ERP system failures are rarely dramatic events – they simply stop being able to keep up with how businesses operate. The gap between what the business needs and what the ERP system can deliver widens until it becomes too costly to ignore.
Here are some of the most common signs your organization has outgrown its ERP and why they’re worth taking seriously.
1. Teams are resorting to manual workarounds
When an ERP can no longer keep up, users return to their old habits, including spreadsheets. This isn’t unwillingness to use the ERP – it’s people finding ways to bridge what the system can’t do. The trouble is that, over time, workarounds stop being temporary fixes and become another form of infrastructure the business relies on.
The cost of that isn’t immediately visible on a balance sheet, but it shows up everywhere else. Each spreadsheet exists outside of what was meant to be the organization’s single source of truth, meaning someone has to keep it in sync manually. Every transaction processed in the ERP creates more work elsewhere, and these work hours add up quickly.
Workarounds of this nature are common – 64% of companies still use spreadsheets in some way to support their payment processes. In the UK, research into UK SME finance and accounting departments found that just 20% had adopted automated invoice processing, while 39% still relied on Excel spreadsheets and manual processes.
Signs to look out for:
A few common signs suggest you’ve crossed from using spreadsheets as a temporary solution to making them a core pillar of your infrastructure. The first is the master spreadsheet: a single business-critical file for pricing, forecasting and financial consolidation that only a couple of people fully understand.
Another example is the disconnect revealed during the month-end scramble, when the finance team works to reconcile data across the system to make sure it’s accurate. It’s worth noting that the spreadsheets themselves aren’t the problem here – they’re great tools for ad-hoc analysis. The issue is when they become the go-to system for processes that your ERP should be able to handle natively.
2. Reporting bottlenecks are slowing down decision-making
When senior leadership asks questions, your ERP system should be able to provide the answer. In many organizations, however, it takes days to get clear answers due to outdated ERP systems. For example, generating SQL Server Reporting Services (SSRS) reports requires a deep understanding of the platform, and senior leadership has to rely on already busy internal or external developers to get a clear answer.
Slow reporting cycles are common – 50% of finance teams take six or more days to complete their monthly close, and 25% of finance teams report needing 10 or more days. When the monthly books take that long to close, reporting also lags, and decisions end up being based on outdated data.
Signs to look out for:
A few common signs that reporting has become a bottleneck include the custom report queue, where non-standard reporting requires an IT ticket, and a turnaround time measured in hours or even days.
Another sign is that teams may tire of waiting for their support tickets to be resolved, and create their own reporting dashboards using tools like Excel because the ERP doesn’t offer the views they need. Slow reporting isn’t a sign of a poor team – it often means the ERP system isn’t pulling its weight.
3. The system can’t keep up with growth
Legacy ERPs were designed for the way businesses used to operate. Adding a new entity, expanding to a new country or absorbing an acquisition exposes the limits of these ERP systems, and it’s usually at the very moment you can least afford the disruption. When these ERPs lack the features or the stability companies need, expensive customization projects arise, and each customization makes future upgrades more challenging.
The consequences are visible and can be severe. For example, after acquiring Elizabeth Arden in 2016, Revlon attempted to consolidate its operations onto a SAP S/4HANA platform, but the rollout caused major disruption. Revlon admitted it was unable to fulfill product shipments for around $64m in net sales, and the company incurred $53.6m in incremental charges to remediate the decline in customer service levels.
Signs to look out for:
A few common signs that suggest your ERP is limiting growth include every new entity, country or sales channel triggering a multi-month initiative that requires external consultants, customization and high costs. Another is an integration backlog, where new tools and platforms can’t go live without weeks of middleware work. Growth always tests systems, but a modern ERP should accommodate change rather than block it.
4. Integrations are fragile at best
A modern ERP is built to integrate with other systems, communicating directly with your CRM, e-commerce platforms, payment processing tools, project management platforms and more. Older ERP systems tend to use proprietary technology that requires specialized (usually costly) custom code for every integration, rather than plug-and-play connectors.
The consequences of weak integration are not just inconvenient – they include inaccurate reporting, missed shipments, billing errors and other unfortunate outcomes. There’s also the cost angle to consider. Organizations spend between 60 and 80% of their IT budgets on maintaining existing systems, including legacy ERPs. With every outdated feature comes a costly customization, and every customization adds to this already high maintenance burden.
Signs to look out for:
If your ERP integrations aren’t working as they should, you’ll soon know about it. One of the first signs is rising operational costs due to inefficiencies, as manual workarounds, duplicate data entry and error correction consume time and resources that could be better used elsewhere.
Another sign is less trust from users. If your team constantly encounters inaccurate or incomplete data, they’ll start to bypass the system altogether. Adoption rates will plummet, and the use of shadow tools (like spreadsheets) will mean teams end up working with entirely different datasets.
5. Compliance and risk are becoming difficult to manage
Regulatory requirements never sit still for long. If your ERP lacks the controls, audit trails and reporting features needed to keep pace with change, the burden naturally falls on your team. They end up spending more time manually collating the evidence needed, and this type of work is expensive, error-prone, and difficult to defend should regulators or auditors need to dig deeper.
But the risk isn’t just regulatory penalties (although those can be significant), it’s that compliance becomes a new project every time the rules change. In highly regulated industries, such as financial services, manufacturing and healthcare, the consequences of non-compliance can be disastrous, including fines and reputational damage that is hard to come back from.
Signs to look out for:
There are a few ways to tell if your compliance posture has drifted into riskier territory. First are internal reactions to external audits. If audits trigger many weeks or even months of unscheduled work to assemble evidence, your ERP has a problem. Another is when every regulatory change turns into a project of its own. Something that could be a relatively simple configuration update instead requires formal scoping and developer time, which often stretches over weeks.
What to do if you recognize these signs
If one or two of these signs are familiar to you, your current ERP is likely functional but is costing you time. If four or five resonate, the question becomes: which new ERP system is best for your business?
ERP implementation projects are a significant undertaking, but done right, they bring a host of benefits to organizations big and small. Unlike legacy systems, today’s cloud ERPs are designed to prevent the problems explored above. They’re built to scale, integrate with the systems you rely on easily and automate time-consuming manual work.
If you recognize these signs in your own organization, the next step doesn’t have to be a full system overhaul on day one. The right starting point is a clear-eyed assessment of exactly where your current ERP system is holding you back.
Partner with ERP Mechanics for your ERP implementation
If your organization is preparing to implement a new ERP system, ERP Mechanics offers a focused, specialist approach built around Microsoft Dynamics 365 Finance and Operations. Our services cover the full ERP project lifecycle: process mapping, system configuration, data migration, integrations, custom extensions and bespoke development where standard functionality falls short.
The relationship doesn’t end at go-live, either. ERP Mechanics provides post-implementation training and 24/7 technical support to keep operations running smoothly.
If you’re still weighing up your options, we also offer a free ERP Readiness Assessment to help determine if your people, processes and budget are aligned for a successful rollout.
Considering Dynamics 365 F&O? Contact us today to find out how we can help you get it right.