ERP Transformations Are Business Transformations

The ERP (Enterprise Resource Planning) is a necessary foundation for any business, regardless of the size, industry, or operating structure. They are powerful, integrated systems that centralize business processes and act as a company-wide database.

Understanding what’s at the core of an ERP—processing and recording transactions—might make you think that the ERP was originally built with accounting in mind. But any end-user who’s an accountant would likely disagree heartily.

ERP systems were originally built with the intended goal of centralizing and automating back-office functions, and they do this well. However, as industries evolve and businesses grow, accounting standards and other regulations continue to change, creating processes and tasks that extend beyond the core functionality of what an ERP was built to do.

When it comes to the financial close process, most key activities that need to be completed take place outside of the ERP. This creates an unsettling reliance on error-prone spreadsheets, rather than a powerful, integrated system like your ERP.

So, why can’t you rely on ERPs to close your books accurately and on time?

• Disparate systems hosting accounting data. As businesses grow, inheriting different systems is inevitable. These systems don’t necessarily speak to each other, making it difficult to have one single source of truth.

• Disjointed processes. Because many close activities take place outside of the ERP in Excel, accountants end up creating their own templates and processes to complete critical tasks.

• Limited visibility. With multiple systems and disjointed processes, visibility at the transactional level becomes extremely difficult.

• IT involvement is required for certain capabilities. ERP systems are usually highly customized. Although necessary for complex and unique business structures, customization makes it nearly impossible for accounting to pull reports and perform certain critical functions without IT’s help.

Without a financial close control and automation solution complementing your ERP, these limitations force accountants to complete key processes manually, increasing risk throughout the close.

An ERP transformation refers to the process of overhauling and modernizing an organization's ERP system to enhance efficiency, streamline operations, and adapt to changing business needs.

It can be a significant organization-wide project that involves implementing new software or upgrading the current system to leverage the latest technologies and functionalities. This transformation requires reevaluating business processes, data migration, customization, training, and change management.

The goal of an ERP transformation is to align the organization's technological infrastructure with its strategic objectives, enabling it to stay competitive in today's dynamic business landscape. By embracing an ERP transformation, businesses can optimize resource utilization, improve decision-making processes, and foster innovation across departments, leading to sustainable growth and success.

There is a growing expectation for finance leadership to make a shift toward digital transformation and upgrade the ERP environment. 

The average age of a typical ERP instance is now between 10-15 years. Most are IT-owned, haven’t kept pace with today’s modern workforce, and are difficult to change—requiring increasing manual effort.

The new wave of ERP is more agile, mobile, and adaptable, and for most organizations, an upgrade is long overdue.

And there’s good news: According to Selecthub, 88% of organizations consider their ERP transformation to be a project that helped their business succeed.

Without the right ERP system and digital strategy, organizations are faced with manual F&A processes that take too long and introduce unnecessary risks. For companies that see an ERP upgrade as too expensive or time-consuming and instead choose to do nothing, these process challenges will continue to persist.

These organizations will miss critical opportunities for innovation and growth. They may also suffer additional costs from employee turnover or fines and penalties resulting from error-prone processes.

Having the right ERP is critical to future-proofing the core of your business.

1) Accounting Is Not at the Table

Business leaders are increasingly relying on F&A to understand the impacts of business activities and inform business decisions. According to Accenture, 99% of CFOs agree that it’s important to have real-time processes and operations in place to better inform business decisions.

The accounting team is instrumental in the success of an ERP transformation. They will spend time in the new system every day, but they are already stretched to capacity, with little time left to invest in the upgrade. As a result, IT is often left handling the business process design decisions on its own.

Analysts at Gartner estimate that 55-75% of all ERP initiatives will fail to meet their objectives, and this is a primary reason why. If the ultimate users aren’t part of the upgrade discussions, how can the organization ensure that the right choices are being made?

As such, F&A leaders need to ensure their teams are well-positioned to provide meaningful insights to business partners when it comes to an ERP upgrade. Finance and accounting leaders must encourage an F&A first approach, which prioritizes a data foundation and actual results to enable the broader enterprise strategy.

Advanced enterprise capabilities are achieved when data is leveraged as a valuable and strategic resource to inform decisions and business strategy. In other words, an F&A-first approach to transformation delivers data as an enterprise asset.

2) Legacy Processes Persist

When organizations embark on their digital transformation strategy and upgrade their ERP, it requires significant support from F&A leaders and their teams. Unfortunately, change is often perceived as a risk for accounting and finance professionals, and many believe that staying with the status quo is the safest choice. As a result, legacy processes are often migrated into the new system—harming the new ERPs potential impact to benefit the F&A team right from the start.

As such, F&A leaders and champions need to be actively involved in preparing for and supporting the ERP upgrade and broader digital transformation strategy to ensure opportunities for optimization are not missed.

An ERP upgrade offers new possibilities for process reinvention and improvement, and redesigning your current processes first will lead to optimal efficiency in the long run. 

3) Elevated Disruption & Risk

There’s plenty that can go wrong with an ERP upgrade: new dependencies, master data changes, unexpected downtime, insufficient training, mounting costs, and missed deadlines, plus the potential negative impact on customer service and satisfaction.

For F&A teams, an ERP upgrade increases the risk of disrupting close and reporting processes. The transition period opens the door to master data changes and data migration concerns, among other things, and ironing out the kinks in the upgraded system can slow down the financial close. Additionally, substantial changes in underlying processes create financial statement risk.

The better a project is controlled through effective planning, staffing, and up-front investment, the more likely a successful outcome becomes.

Clearly, upgrading your ERP is no small task.

To do it right, the project should begin with designing better processes that take full advantage of your new ERP system.

1) Achieve A Fast, Tangible Win

It makes sense to get your accounting house in order long before you begin an ERP upgrade.

Process inefficiencies and balance sheet challenges, such as a significant volume of open items, can put the brakes on an ERP upgrade down the road.

The right technology solution reduces the effort needed before go-live and enhances balance sheet integrity. It also provides a fast, proven way for your team to reduce your time to close by automating much of the workload around account, intercompany, transactional reconciliations, and close management.

These time savings are invaluable any day, but especially when you’re undertaking an upgrade. Process automation's quick wins will also give accounting the time it needs to be involved in the most important upgrade conversations.

2) Free Up Time to Focus

Without technology, accounting and finance organizations can only spend around 20% of their time on an ERP upgrade. For many days in the accounting period, including the close, critical accounting and finance resources are entirely unavailable. 

Staff accountants and accounting managers are often the ERP's biggest users and most knowledgeable about pitfalls, process, and structure improvement opportunities. They can also reap the greatest time reallocation benefits from process automation, freeing up to 50% more of their time from repetitive workloads to more value-added activities.

Process automation is the key to creating the time your teams need to invest in the upgrade. By implementing the right technology first, accounting and finance can gain rapid wins by cutting time spent on manual close tasks (like reconciliations), achieving faster time-to-close, and improving balance sheet integrity.

And after the upgrade? That means more time to focus on business partnering, analytics, and further automating the financial close.

3) Proactively & Continually Reduce Risk

A substantial ERP upgrade introduces enhanced financial close and reporting risk throughout the transition process, during which specific close activities will continue to be managed in spreadsheets, require manual lookup, or perhaps be overlooked.

Technology oversight reduces this risk with preventative controls, continuous monitoring of accounts and transactions, and task management. In a preventative environment, a higher number of automatic controls take place in real-time at the front end of the process instead of the back end.

This helps protect accounting and the ERP project from risks both during and after the upgrade.

The BlackLine platform enables an F&A first approach to an ERP upgrade. By augmenting the ERP, BlackLine helps organizations achieve an integrated and continuous end-to-end finance and accounting model that helps deliver optimized and efficient actuals. 

In addition to providing incremental capabilities for manual F&A processes that exist outside of the ERP, BlackLine can help F&A organizations make the transition to a target model by:

• Centralizing data and processes—unify information across disparate data sources in a single platform that integrates seamlessly with your legacy and new ERP.

• Improving balance sheet readiness—prepare and cleanse data by clearing open items and substantiating account balances ahead of the migration to limit process and financial statement risk.

• Strengthening controls and streamlining audits—proactively manage controls with embedded leading practices and segregation of duties.

• Freeing up F&A resources—reduce manual effort with automation and refocus time and capacity on ERP implementation or other strategic initiatives.

Leading companies are deploying modern accounting technology like BlackLine to help make the move to their target ERP.