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5 key things you should do to keep your ERP implementation budget from spiraling out of control

By: Serge Janssen Daalen, 22 May  2023

Switching to an ERP system is no small thing and it requires thorough preparation. It is therefore important to clarify the processes within your organisation. It is also necessary to define your budget for the new ERP system. No Project Manager wants to exceed the budget of a project. After all, it can lead to financial problems, delays and huge disappointments.

Problem 1: Unrealistic estimations
One of the biggest pitfalls in determining what the costs will be is making unrealistic estimates. People are often too optimistic about the cost or time involved in the implementation of a new ERP system. It is crucial to remain realistic and make a thorough analysis before determining your budget. Examine all of the cost drivers thoroughly and make sure you include a margin for contingencies.

Problem 2: Bad projectmanagement
Not having high quality project management can be disastrous for your budget. Failure to follow deadlines, poor communication and lack of control can lead to extra costs and delays. Make sure you appoint one person with experience as a Project Manager who will efficiently manage the entire project.

Problem 3: Scope Creep
Scope Creep is a term used when a project becomes increasingly larger and more extensive than originally planned. Scope Creep will inevitably lead to higher costs. Maintain a clearly defined project scope and if there are any changes, make sure they are fact-checked before they are implemented. Maintain control over the scope of the project and ensure changes are well documented and approved.

Problem 4: Inadequate Supplier Management
Another risk is not giving enough thought to who will be the supplier of your new ERP system. What are you looking for? And what do these providers actually offer? Is there a match? When you don’t align with  your supplier, it can result to poor negotiations, unclear contracts or a lack of control. If this happens it will inevitably result in unforeseen costs. Make sure you build a strong relationship with your supplier, and that clear contracts are put in place, with regular reviews of progress, performance and costs.

Problem 5: No budget monitoring
Budgets are essential. Monitoring and controlling the project budget regularly is a necessity! This includes tracking costs, identifying discrepancies and, if necessary, implementing transitional actions. Use budget tracking tools and prepare periodic reports to gain and maintain a clear understanding and overview of the project’s financial status.

Controlling and managing the budget of an ERP implementation project is crucial to the success of any project. Avoid the pitfalls and take the right action in time. Be realistic in your estimations (or obtain clarification from your prospective ERP provider), invest in good project management, and monitor the scope and budget.

We at Spire Solutions love to create a bespoke ERP system specifically for you. Get in touch with us and let’s figure out together how we can create a system which stays within your budget and makes your work flow with ease.

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