Measuring Your ERP’s ROI: Looking for the Hidden Sources of Return on Investment

When faced with the decision to purchase and implement new technological solutions, the first thought that comes to mind is, “What’s the ROI?” Generally, ROI is expressed as a number – after all, the formula is ROI = net gain/cost. Let’s say you buy a $5,000 software system and you then go on to make $7,500. That’s an ROI of 50%!

Sometimes, the sources of ROI are less obvious. However, that doesn’t mean that they’re any less important or that they shouldn’t be considered at all. Read on to learn how four hidden sources of ROI in your ERP implementation can transform your entire company, making it more profitable and sustainable.

A Single Source of Truth and Error Reduction

These two concepts are highly related. At many companies, multiple people within the same department maintain records. That’s a waste of time and money. Moreover, people commit quite a few errors when they manually enter data.

An ERP system kills two birds with one stone: it draws data from a single repository, creating a definitive version of truth, and it eliminates the need to manually enter data, thus drastically reducing errors. That has a huge and positive impact on firms.

Lower Operating Costs and Higher Productivity

Two other hidden sources of ROI for ERP implementations are lower operating costs and higher productivity.

We’ll start with higher productivity. When you’re not spending time entering data or searching for information in disparate data repositories, you have more time to get your job done. That, of course, is good for a firm’s bottom line.

In addition, you’ll see lower operating costs as a result of ERP implementations. Administrative tasks (such as data entry and searching for information) are a cost to businesses. When those tasks, and by extension, those costs, either disappear or are significantly diminished, your operating costs drop. And that’s good for your profits, too.

Why Searching for Hidden Sources of ROI Matters

“That’s great that there are a number of less-obvious benefits to an ERP implementation,” you say, “but why should I bother doing the legwork to figure out what the hidden sources of ROI are?”

When you’re making a business case, you want to be thorough. There are always naysayers and Doubting Thomases in the c-suite who don’t want to invest in new technology. They’re always looking for excuses to shoot down ideas. Showing that there are hidden sources of ROI for your ERP implementation makes your business case stronger.

Moreover, this research gives you a deeper understanding of how an ERP system works. When you talk about these hidden sources of ROI as you build your business case, it displays your in-depth knowledge of all of the functionalities that an ERP system possesses. And when you know just what your ERP system can do, you’ll get the most out of it.

By all means, look at the obvious sources of ROI in your ERP implementation. Just don’t forget about the less visible sources, too.

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