Companies Underutilize ERP Systems

Ventana: Failure to take advantage of systems’ capabilities costs companies money and blunts strategic effectiveness . Large corporations invest tens of millions of dollars in this type of software, which does their accounting, manages inventories and handles their human resources records. Yet most companies fail to use well-established capabilities of these systems in ways that will reduce their costs, improve customer satisfaction and support strategic initiatives, the study finds. A CFO would demand to know why their company was running a factory only one shift when it could be operated profitably for two or three, but that’s exactly what most of them are doing with their ERP systems without even realizing it,observed Robert Kugel, who directs . Benchmarking data shows that in the 1990s, companies cut the cost of their finance operations significantly. Ventana Research’s work points to ERP systems as the source of much of this efficiency. However, little progress has been made recently. Ventana Research estimates the Fortune 500® is currently saving $60 billion annually because of these investments. Finance executives often are unaware of the impact ERP has had on efficiency, so they have been overlooking opportunities to use the full capabilities of the software to generate further savings.

• A majority of respondents believe ERP can drive and support innovation in 11 of 12 key functional process areas such as financial and managerial reporting, purchasing and compliance and risk management.

• Process automation and integration are a proven ways to cut operating expense, increase cash flow and reduce error and fraud. Yet only half of the study’s participants have implemented an order-to-cashsystem that can accelerate cash collections. Only 30% are using image capture which can improve customer satisfaction by cutting the time to respond to inquiries and reducing costs by eliminating unnecessary paperwork.

• Enhancing company performance requires companies use both financial and non-financial metrics to set objectives. Most modern ERP systems are capable of tracking much more than just accounting data but only 11 percent thought their ERP system captured all or most of the non-financial information they need to monitor employees’ key performance indicators.

Ventana Research’s Financial Performance Management practice

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