When is the right time to transition to an ERP?

Jake 

I’m your host, Jake Jones, Multimedia Producer and Brand Influencer at Zone & Co, and I’m joined this week by Tyler Santos, VP of Engineering, and Joe Scavotto, Senior Director of Solution Consulting, both here at Zone and Co. Thanks for joining me today guys.

Tyler

Thanks for having us back.

Joe

Thanks Jake, happy to be back.

Jake

When you’re busy running your business, things may seem like they’re running smoothly. But in reality, there may be an issue with your financial data. Things may be working now, but will they as your business scales? And could business be better? These are important questions that point to the need of an ERP system. When is the right time to make this change? That’s what we’re here to discuss. Guys, I’m really excited to get into this topic of when is the right time to transition to an ERP, but before we really get into that, I do want to give some space to let you guys talk a little bit about yourselves, what you do here at Zone, and who you are. 

Tyler

Hello everyone, my name is Tyler Santos, and I have been with Zone for almost four and a half years now. I run the engineering and development team here. Me and my team work on building customizations for all of our NetSuite clients, to build enhancements to their business processes within NetSuite, as well as actual product development of our SuiteApps—ZoneBilling, ZonePayments, ZoneApprovals, ZoneCapture, et cetera. So, thanks for having me today. 

Joe

Hi everyone, I’m Joe Scavotto. I run the entire pre-sales team here at Zone and Co. We focus on demoing to our existing and new customers. I’ve been at Zone for about three and a half years now and prior to that I was a solution consultant at NetSuite, so I’ve been in the ERP space for a number of years. And prior to that I was actually in accounting, so I was living and breathing what a lot of what individuals are going through—accountants, controllers—on a day-to-day basis. Happy to be here again.

Jake 

Again, excited to have both of you here. A lot of expertise on this call so I’m really excited to talk about when is the right time to transition to an ERP. And as we joked before we started recording, the time was yesterday to get an ERP. So, let’s just jump into the topic. Joe, when is the right time for a business to transition to an ERP?

Joe

In all honesty, I really like to think of it as, you know, as companies are growing, taking a step back and saying what am I doing on a day-to-day basis? Am I doing it in an efficient manner? Sometimes it’s very hard to say everything is running great, right? 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 that some things are taking a little bit extra time to bill entry, it’s taking a little bit of extra time to close the end of the month. That time might not seem like a big thing today, but that can rapidly scale into hours and days and weeks if you don’t have a full ERP system that’s helping you manage your day-to-day operations. So, small little things are going to add up very quickly. But you don’t always notice it when you’re living it day-to-day. I’ve dealt with a lot of controllers, and they talk about how their close process takes a number of days or a number of weeks, and you uncover what the root of that is—it’s that they have a lot of day-to-day manual processing. But they also don’t often know enough about the numbers as well, and we’ll talk a little bit about that more as we go on. But understanding what your numbers mean and what they represent is what an ERP gives you. 

Tyler

Last time Joe and I were on the podcast, we talked a lot about scale. What we see a lot of people struggle with as they try to scale their businesses and grow their businesses is that their ERP can’t keep up with them. To Joe’s point, it’s that close process, it’s their collections, their billing, et cetera. 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. I also like to think of it from a more functional use case. When we look at businesses, you have your profit centers and your cost centers. Historically, finance is a cost center, running the organization. But if you try to make that a more intuitive portion of your business and say hey, finance is enabling your business to grow or enabling ourselves to move faster and adding more value, rather than just being a reactive functionality of a business, it becomes a business attribute rather than a business detriment. And I think looking at it from that lens enables you to say hey, we need the tools to be able to that capability. 

Jake

Joe, you brought this phrase to my mind—if it’s not broken, don’t fix it. That’s such a mindset that we can get stuck in, where maybe it is working, maybe it’s not broken, but could it be better? Could there be an easier solution? And to your point, too, eventually it will be broken. Eventually it will be too hard to keep up with, and it’s important to stay ahead of that. What are some of those signals or some red flags that, as a business owner or a CFO, you would start to see that might alert you, like, hey, maybe we need a better solution, maybe we need to start looking at an ERP? What would some of those signs and signals be for you, Joe?

Joe

I think of it in a couple of different manners and Tyler hit upon something there at the very end, which is that finance can help enable your company. I’ve talked to people that say sales would like to sell our product a certain way but they can’t because finance can’t support it. That’s an opportunity for finance. They would have to have so much manual work, so much intervention that they just don’t have the time, they don’t have the bandwidth to be able to support that. That’s when you really know that you’re really inhibiting your company. You’re not giving it the tools, the mechanisms, to actually grow and scale over that period of time. And then I think the second one, as we talk about leveraging finance, you know, I like to think of it from the AR clerk or the AP clerk. What are they doing on a day-to-day basis and are they just spending time entering data into a system? Are we giving them a value in the company? There’s a lot of options out there to get that information in automatically and not have data intervention manually. Because then you could take a look at the business, talk about the numbers earlier. But when you can actually, in real-time, know how you’re performing midway through January, that can give you the option to make a gametime decision, like, hey, I might need to shift something, realign focus—not wait until the end of the month. Because if I wait until the end of the month and books don’t close for one or two weeks, now you’re talking middle of February when you could’ve made a change mid-January. And that real-time decision can have drastic results on your business. For the AR and AP clerks who are living and breathing the numbers on a day-to-day basis but they don’t have time to look at it holistically because they’re just working on getting data in there, sending out invoices or payables.

Tyler

You know, from my seat, what I see on the operational side—when we see companies come to us that are trying to scale, they usually have a smaller accounting system that they’ve been working in since they started and they just spun it up when the business originally got initiated just to keep the lights on as an activity. And, 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, like Joe was saying, capable. 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 you start to think about what are the business capabilities that we need to do, what do we need to achieve, that is the immediate time. 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. 

Jake

You guys bring up a lot of great points. Not only what possibilities, as you mentioned Joe with different models, like how the sales team might want to sell it one way but the business just can’t handle that, the finance team can’t handle that. But also, Tyler, what you’re bringing us to, is there are issues that can really start to cause problems later on if you don’t switch to a better system or prepare for a better system. So, what can happen if you don’t transition to an ERP? Or if you transition too late?

Joe

I’m actually seeing this with a number of customers. They’re using Google sheets and Excel for billing, for RevRec. We’re accountants—we all love Excel and Google sheets. It gives you an easy way to manipulate the data, 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 when companies are telling me that. Have you missed billing? Is your RevRec correct? Yeah, we sent out invoices late. Your DSO is so important for small businesses to have that cash flow in there, but 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—not keep a lean finance operation.

Tyler

To Joe’s point, what we see all the time is people doing things in spreadsheets. And what ends up happening is that those things actually become so much more work because you’re always trying to maintain them. To Joe’s point, accidentally hitting the backspace button and deleting a zero and then all of a sudden your financials are almost completely screwed up and it takes a lot of work and effort. You need to start to enable yourself so you’re not creating more problems for yourself in the future. One thing we constantly see when we look at implementations of NetSuite or our products is that, a common pain point is that people have gotten themselves into situations where they have such a pain, that they’re doing so much more work than they need to today, and they finally have identified that they need a new ERP or they need other financial tools to do their job, so now they have to do the implementation and their day-to-day job. And they don’t even have the time for that now. Being able to paint the picture of what the business is going to be like in six months, twelve months, three years, five years, and trying to really plan for that is going to actually create less work and less costs for you in the long run because you’re preparing yourself now for the future. I think having that insight really helps you make good decisions for yourself and for your company. 

Jake

Great advice there and explanation of setting up for your future, making sure that it’s easier for you in the long run, better for you in the long run. As we wrap this up, is there any parting advice for a company who, maybe they’re starting to understand they need an ERP system? What advice would you tell them to help them start to prepare now as they start looking?

Joe

So I like to think of it from a longer-term focus—don’t be short-sighted that my business needs a system that does xyz because that’s what you do today. 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. You want to be able to add that second, third, fourth story to the house. You want to have that structure that’s there, where you don’t have to move in two years or three years because you’re like, well, now I can’t do global consolidations or send out an invoice in a foreign language. You didn’t have that requirement two years ago. So what do you do then? So just making sure you’re set up for not just today but the future as well. 

Tyler

That key component of scale—where are you now, where do you want to be, where would 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. I think, just to add to that, a good recommendation I always have for customers is: I feel like the task of getting a new ERP, especially as a CFO, is a daunting task. You need to think about what are the risks of this process, what is the cost of this process, what is the change management of this process. But frankly, you don’t really need to reinvent the wheel. Look to other peers in your industry, peers of your colleagues that work at other companies, and get their recommendations of the processes they’ve implemented, what are the scalability benefits of those platforms, and what are the feature sets that they have—things that you might not have thought of, or things you need to think of on your journey. Really take advantage of your network. And, recommendations from those ERP providers can really help in that assessment. 

Jake

Well, Joe, Tyler, thank you both so much for sharing your expertise about when is the right time to look into an ERP. There are so many benefits that are there to join a system like this and it’s so interesting to hear the potential that you could be holding yourself back from, but also how this could also hold you back in other ways if you don’t jump in early enough or if you wait too long. So, thank you both again for sharing your expertise on this topic. 

Joe

Thanks for having us back. 

Tyler

Thanks!