7 Ways Cloud ERP Helps Build Resilience and Agility
Businesses running on-premises ERP systems are often reluctant to undertake upgrades because the disruption caused by broken integrations and customizations being overwritten, combined with the added demands on IT, mean the costs outweigh the benefits. With fewer resources to devote to enhancements and businesses reluctant to perform upgrades, users are left to their own devices to figure out how to achieve their strategic objectives with aging technology. These gaps may be hidden during prosperous economic times, when everyone is happy with their company’s performance and things are going well but come to the surface pretty quickly when disruption rears its head and begins to impact the bottom line.
For example, when mandatory office closings and shelter-in-place orders forced people to work from home, companies scrambled to find ways to support their suddenly-remote employees. Those using traditional, on-premises software faced the greatest challenge, as demand for remote access to these systems put a strain on network capacity, introduced new security concerns and created a need for better access controls. Sluggish system performance and lack of effective collaboration tools led to a decline in productivity, as completing tasks that were relatively easy to perform while in the office became much more difficult. Lack of integrated solutions and difficulty penetrating departmental data silos made it harder to know what was happening in the business right when companies needed visibility the most.
Cloud ERP overcomes these issues by allowing remote users to access the functionality and data they need to do their jobs from anywhere with an internet connection.
Here’s how Cloud ERP capabilities help support more intelligent, resilient organizations and why companies need to begin evaluating their need for ERP now rather than later:
1. Enables remote workforce management and collaboration.
The shift to remote work was already underway when the coronavirus pandemic forced a rapid acceleration of those plans for many businesses. With state and local shutdowns looming, companies had to quickly find ways to transition their workforces to comply with stay-at-home rules. Reality hit hard when organizations began to have difficulty managing critical process with a remote workforce. Closing the books is just one example. Companies using basic accounting software, like QuickBooks, or an outdated ERP system, learned quickly that their standard approach wasn’t feasible with the entire accounting team working from home.
Using cloud ERP, the same accounting team can confidently review the data, make any changes and close the books remotely without having to be in the same physical location. The system’s checklist functionality lets users know exactly what steps need to be taken and ensures a smooth close process.
2. Complies with accounting standards and regulatory requirements.
Complying with changing rules and regulations is a major headache for both public and private companies. Recent revisions to Generally Accepted Accounting Principles (GAAP) have pushed many organizations to reconsider processes typically handled with spreadsheets. Both ASC 606, the new GAAP standard for revenue recognition, and ASC 842, which changes the way companies report lease-related expenses, are already impacting public companies and will take effect for private companies soon.
Focused on eliminating off-balance sheet operating leases, the new lease accounting rules require companies to have leases lasting 12 months or longer listed on their balance sheets. This creates complications for companies that now must separate out the presumed interest expense of the asset and the lease expense and amortize them over the duration of the lease. Managing this process in a spreadsheet risks data integrity and data entry issues when moving that data into an accounting system. Modern ERP systems can factor in all of the variables and automate the process.
New revenue recognition rules present similar challenges and require companies to recognize revenue in a consistent manner, based on achieving defined performance objectives. This is something older accounting systems and older, on-premises systems weren’t set up to handle.
Cloud ERP solutions receive regular feature and capability updates that are automatically passed on to the user and can better handle these types of changes to accounting rules than older on-premises systems or entry-level accounting software, which typically issue less frequent updates. The potential for new rules and regulations always exist, but over the next several years as the global economy weaves and adapts, organizations should prepare for the possibility of greater regulation. Cloud-based ERP systems offer a clearer pathway to adapting to the new regulations.
3. Gives all organizational departments a unified and accurate picture of the business.
As companies evolve, they tend to purchase software as a need arises. This leaves them with multiple systems from different vendors, each designed to perform a specific function or support a single department. Without complex and costly integrations, the data in those systems can only be accessed by a limited group of people. When critical information about customers, orders, inventory, capacity and more is spread across multiple solutions, aggregating it for analysis and decision- making is complicated and time-consuming.
Also, it’s nearly impossible to get a complete picture of what’s happening in the business. Turf battles often emerge over who has the more accurate data set. As a result, teams can’t work together efficiently, and both productivity and profitability suffer. For example, if sales wants to promote a product but leadership can’t see that there isn’t enough inventory to support the promotion, then orders will go unfilled and customers will be unhappy.
Cloud ERP solutions provide accurate, real-time data that helps teams collaborate more effectively. Using real-time inventory data, sales and marketing can develop promotions for products that are actually in stock, leading to increased revenue and happier customers.
4. Drives quick reaction times.
Companies that are using disparate systems can’t react fast enough to changes in their environments. With a unified system, reports deliver insights in real-time Businesses with disparate systems often rely on IT or finance teams to gather and produce reports, which is often outdated by the time leadership sees it. Modern ERP systems feature role- based dashboards that give employees immediate access to the data they need to do their jobs and the ability to drill down for further analysis without the need to call on IT for support. As a result, employees can make more informed, faster decisions and
take advantage of new opportunities or realize and correct inefficiencies.
5. Reduces operational risk.
Without proper accounting and procurement controls in place, organizations can easily fall prey to dishonest practices, including the abuse of power by employees or struggle to provide accurate details to investors, auditors or regulatory agencies. ERP helps limit these risks by embedding approval workflows into procurement, accounts payable and other financial processes, as well as by controlling access to system features and data based on user roles and individual permissions.
6. Tracks unit economics, customer and project profitability.
A measure of profitability on a per-unit basis, unit economics are helping companies manage the current economic uncertainty while also helping them prepare for future success. Through a process of regularly evaluating the direct revenues and costs on a per-unit basis, unit economics help companies understand the profitability potential of product lines and adjust accordingly. Without integrated systems, manufacturers struggle to accurately answer these questions and determine how many resource are being allocated to product X versus product Y— visibility gaps that can impact margins.
Using cloud ERP, companies have the visibility they need to know which products are posting positive versus negative margins and make projections around business development and profitability.
Similarly, without a unified system that tracks customer and financial data, businesses can struggle to determine who their most profitable customers are. Customer profitability requires insight into data across areas like average order volume, discounting and customer service requirements, which only a unified ERP system can provide.
Many services-based businesses also struggle to accurately quantify project profitability. An ERP system with a professional services automation component allows a business to allocate staff to projects based on their skill sets and project requirements, minimizing “bench time” for consultants and delivering the greatest profitability.
7. Helps companies scale and adapt.
Companies that initially rely on QuickBooks, spreadsheets or another basic accounting system generally outgrow those solutions as they scale and add complexity. When these organizations open additional locations, add subsidiaries and/or
start handling multiple currencies, the need for a more robust, enterprise system increases exponentially. Additionally, any attempt to venture into new lines of business, such as services or new products demands the visibility and adaptability that ERP provides.
While smaller firms may be able to run on basic systems and spreadsheets, those that adopt cloud ERP not only improve their existing business management processes, they’re also well positioned to scale up in the future.