Is ERP Software Worth the Cost?
DEC 14, 2017 00:30 AM
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Is ERP Software Worth the Cost?

by Anna Johansson
Enterprise resource planning (ERP) software can be used for a variety of applications, across multiple departments. It’s purported to improve efficiency, maximize the use of current resources, and improve per-project ROI, but it also costs thousands of dollars to implement, even for small businesses.
Entrepreneurs and business decision makers must evaluate this relationship, and decide whether the benefits of the software outweigh the overt costs of buying and implementing it, but how can you make this decision objectively? 
ROI and ERP Software Costs 
To calculate the relative “value” of your ERP software, you need to consider its ROI, or the comparison of how much money it saves or makes you, against its costs. So what costs will you need to consider for its implementation? 
  • Hardware and upgrades. You might need to upgrade your services and/or devices to support your ERP software, but this isn’t always the case.
  • Software licensing or subscription rates. If you purchase your ERP software flat-out, you’ll pay a single rate—usually several thousand dollars. You may also pay a subscription rate monthly, between hundreds and thousands of dollars, depending on your needs and how many users you have. 
  • Customization and consulting. If you can’t use an out-of-the-box platform, you may need to pay for customization, and if your team has trouble implementing it, you may need external consulting to set things straight. 
  • Ongoing costs. There will also be ongoing costs, including maintenance, training, and upgrading to consider. 
How ERP Software Saves Money
Because ERP software affects many areas of your business, it can save you money in many ways:
  • Organization. First, your software will help your business keep everything organized. Being able to recall a specific invoice or project file in a matter of seconds, rather than minutes, will cumulatively save your organization hundreds of man-hours of work, especially over the course of months and years. 
  • Project prioritization. ERP software will also help you prioritize your projects, giving you the chance to work on the most profitable projects before your secondary projects, and helping you execute those projects faster by zooming in on the most important priorities. Ultimately, this will help you work faster and more profitably, securing more revenue for each hour spent. 
  • Inventory tracking. Most types of ERP software give you inventory tracking, which will help you minimize loss and streamline the efficiency of your shipping and logistics departments. Depending on the size of your operation and the system you currently use, that could amount to thousands of dollars of savings. 
  • Automation. Depending on how you customize your platform, your ERP software will likely automate dozens of different employee tasks that used to be manual. This will save you dozens, if not hundreds of hours of time per year. 
  • Cost control. ERP software helps you track and analyze your expenditures, from office costs to ongoing operational expenses. With that kind of transparency, you can likely make cuts and switches that make your business far more efficient. 
  • Financial agility. Most ERP platforms come with financial integrations that make all transactions process faster, including invoicing and receiving payments. That means you’ll have access to cash faster, and can remain nimble with your financial decisions. 
  • Infrastructure costs. If you already use multiple systems to manage your organization, switching to an ERP platform can drastically reduce your infrastructure costs. You’ll be paying for and managing one platform, rather than several, and you’ll cut all those other subscription costs out of your budget. 
Important Variables to Consider
It’s also important to realize that your costs and benefits could vary significantly, based on several variables: 
  • Platform specifics. Not all platforms are created equal. Some are more expensive, some have more features, and some handle tasks with greater efficiency. 
  • Implementation. Your implementation costs will also vary based on how intuitive the platform is to learn, your current hardware settings, and whether you require any integrations. 
  • Employee factors. How your employees use your software will also factor into its eventual cost savings. Will your team actively work to make the most of the platform? 
So, is ERP software worth the cost? That depends on your business, which platform you choose, and how you intend to use it. Fortunately, this article should give you all the tools you need to make that determination for yourself. For most businesses, ERP software is a worthwhile investment—at least, in the long run—so don’t write it off prematurely. 
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