Successful implementation of an ERP system requires excellent planning, communication, training, dedication, and teamwork. For its ERP system implementation, your company needs adequate project staffing and software-specific experienced guidance from the software company or an affiliated consultant.
Learn what ERP implementation means, specific steps for ERP implementation, common challenges, and best practices in this guide. Then take the next step of integrating AP automation with your ERP system to achieve greater benefits from your ERP investment.
Table of Contents
What is ERP Implementation?
ERP implementation includes planning and selecting a new business software system with a unified database and consulting services, budgeting, organizing the team for implementation of ERP, company communications, change management, user software training, configuring software workflows in the new system, customization, migrating company data, testing, and going live with the new software system.
ERP stands for enterprise resource planning.
Who is Involved in the ERP Implementation Process?
The ERP implementation process includes top management (CEO/CFO/VP Operations), HR, change management, an ERP project leader, team leaders in different functional business process areas, software consultants for implementation guidance and system customization, IT staff, and the rest of the team that will be implementing and using portions of the ERP system in their daily jobs.
The 5 Stages of ERP Implementation
The 5 stages of ERP implementation are:
- Plan the implementation and choose an ERP team
- Train users
- Implement the ERP system
- Test the system offline
- Go Live
These 5 stages may be referred to as the ERP implementation lifecycle.
Before the company begins the implementation process, it determines system wants and business needs, creates a system budget that includes software and implementation costs, evaluates the best ERP software solutions for its needs and budget, and selects an ERP system for implementation.
When it chooses to implement a new ERP, your business may have outgrown a small business ERP system when it experiences rapid growth. Or your company may desire a modern ERP with new technology and real-time features and dashboards with KPI metrics not available in its existing legacy system that will overcome inefficiencies.
After completing the 5 stages of ERP implementation, employees in your company will tweak the system with any required changes or corrections and perform a post-implementation project evaluation in their role as a learning organization.
1 – Plan and Choose an ERP Implementation Team
To implement an ERP system, your chosen ERP team must adequately plan the implementation process.
For planning and supervising or performing system implementation, choose an ERP team. The ERP team should have the software skills and business functional expertise needed to effectively plan the ERP implementation and motivate employees through their leadership and communication skills. Key ERP team members can be chosen first before augmenting the team by filling all team positions with qualified members.
Human resources and a member of the change management team should participate in the implementation and launch/rollout of the new ERP system to get buy-in from all stakeholders and future system users.
Business functions involved in an ERP system include accounting and finance, planning and forecasting, supply chain and procurement, and operations. There’s a difference between ERP vs. CRM (customer relationship management) software, which we consider to be a separate system with ERP integration. Determine the need for sales, marketing, and customer service employees on the ERP integration team.
In a guide, TechTarget provides specific tips and the methodology for “How to choose the right ERP project team: 5 secrets to success.” From this TechTarget article:
“Here are a few common ERP project team roles:
- Executive leader. The executive cheerleader is in charge of the purse strings, keeps everyone’s eyes on the larger mission at hand and addresses tough situations.
- Project manager. The day-to-day ground commander keeps the business happy, manages risks and makes sure scope, timeline and budget are all in check.
- Functional and technical architects. These are the deep ERP product folks who expertly translate business requirements into processes and system features that will fit best and assess current and future needs.
- Business and technical analysts. These business experts are responsible for requirements gathering, documentation design, process mapping, configuration, testing, data conversion and training.
- Subject matter experts. These people are specialists in industry, process or technology and help guide system design and building.”
The project plan for ERP implementation should be detailed, with tasks to be accomplished, task responsibilities assigned, and timelines that include deadlines. Decisions should be made about the data timeframe that will be migrated to the new system vs. archived.
The extent of using an outside implementation team and system customization or other system-related services should be known in advance to adhere to the budget and make sure needs are filled. A team-based project communications system should be used for the implementation processes.
2 – Train Users
Have the software company or its affiliated consultant train end users with an in-depth demo of the software and a review of best practices for implementation and ERP system use. Include more intensive user training for their specific functional areas.
Your ERP implementation plan can determine whether all employees are trained directly in this ERP implementation stage or if supervisors take the training and later train their staff in completing specific software user roles.
As employee turnover occurs, focus on adequately training new employees for their software system roles. Considering new hires that have prior experience with this particular new ERP system being used now or soon by the company.
3 – Implement the ERP System
ERP implementation includes matching business workflows with the system, software customization, and data migration. By the ERP implementation stage, the ERP team will be filled out to include employees performing their role as a user.
4 – Test the ERP System
Before Going Live, it’s best to do system testing in a test environment provided by the ERP vendor, also known as a sandbox. In this test, users will try using the system with company data and see if the system is working as desired, with data integrity and user acceptance. You can make changes to the implementation before going live.
5 – Go Live
When your ERP team is satisfied that the system will work as intended, prepare accurate financial statements, and not cause business interruptions or customer communications problems, due to major bugs in the system, it’s time to Go Live. Companies often operate their existing system and the new system in parallel for a few months to ensure that the new system is working as intended and compare results.
Before Going Live, get decision-making consensus, buy-in, and approval from the ERP implementation team, including consulting external implementation team members, and top management. Going Live isn’t just dependent on reaching the original deadline in the plan. The system must be ready for business use.
Going Live isn’t the end of the journey. You’ll still be making tweaks to the system to improve it. Once the system is functioning well, consider integrating third-party AP and finance automation software with your ERP system to improve its performance, achieve time and cost savings, and strengthen financial controls and global regulatory compliance.
After the system is implemented and used by the company, your ERP team needs to complete a post-implementation review report. In this post-implementation report, team members will review their ERP implementation project successes, implementation failures, and time delays and score the project. They will document ways to improve future implementation projects, as they learn from the experience.
How can your business get the most out of its ERP implementation?
Find out more about “Tipalti ERP Integrations” to learn how your growing business can integrate ERP add-on software for AP automation and global payments.
Use ERP-integrated AP automation software with efficient self-service supplier onboarding, invoice processing automation, global payments, automated AI-driven general ledger account coding, error detection rules, business intelligence, and fraud risk controls.
Most Common Challenges of ERP Implementation
Implementing comprehensive ERP systems in a business presents varied but common challenges. Add-on software implementations (like AP automation) are easier to accomplish and require shorter time periods to achieve.
The most common challenges of ERP implementation are:
- Inadequate change management communication, planning, and support from top leadership (CEO/CFO)
- Understaffing, which results in loss of focus and implementation time, with other competing time demands of the job
- Stresses from project roadblocks and system errors, tight deadlines, and inadequate system knowledge
- Turnover of employees during the ERP implementation project
- Inadequate training for and prior experience with the specific new ERP system
- Budget is too small to get outside expertise to guide/help with the implementation
If employee turnover occurs, will the replacements be adequately trained in the new system to complete the implementation process? Or do they have excellent experience with this new software system through use in their prior company that can be transferred to their new employer?
Earlier in this guide, the 5 stages of ERP implementation were listed and described. However, ERP implementation can present challenges and invoke a range of emotions if not planned and executed well.
ERP Implementation Project Emotional Curve
Pemeco Consulting, an experienced ERP implementation company, states “92% of ERP implementations fail” in its article, “The Emotional Curve of ERP Projects.” Their article presents a different 5-stages ERP image, The ERP Emotional Curve, that’s reminiscent of a long-existing meme about ERP implementation usually distributed by members of the ERP implementation team when they struggle with stressful challenges of the ERP implementation process.
From the Pemeco Consulting article’s ERP Emotional Curve image, 5 consecutive emotional stages of ERP implementation are:
- Go Live
Resistance means resistance to change in moving from the current system to implementing a new ERP system. Change management techniques and communication can be used to overcome employee resistance.
Euphoria means that the team is elated that progress is being made in the early stages of implementing a new ERP system.
Go Live is the stage of the ERP implementation cycle after the new system has been set up and testing has occurred, when the system starts being used by the company.
Desperation will occur if the system doesn’t work as intended and causes problems in accurately completing and accounting for business transactions or completing business operations processes like manufacturing. Desperation will be even higher if the system impairs customer communications and product shipments.
Recovery is the final emotional state of employees when new ERP system problems are solved and the business can operate without major system glitches.
Best Practices to Ensure a Smooth Implementation
Best practices to ensure a smooth software implementation include:
- Budget for and buy services from an experienced software vendor’s or consultant’s implementation team to guide or do the implementation efficiently and timely
- Provide top leadership communication to the entire organization to announce and champion the new system implementation
- Ensure that implementation team members have sufficient training.
- Adequately staff the company for additional implementation time required beyond normal job duties
- Spend enough time planning and testing the implementation in a sandbox environment before going live
- Ensure that the designated project manager and team have sufficient training and software expertise to succeed with the implementation
- Set and measure project goals and celebrate successes along the way.
How Much Should You Budget for ERP Implementation?
Budgeting for ERP implementation requires some research, thoughts regarding what to include, and software vendor quotes.
Items to Include in Your ERP Implementation Budget
The amount of your ERP software and implementation budget should include:
- New ERP system software and miscellaneous costs, budgeted when the core system and modules are required (SaaS subscription or on-premises pricing)
- Experienced, successful ERP implementation services from the software company or a software consultant
- Training costs for all users and user conference attendance
- Any additional staffing required (preferably with expertise in the new software)
- Software customization costs
- Public cloud services (Amazon AWS, Google Cloud Platform (GCP), or Microsoft Azure)
- Although 97% of companies select a cloud ERP solution, otherwise include hardware and hosting required for on-premises or hybrid software deployment
- Celebratory budgets for maintaining employee motivation
To determine how much to budget for ERP implementation, request quotes from specific vendors under consideration, and compare quotes when selecting vendors or service providers that have comparable expertise and implementation success levels.
Average ERP Budget by Company Size
Software Path’s 2022 ERP Software Report indicates that the average budget per user for ERP implementation is $9 thousand in companies with 50-499 users. For larger companies with over 500 users, the average budget per user for ERP implementation is $11 thousand.
Notice that’s a budget per user and not the overall budget for ERP implementation and the total budget varies significantly by company size. As an example, according to their survey, for a company with 500 users, the necessary implementation budget could be as high as $5.5 million. That seems high.
You will probably find that ERP implementation costs are lower than these levels for your small business or mid-sized company. For example, Clients First Business Solutions, an experienced Microsoft Dynamics ERP and Acumatica ERP implementation consulting company, discusses ERP implementation costs, including ERP implementation budgets for mid-size companies:
“A typical ERP installation for a mid-sized enterprise will range from $150,000 – $750,000.”
“In small and medium-sized enterprises (SMEs) employ fewer than 250 people. SMEs are further subdivided into micro enterprises (fewer than 10 employees), small enterprises (10 to 49 employees), medium-sized enterprises (50 to 249 employees). Large enterprises employ 250 or more people.”
This OECD enterprise-size data is derived using manufacturing companies’ data. OECD is a global organization with the full name, The Organisation for Economic Co-operation and Development.
Other ERP and Integrated Software Budget Considerations
The ERP budget may be large enough to require top management and other stakeholder approval, including a vote by the Board of Directors.
When you budget for new software and ERP implementation, don’t forget to include costs for third-party add-on automation software. Tipalti software integrates with any ERP system for AP automation, global partner payments, advanced FX features for multi-currency payments when needed (Multi-FX and FX Hedging), and PO management in procurement.
Automation Software Integrated with ERP
Tipalti cloud-based AP automation software integrated with your ERP (or accounting software) streamlines workflows, eliminates paper, and efficiently accomplishes invoice processing and global payments.
The Tipalti third-party AP automation software helps your company become more efficient in end-to-end AP processes by 80%, reduces hiring needs, and establishes stronger financial controls to prevent fraud and reduce errors by 66%. With Tipalti AP automation and finance automation software, you can maximize your ERP investment.
To optimize your ERP system with digital transformation, download our eBook, “The Last Mile of ERP: Payables Transformation Strategies.”