How do you know if Project-based ERP is right for you?
Most companies these days recognize the need for ERP, an enterprise resource planning system that integrates a vast range of business information, financial, project, customer, proposals, HR, and a lot more. The majority of companies today use some type of ERP or business accounting system.
But ERPs aren’t “one size fits all,” and many companies are using systems that aren’t right for their business needs. This is especially true among companies that execute projects for external customers. Traditional product-based ERP systems just aren’t a fit for the needs of project-based companies.
Following are 6 benefits of project-based ERP. How does your firm stack up in each of these areas?
1. Higher Win Rates
Are you able to identify your most profitable projects and types of projects?
When your organization can tell which projects and types of projects are most profitable, you can pursue the right projects and build a basis for solid cost estimation. This will drive efficiencies in the bid process and allow you to focus on business that is best suited to your organization’s skillsets. This in turn, will help to increase win rates.
2. Higher Resource Utilization
Is your staff being utilized as efficiently as possible?
Because your workforce is one of the biggest assets your organization has, you want to make sure that this resource is being used effectively on revenue-generating work. You’ll go a long way toward making the organization profitable if you can see where your people are being used — and where they aren’t being used. After you have that information, you can make sure they’re assigned to work that is actually generating revenue.
3. Higher Profits
Are you able to set the right price for the projects you bid on?
When businesses compete for fewer jobs and projects, it creates an atmosphere where pricing can be extremely competitive. Profit margins will be tighter. It may be important to win the project – but only if you are able to make a profit. When you set the right prices for bids, it is the first half of the equation for managing your profit margins. Having visibility into your actual historical project costs, performance, and risks/opportunities is critical to help set prices that will keep you in the running – but not negatively impact your long term profits.
The second half of the profit margin equation is ensuring that your projects are well run. Manage projects proactively to ensure you keep your costs in line with your revenues to maintain expected margins. Project-based ERP solutions that integrate financial and project management capabilities enable organizations to create accurate forecasts. Accurate forecasts help to support profitable bids and ensure that projects are executed in a manner that maintains margins.
4. Increased Cash Flow
Can you create accurate invoices that get paid on time?
It takes less time to get paid in a project-based ERP system because the time to create an accurate invoice dramatically improves when labor and materials costs are connected to the right phase and task levels of a project. Transactions are validated for accuracy at the point of entry, making invoice creation more automated and predictable, with fewer errors. As a result, customers are more likely to pay the invoice on time, which helps to accelerate cash flow.
5. Automated Compliance
Does your system take the headache out of compliance and audits?
In project-based ERP, the accounting and business rules flow down to the project itself, making compliance more uniform across the business. Generic accounting systems often can’t enforce the business and accounting rules upfront, which means any violations are caught on the back end of a transaction’s life cycle during reconciliation or audit. Project-based ERP systems built with compliance in mind have forms and reports (such as a billing format) that make life easier and take the guesswork and worry out of compliance.
6. Visibility and Control
Do you have access to complete and accurate information when you need it?
With multiple, standalone systems, it can take days or weeks to pull together accurate information about schedules, costs, and profit by project or program. This leaves plenty of room for surprises in terms of missed deadlines, cost overruns, and backlogs that can jeopardize individual projects — and potentially torpedo the profitability of the organization.
Project-based ERP provides fast and accurate visibility into project and financial status, as well as risks and opportunities. Alerts proactively warn management and project/ program managers about potential cost overruns and schedule slippage without requiring them to wade through lengthy reports. Access to timely information reduces surprises and allows organizations to take proactive actions to address issues before they impact schedules, costs, or revenues and margins.
Project-based businesses have needs that are very different than other organizations. Each project is different and staff need tools designed to manage and track information at the project level. If you are a project-based company, you will benefit from this complimentary book, “Project-based ERP for Dummies”. This book is a great reference guide and will explain in detail how you can improve your firm’s performance and project success with project-based ERP.
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