By Chandan Chourasiya
In today’s world of business it’s tough to imagine any organization without Information Technology systems. IT has graduated from business support to a business enabler. The organizations have IT applications in some or the other form. E.g. - ERP system, payroll applications, CRM, inventory management and other numerous applications running performing various functions performed earlier manually. An entire organization comes to a standstill in case these critical applications go down.
The IT deployments such as ERP have been in the organizations for more than a two decade now. The basic idea behind the ERP implementations was optimization of business processes to create a silo of activities which creates ease in maintenance and management of inventory management, customer relationship management, supply chain management, payables, receivables, material resource planning, financial and payroll. There were numerous ERPs implemented across the globe which includes SAP, Oracle Financial, Baan, JD Edwards, PeopleSoft, etc. The ERP implementation has indeed created a chain of interdependent processes which assist in production planning, management of inventory, payables, receivable and accounting.
The implementation of ERP is a herculean task which consumes organizational resources such as manpower, cost, time, requires upgrade of IT systems, reengineering of business processes, changes in reporting lines and segregation of duties. The business process reengineering specially creates new hierarchy, reporting lines and job profiles. Numerous surveys in the past have indicated 55 %-60% rate of failure of ERP implementation. There are several common risks associated such with implementation of ERP which include:
- Lack of management support
- Lack of employee support
- Time and cost overrun
- Operational bottlenecks
- ERP not meeting the promised expectations
- Inadequate education and training to employees
- Reputation risk among vendors and customers
- Lack of post implementation reviews
The ERP implementation involves commitment of resources such as costs, time and personnel. The failure of ERP leaves a big hole in the pocket and wastage of organizational resources. This creates a major problem especially in post implementation era.
One of the common factors for post implementation failures is lack of implementation audits of an ERP. Organizations tend to rely more on user feedback and requirements after the implementation instead of ERP reviews by an independent auditor. This may cause more system disintegration as some changes may tend to be disruptive and non compatible to other modules of the ERP. There are numerous questions, the answers to which can indicate inefficiencies in the implementation of ERP.
• Does the system meet the needs of your daily activities?
• Is the system efficient to use?
• Was the functionality promised at the start of the process delivered?
• Have business processes changed?
• Are there any spreadsheets or databases in use?
• Are there any old systems in use?
• Is there data to show that the new system has delivered business benefit?
• Could further training improve your utilization of the system?
• Are available functionality and features are utilised to the fullest?
• Has system resulted in saving the resources of the company?
• Does the system provide all or most of the information you needed to perform your job?
• Level of manual interference post implementation stage?
The answers to these questions will represent
• System issues- which provide an indication that the system implementation is not as per the specified criteria, certain required features disabled, and excessive resources consumed for processing, etc. E.g. - Interface errors between inventory and production scheduling resulting in difference between work in progress and completed inventory.
• Functional gaps- A module not adequately functioning resulting in underutilization of the system and alternate procedures. E.g. - Accounts receivable is not configured for generating ageing statements resulting in manual processes followed for the same.
• Inadequate training- Many surveys in the past indicate that more than 80% of the ERP problems arise because employees are inadequately trained to understand functionality of the ERP. E.g. - Check processing done manually when actually these can be printed from the system.
• Processing gaps- Inadequate process resulting in use of certain manual processes. E.g. - Use of reconciliation for AR balances.
The analysis of gaps using these criteria can help in leading to solutions for improving the efficiency and productivity of the ERP. The post implementation audits can help Organizations achieve the underlined objectives of implementing the new system. Further a survey by Big four accounting firm in 2005 indicates that 62% post implementation audits have actually saved an organization from scrapping the ERP project and went a long way in making the implementations successful.
The post implementation audit of ERP would result in following advantages:
• Mitigating Risks such as processing gaps, segregation of duties, interface errors, security features, etc.
• Efficient use of resources such as manpower, time and system resources.
• Identifying and address training requirements. The audits can indicate certain areas where user training is required.
• Ensuring effective compliance processes. The newer versions of ERP ensure certain reporting for the purpose of compliance such SOX. The ERP can be automated to produce certain automated reports which can be utilized for the purpose for compliance.
• Optimizing processes for effective utilization of ERP capabilities.
Thus the post implementation ERP audit can go long way in ensuring organizational objectives of implementation have been achieved. It can also benefit the organizations which have successfully implemented the ERP as the Audit can help in augmenting the existing features and enhancing the capabilities of the system. The audits help in saving time, provide right direction on implementation, resolve security issues and optimize the business cycles.
