Why implementing new finance systems can lead to failure…and the best way to avoid it
Implementing a new finance system is a common module of the overall process of Enterprise Resource Planning (ERP).
An ERP system connects a business and provides the platform for a management team to understand the processes with customers, suppliers and their employees. Implementing a finance system can support the company by enhancing the management of their resources, reduce costs and manage other competitor businesses. Despite having a critical role in a business implementing financial systems and general ERP upgrades can quite often result in failures and disruption to a business.
According to a recent industry report, nearly 30% of ERP implementations fail to succeed half of the intended benefits to a company. There are several notable cases that have gained significant attention to highlight this figure, including how the US Navy reportedly spent over $1 billion on several varying ERP systems, all of which have failed to work. The string of problems attached to implementing a new finance system is generally driven by the complex nature of the process of implementation and the general natures of the business activities they intend to automate. Codex Recruitment explores the main reasons that a new finance system and ERP implementation can fail and offers advice to overcome these potential pitfalls.
Why is your business implementing a new system?
Quite often the first challenge is determining whether the implementation of a new system is really necessary. Many businesses will decide that their existing systems are below par and that reporting, integration and overall efficiency issues are directly related to the software they are using. With this in mind, businesses will choose to transfer to an alternative system, a costly and potentially risky process which may be avoided by a relatively simple procedure of improving the existing service. The reimplementation of existing software will generally be far more cost effective than a complete switch to another vendor.
Has your business clearly defined its goals?
If your business is determined to implement a new system then a clearly defined goal is critical. Quite often, a combination of unclear classification of the problems, the overall outcome or financial implications of the project can result in issues further down the line. A strong understanding of the goal, the business processes, financial benefits and clear timescales will ensure your business has a defined target.
Has your business created a detailed plan?
A thorough plan is essential to succeed in implement new services. It may be a fairly obvious point, but more often than not, plans can be unrealistic or lack specific details. Businesses may create plans that lack information of all the specific requirements and which people are going to be working in each area. Until a good plan is in place, your business won’t truly understand the project timescale and associated costs. Failing to clarify your business requirements at an early stage can result in confusion further down the line. In order to rectify this potential challenge, your business should collaborate with a specific team to perform a detailed audit of your systems and business activities. This process will enable your business to highlight specific ‘pain-points’ and then determine which solution will meet your needs.
Regular Process Management
It is quite clear that any transformation of finance systems requires a dedicated and experienced manager. Quite often, businesses will implement this management role as an additional sub-task to the existing duties of project managers. In reality, this transformation requires an active leader, focused and continually monitoring the overall process. In order for this to be effective in a business, it is essential that the entire company understand the reasons for this implementation and the strategy behind the project. Implementing a new system will have an impact on most areas of a business so it’s critical to communicate the impacts it will have on the business and how it will benefit from applying the new system. Without developing a clear understanding, there is the potential of resistance to change, or particular departments not applying the required resources of commitment to the project.
Understanding what resources are required
A typical error involved with implementing new systems is not understanding the resources required to effectively complete the project. Having a clear idea of the time commitment required from specific teams in the business is a common oversight. As mentioned before, creating a clear plan of the specific duration, skills and quantity of resources required is vital for successful implementation.
Relying on your business consultant
Most transformation processes will involve utilising the resources of expert consultants. There is a danger that this can result in a business relying on the skills of a consultant. Your business needs to ensure it continues to control the main business decisions and have a clearly structured plan to directly transfer key information from the consultant to your internal team.
Customising your business finance system
Any customisation for a business system will add potential risk, time and costs to a project. Despite the potential risks and incurred costs with customisation, many businesses find it tricky to manage the number of customisations within a particular project. Leading business Gartner, PwC and Deloitte believe that customisation is a key area of technical risk within ERP implementation. A business can avoid added customisation by selecting a system that specifically meets their requirement. Industry specialists suggest seeking a solution that meets at least 80% of your requirements, leaving a solution that can include bespoke customisations to meet your remaining needs. Furthermore, finding a partner that has proven working knowledge using your selected platform is recommended.
Providing on the job training
An average lifespan of an ERP system is approximately 10 years, which mean that most employees within a business would have experienced at least one transformation within their career. Project leaders should ideally have experience of implementing your chosen system. Having an experienced internal member on the team is a significant benefit to working with an outside consultant or directly with your chosen vendor.
Has your business done sufficient testing?
The main purpose of testing an ERP project is to ensure the system meets your requirements and generates the output required. A reduction is testing may result in selecting a system that lacks important functions. It is essential when selecting a potential partner that your implement proper due diligence. Improper selection can lead to a process that can experience difficulties and additional costs. Due diligence will generally involve gaining a clear understanding of how a vendor has managed potential challenges and details on their services, support and training.
Providing sufficient user training
Modern systems are being utilised by more and more members of a business, but management shouldn’t rush to start using new systems without providing sufficient training. Training members of staff to an adequate level for larger companies is not a simple task and leaving training to the end of a project can result in users lacking sufficient information on how to effectively use a new system and understand the benefits. According to industry specialists, a lack of sufficient training is one of the main reason ERP projects fail. Ideally, your business will have a team of internal and external leaders with experience of implementing new systems several times. Your business should implement a detailed training plan that intends to share and distribute the required knowledge from consultants to the internal business team. Training hundreds or thousands of people is not a simple task and a business needs to prepare enough time to get used to a system before activated.
If your business is considering implementing a new finance system and wants to avoid these common challenges then get in touch with the Codex team.