There will NEVER be a better time to invest in your business if an ERP solution is under consideration … This is why:
√ Prices that will never again be this low!
- No matter how you word it, the US has seen rapid deflation in the past two quarters. In order to not damage future prospects companies are offering unheard of incentives. You can literally get a 33% discount on an American car. Gasoline is 75% less than a year ago and 30% to 50% less than the average in the last 10 years or so (inflation adjusted.) Companies would rather sell inventory at a loss than have to auction it and you the purchaser (business or consumer) can greatly benefit.
- ERP publishers are feeling the hurt. As these publicly traded vendors approach quarter and year ends, their willingness to be financially “creative” is at levels we’ve never seen. Whether it’s an off the cuff discount, free modules, users, extended support or maintenance, subsidized financing etc, we are seeing discounts that are double or triple industry norms. These will disappear as the economy recovers and the pent up demand will drive up the cost of services by 10% to 20%.
√ ERP solutions typically add 2% to 6% to the bottom line for reasons that include:
- Effective inventory management, forecasting, and replenishment optimizes inventory, increases turns, and reduces the amount of dead and slow turning stock. Experts indicate a 15% to 20% cost reduction and cash flow improvement based on decreased stock, handling, and shelf space costs.
- Improved customer service augmented by technology keeps customers from leaving for that desperate competitor who is low balling their prices during the recession to stay afloat. Better customer and value added services means better customer retention and helps insure long term customer loyalty.
- Reducing DSO (day’s sales outstanding) by even a few days due to improved billing engines, electronic transmittal of invoices, integrated payment receiving (including credit cards), and proactive collections management considerably improves access to cash.
- ERP solutions can dramatically reduce the amount of paper handling and filing. There are many studies that show, depending on company size, a saving of 10’s if not 100’s of thousands per year when all the costs of searching, filing, and printing, storing and disposing of paper are reviewed.
- Electronic Data Interchange (EDI) dramatically reduces data entry costs and errors and allows you to get preferred status with your vendors.
√ Waiting Costs Money … most ROI and payback analysis show that ERP implementations have a payback of less than 3 years and provide companies the opportunity to increase revenue with better bottom line profits. There usually is a significant lost opportunity cost by waiting that can never be realized.
√ Inflation will drive up prices … Economists predict that the Federal Reserve will not contract the money supply fast enough as the economy improves. This will likely cause a serious inflation problem as the money supply will double at the end of the recession resulting in sky-rocketing wages. A leader workforce supported by technology and optimized business processes positions well run companies to gain a true competitive advantage and increased marketshare.
√ Implement while your staff has the time… Unfortunately during a downturn, your staff isn’t as busy as they might be during robust times. Putting in any ERP solution requires significant effort from both your staff and ours. Project success rates are highest when the client staff is fully engaged on the project. There is no better time than now to have them working on such a project.
√ Stimulus Incentives… recently enacted laws in Congress allow you to deduct 100% of your software and services assuming the system is put into service this year. Historically, a technology solution is depreciated over a 5 year period. Section 179 deductions have temporarily and dramatically been increased. If you have a profit this year, you can save significant taxes. If you have accumulated significant deferred revenue from prior year tax strategies, this is a great way to offset that income as significant tax rate increases are pending in Congress for future years.
√ No Cash Flow Impact … leasing companies are offering subsidized programs where you can make no payments for 6 to 12 months. Their models show a cash flow neutral scenario with the ROI improvements covering the lease payments. These programs take the cash flow concerns off the table permitting businesses to invest in new technology today.
This economic downturn can be viewed with fear or as an opportunity to invest in your business. By leveraging ERP technology and optimizing business processes your organization can improve productivity, increase efficiency, and position itself for a real competitive advantage at a cost that is far less than it will be in the future.
Those who are afraid and act as such survive, while those that seize the opportunity rise to the top to achieve a world class status and prosper accordingly. The choice is yours but definitely worth reflection and consideration.
Posted by Mark Chinsky