project-based erp for dummies
six ways project-based erp can make a difference
Some 88 percent of companies use some type of ERP, an enterprise resource planning system that integrates a range of business information, from financial to customer to HR, and a lot more. But ERPs are not one size fits all. This is especially true among companies that execute projects for external customers.
Project-Based ERP for Dummies introduces the basic concepts of ERP systems that are intended to serve project-based businesses. Check out Article 8 "Article 8: Six Ways Project-Based ERP Can Make a Difference" of the new Project-Based ERP for Dummies article series and see how your business can benefit from a purpose-built ERP system. (And in case you missed it... Article 7: Project-Based ERP for Dummies - If You Build it...Project Manufacturing.)
Six Ways Project-Based ERP Can Make a Difference
You wouldn’t run a marathon in high heels, would you? Of course not (click to tweet). And you wouldn’t run your business with the wrong tools, either. You should use ERP tools that have been designed specifically for project businesses. Figure 8-1 shows why.
Figure 8.1: Project-based ERP delivers value to the organization
Higher Win Rates
When organizations can tell which projects and what type of projects are the most profitable, it builds a basis for solid cost estimation and a track record of performance that drives efficiencies into your business development processes. This allows you to hone in on the business that is best suited to your skill set. That, in turn, increases your win rates.
Being able to identify and provide past performance information to your customer is a key differentiator in the bid cycle.
Higher Resource Utilization
Because your workforce is one of the biggest assets your organization likely has, you want to make sure that 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 are not being used — and make sure they’re assigned to work that is actually generating revenue.
Today more businesses are competing for fewer jobs and projects, and that forces everyone to make sure their pricing is as competitive as possible. Profit margins are tight. Setting the right prices for bids is the first half of the equation for managing profit margins. Visibility into actual historical project costs, performance, and risks/opportunities is critical to setting prices that will keep you in the running but won’t cause negative profit impacts for the organization in the long run.
The second half of the profit margin equation is ensuring that projects are well run. Manage projects proactively to ensure that they keep costs in line with revenues to maintain expected margins. Financial and project management software solutions enable organizations to create accurate forecasts that support profitable bids and ensure that projects — and changes to projects — are executed in a manner that maintains margins.
Increased Cash Flow
The amount of time it takes you to get paid is faster in a project-based ERP system (click to tweet), because the time to create an accurate invoice dramatically improves when your labor and materials costs are connected to the right level of your project. Transactions are validated for accuracy at the point of entry, making invoice creation more automated and predictable, with fewer errors. As a result, your customers are more likely to pay the invoice on time.
In a project-based ERP, the accounting and business rules flow down to the project itself, making compliance more uniform across the business. Generic ERP systems can’t always enforce the business and accounting rules upfront, which means any violations are caught on the back end of a transaction’s lifecycle during reconciliation or audit. Project-based ERP systems built with compliance in mind have forms and reports such as Billing Format that make life easier and take the guesswork out of compliance.
Visibility and Control
With existing siloed solutions, 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 entire organization.
Financial and project management software solutions give the entire team complete and timely visibility into project and financial status, as well as risks and opportunities. Alerts proactively warn executives and project/program managers about potential cost overruns and schedule slippage without requiring them to wade through lengthy reports. This timely information reduces surprises and allows organizations to take proactive actions to address issues before they impact schedules, costs, or revenues and margins.