light on other systems they used at previous companies and how well the systems performed. Identify industry association or other comparisons of potential software. For example, the AICPA offers an annual review comparing tax software. Keep in mind, most of the reviews only cover the most generic functions of the software. Also, long-standing industry software may still be operating on “old technology” behind a modern-looking interface. I don’t view this as a deal breaker unless the reporting is too old school.
  • Choose the finalists. Once you have identified several software options, try to quickly narrow down the choices to five (or fewer) and only delve deeply into those finalists.

Focus on Usability Specific to YOUR Business

  • Be sure to look at the reporting tools. How flexible are the reports? Are there third-party report add-ons that integrate with the system? Will you be able to generate the reports that management requests (and is it efficient to do so)? For example, behind the scenes, Great Plains Dynamics was 20+ years old, but they updated the reporting to make it very adaptable and user-friendly. Be sure to understand the skill sets required to build reports. Do those skills exist amongst your team or are the requirements new?
  • Make sure the data collection in the system is complete for your needs. For example, if you’re required to file governmental reports on minority contractors your company uses and there’s no data field to identify the minority contractor, you will need a workaround.
  • Provide your “use case” scenarios to the vendor and request a demo version of the software to test. Test under the Pareto principle: meet the exact needs of 80% of your transactions, don’t try to identify and make the ERP system selection based on the outliers. With larger ERP systems, the vendors will typically be more accommodating than vendors of smaller cloud-based software. Don’t believe a task can be done by the software system unless you see it for yourself. If a vendor claims it can be done always say, “show me!”
  • Prioritize when you select software. When using the Pareto principle, measure by several facets: first by cost, then importance. Make sure the most expensive processes are covered by the ERP system, while simultaneously ensuring the most important processes are covered as well (whether they are regulatory or business-driven).
  • Identify how long the software provider has been in business, how many users the company has, and request their upgrade release schedules. If you are under regulations such as HIPAA or GDPR, verify that the software is compliant. Identify the size of the development team that created the ERP system you’re potentially buying. If it was engineered by a small team, you may need to ask about retention packages for key individuals.

Enlist SMEs for More In-Depth Systems Research

  • Obtain three current users for each ERP system you’re exploring and contact them for insights and references. Be sure to have your SMEs talk to users in all areas of the company. If possible, an in-person visit and demonstration is even better. You will be able to see the software in action.
  • Ask about all aspects of the software and user experience. In addition to the use case scenarios, vendor history, and user satisfaction, ask about:
    • User security levels (set-up, access within functions, etc.). Larger systems can offer security on the field level whereas smaller systems may secure access at the module or transaction level.
    • Customer support and maintenance. What is included if you buy a customer support program? How much support is available in the initial learning phase?
    • Set-up process and requirements. In my opinion, this is one of the most important points. The set-up is critical to the successful implementation of a new ERP system. Whoever guides you through the set-up process needs to be intimately familiar with the effects of any choice made in the set-up. Bad set-up creates long-lasting pain. Examples might include: thinking serial number control might be good and then finding out that every single transaction needs the serial number to move it through the system, causing added workload; deciding to treat an item as non-inventory without recognizing that limits the ability to track it; or a simple misidentification of the type of account resulting reporting errors.
    • Release schedule and what might be coming out during your implementation period.
  • Determine the need for all modules of the software based on the interviews with references and your team’s evaluation. This is also the time to decide on the ERP system implementation process: phased or “flip the switch.”

Select Your Finalists

Narrow down your choices. If only one software meets your needs and falls within your budget, you can skip this step. However, if you have 2 or 3 finalists that meet your needs and price seems to be the deciding factor, set up an analysis to compare total costs over a 3 to 5-year period. Consider the following:

  • Maintenance coverage may be included in the first-year implementation plan of some options, but not others.
  • Necessary hardware upgrades to satisfy system requirements; be sure to include software expense for all regions. Typically, software users have to buy a production region, test region, and perhaps others based on the size of your organization.
  • The need for any add-on products such as reporting tools to fulfill the needs analysis.
  • Ongoing annual maintenance costs, user fees, per seat costs, or historical price increases.
  • Consulting or other out-of-pocket implementation costs.


Planning for ERP System Implementation

Once you’ve settled on an ERP system selection, you’re ready to begin implementation. A little foresight and planning will help you avoid any issues as you move forward.

Create a Workflow

As you work on creating or restructuring the workflow for the new ERP system consider:

  • Entering data at the point where you create data.
  • Eliminating multiple touches on the data.
  • Creating exception or control reports to verify processing (for example, cash deposit reports, payroll payments exceeding a certain dollar amount, employee utilization under a certain percent).
  • Eliminating multiple check or approval points (this may involve security levels for managers different from front-end users).
  • Performing comparisons within the system.
  • Optimizing the system capabilities to eliminate redundancy.
  • Standardizing and using file naming conventions and electronic filing capabilities.

Watch Out for Implementation Issues

Be on the lookout for common issues in implementation. Some of these implementation issues include:

  • User security levels are set too tight or too loose. I prefer setting the security levels tight and as the user encounters a roadblock, freeing that capability. This security assures access is available only to the needed parts of the system. Even though some companies prefer more lax security limitation, HIPAA and GDPR considerations should drive set-up and security.
  • Even with thorough evaluation and testing, there will be transactions or reporting that require workarounds. No system meets all the requirements.
  • Team members complain about change, the workload, learning – you name it. This is normal and shouldn’t be discouraging. Continue to communicate the why and the benefits to the company and the user.
  • Something wasn’t set-up right. Many elements of set-up can be changed after implementation, but some are set for life. Hopefully, the problem is correctable. Make sure you know what is administrable and what is not. Have multiple people trained on maintenance during implementation.
  • If you do a data conversion, make sure the team knows how the data migrated, then test the system extensively.

Outline a Transition Plan

Define and outline the transition plan to the new system during project planning (and leave room for adjustments). Transfer of historical data (manual or electronic) is part of the transition to the new ERP system. Some of the detailed information for the implementation may not become available until the software system is purchased. These variables may include transaction volume, staffing, and training. Typically, there are two ways to transition to new software:

  • Concurrent processing for a period – This means the data goes in both systems and the results are compared for agreement prior to fully switching to the new system. Keep in mind, most companies are running lean and concurrent processing puts an undue burden on staff.
  • Cold cutover – This means the use of the new system begins on a specified date. With adequate training and testing, I believe the cold cutover works more efficiently and can save extra work from your staff.

Adopt a clear plan for customer/vendor portals. Opening client or vendor portals involves developing a communication plan as well as a training plan. This will vary from an email to a personal session depending on your customer and vendor base. Most portals are easy to use but don’t neglect the communication of the how and why. Highlight the benefits to their business or organization. This transition to a new ERP System should improve their interactions with your company.

In the most recent ERP system transition that I oversaw, we developed the procedures for each process prior to training. Each person’s training verified the documentation of the procedure and we edited as necessary. Using the procedure outlines and previously processed transactions, we built the historical data using it as training material for the new system.

During the transition to the new ERP system, all team members trained and after each month’s data entry, we ran reports to verify the accuracy and completeness of the processing in the new system. The team was working on real transactions and issues that would arise every day were part of the training. This involved some additional work, but it assured that the training was real world and made for a successful ERP system transition.

ERP system selection and implementation require cross-functional interaction and agreement. When done well, it can be very smooth and will result in real gains from the new system. Good Luck!

Featured image via Pixabay. All images licensed for use via Pixabay licensing.

About Author

about author

Lynne Robinson

Lynne brings years of experience in service industries, manufacturing, leasing and corporate finance. She started CEO Buddy to help small business owners grow their businesses.

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