How to Know When It's Time to Transition to an ERP

In episode 21 of our “Finance in the Clouds” podcast, Tyler Santos and Joe Scavotto of Zone & Co join host Jake Jones to discuss the importance of ERPs and when businesses should transition to one. Listen to the full episode here or wherever you get your podcasts.

Tabatha Buessing
Tagged In
6 min read
April 26, 2023

Spoiler alert: If you’re like most businesses, you’re already overdue for an ERP. 

That’s not to say you’re to blame—it’s just the way it is. Truth is, most finance leaders are so involved in the day-to-day work that it’s hard to step back and consider how time could be saved, processes accelerated, and accuracy improved by an ERP solution. 

When you’re in it, blind spots grow larger and inefficiencies compound in camouflage.  

What can personal finance teach us about ERP implementation?

Think about personal finance for a second. Let’s say you have a general goal of saving more and spending less this year. So, you make a cognizant effort to put more money away and cut out some of your expenses. Midway through the year, you’re under the impression that you’re crushing it. 

And then you do a deep dive to compare this year against the year prior. 

That’s when you realize it—sure, you’ve managed to save a little more and spend a little less, but these are nominal differences. You look at your credit card statements more closely and notice a multitude of recurring expenses for things you don’t need (and hardly want) that’d been flying under the radar—newspaper subscriptions, streaming services, wine clubs…you name it. Recognizing that these represent nothing more than wasted money for you, you cut the costs and immediately increase your savings by 25% per month. 

Finally, you’re on track to hit your goals. But it wasn’t until you stopped and truly investigated your spending that you discovered how much it could be improved. 

This perfectly illustrates what often happens to businesses regarding their own day-to-day financial processes. “Sometimes it’s very hard to say everything isn’t running great, right?” says Joe Scavotto, Senior Director of Solution Consulting at Zone & Co. “‘Everything’s working, my day-to-day processes are fine.’ But when you do take that look back, you’ll start to notice when you’re not on an ERP that gives you the ability to scale, that things are actually painful. And that is where you’re going to start uncovering more and more: it’s taking a little bit of extra time to bill entry, it’s taking a little bit of extra time to close the end of the month.”

The first sign that you need an ERP

Unfortunately, finding out you need an ERP isn’t like catching a cold. There aren’t any very obvious symptoms—no cough, no runny nose, no aches. It’s really up to you to stop, observe, and ask yourself the hard-hitting questions, like: 

  • Are we losing time with our current processes? If so, where? And why?
  • Are there current inefficiencies that are preventable?
  • Is manual work getting in the way of us scaling?

As Tyler Santos, VP of Engineering at Zone & Co, explains: “So whenever you’re starting to ask yourself those questions, like why is this so painful? Can this be better? Usually the answer is yes, there is a solution, and that probably is your first flag to upgrade and get a new ERP.”

Overengineering: Another sign that it’s time for an ERP

As companies grow, finance becomes more and more like the middle child: you get no attention but are still expected to do your chores. 

“As the company grows and scales, whether that’s within their product or within their sales team or whether it’s their go-to-market activities, usually there are more requirements of finance in order to make those activities capable,” says Tyler. “So what we see a lot is, companies stick with one system and they start building. An engineering team will start building a database over here to capture usage of a product or they’ll keep a database over here to authenticate the licenses that a company sells, or they create their own inventory management system via another database. And all of the sudden you have this situation where the business operations are spread out over these systems that are custom-built or custom-installed by different departments, and they’re not aligned and that creates so much more overhead in working costs for the team.”

So when the requirements of your finance team begin to pile up, and requests are coming in for new capabilities, that’s the time to seriously consider looking into an ERP. Because before you know it, you’ll be caught in the weeds and navigating a maze of custom solutions on different systems. 

Instead, as Tyler advises, “Let’s try to add to the capabilities of the functional processes that we have, aka the accounting and the ERP system, rather than starting to build new things.”

The dangers of spreadsheets

Some businesses put off transitioning to an ERP. That’s okay, we get it—it’s a costly investment and the onboarding process can be time-intensive as well. 

What we don’t understand, however, is when a company that really should have an ERP puts it off in favor of spreadsheets. And that’s because, over time, spreadsheets will end up costing you much, much more than an ERP.

The dangers (and pains) of spreadsheets are simply too volatile to mess around with. They include:

  • Inaccuracies
  • Late invoicing/payments
  • Duplicate payments
  • Deleted documents
  • Manual input

Each of these things is harmful to your business and creates a lasting (negative) effect. And the scary thing is, many companies continue to run their processes out of these spreadsheet systems. “As a former auditor, that gives me a lot of concern when companies are telling me that,” says Joe. “Have you missed billing? Is your RevRec correct? Are you sending out invoices late? If you’re not billing on a timely basis because you’re relying on a Google Sheet—even though it’s easy to use—you are not going to be able to grow and scale the organization that way because you’re just going to have to put more bodies to be able to manage that as the company grows.”

In other words, spreadsheets and manual processes don’t just pose data risks—they also require you to spend more on headcount as your company grows. Over time, the costs of an ERP solution pale in comparison to trying to scale with manual finance processes and workforce bloat. 

What to do when you begin looking for an ERP solution

The key here is to take a future-focused mindset. 

“Don’t be short-sighted that your business needs a system that does xyz because that’s what you do today,” says Tyler. “You need to make sure you’re setting yourself up for the future. An ERP has a lot in it, but you don’t need every module today, you don’t need every offering that the ERP has. You have the ability to grow with it as you need it, but you want that foundation that you can add onto.” 

Ask yourself:

  • Where is your company now?
  • Where do you want to be?
  • Where could you go in the future?

“These are questions you need to ask yourself to make sure you can add those modules to your ERP and those business capabilities within your finance department,” says Joe. 

Listen to the podcast to learn more about transitioning to an ERP

Check out the full episode with Jake Jones, Multimedia Producer at Zone & Co, Joe, and Tyler to discover:

  • The advantages of real-time data and decision-making made possible by an ERP
  • Why CFOs don’t need to reinvent the wheel when implementing an ERP
  • Additional signs that it’s time to transition to an ERP

And more…

Quote of the episode

“We’re accountants—we all love Excel and Google sheets. It gives you an easy way to manipulate the data and look at it, but that should not be your system of truth. I could easily hit the backspace button and mess up every formula on there. How do you have internal control? As a former auditor, that gives me a lot of concerns.” – Joe Scavotto

Listen to the full “When is the right time to transition to an ERP?” episode here or wherever you get your podcasts.

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