"Is it really important to have a fully functional ERP before you can set up an efficient
This question was asked at a recent webinar, now available on-demand:
"Designing Great FP&A Processes"
Please add your thoughts about it below. Thanks!
Which comes first – ERP or FP&A?
Answers
It helps, but it is not critical. If you need some FP&A work done on your business right now, find ways to work with data that you can access and analyze/model.
Also, as an FP&A person, you should be paying attention to what ERP data and processes are being configured-your insights into what data may be needed for
The ultimate Go live of the ERP system should just make your work better.
2
After reading some of the other great comments, this question reminds me of the "polarity thinking" mindset that sometimes happens to all of us. The question as posed above is much like asking "Would you rather breathe in or breathe out?"
e.g. see https://www.saybrook.edu/rethinkingcomplexity/posts/11-07-11/polarity-thinking-
Depends on whether you have asthma or not. I choose breath out (which is much more difficult when you are having an active asthma episode).
Clearly having a robust ERP system is essential for capturing actuals but as most FPA work is done outside of ERP systems today, it is not a precursor for improving planning and budgeting.
Answer to the question depends on the size of the organisation.
For some FP&A methods that involve modeling (e.g., product, channel, customer profitability at the family level) estimates from knowledgeable cross-functional employees can suffice.
I would prefer a BI/Reporting tool talk to the legacy
This is a very much a chicken vs. egg question to me since they should match. Often you don't get to choose which comes first so then you make them match.
In a perfect world, you map out your entire ERP configuration plan in
to ensure you set up consistent with your FP&A, since a budget is not worth much
if you have no easy way to compare actuals to budget to see variances to address.
FP&A is no way dependent on an ERP system. You may obtain more data, but even a simple TB consolidation system has a lot of data that can be used.
Installing a "fully functional ERP system" BEFORE "setting up an efficient FP&A organization" is an insanely bad idea. First of all -- as several of the commenters have pointed out -- there are a lot of important FP&A functions that can be done well with Excel and other tools, even at large organizations.
But perhaps more important, among the most important reasons to install a “fully functional ERP system” is to maximize the value of the information coming out of those systems, and to improve the quality of management decisions. How can such a system be properly spec’ed without FP&A involvement?
1
Randall brings up a very good point. How can you just implement an ERP system, accounting system, in fact any system without a fully developed plan.
This plan should be developed prior to the purchase of an ERP system and then adjusted to maximize the system you both bought and your needs, since every system has different attributes that were not present when you developed your plan.
Lastly, plans are dynamic, not static.
I don't see where FP&A requires an ERP. There are lots of ways to capture information and analyze without one.
I agree with Mark. There are plenty of firms that have no use for an ERP system. A manufacturer would probably need one and it certainly helps but it really depends on the business and industry.
FP&A successfully existed way before ERP (early in my
No.
You do need both in today's environment. However, you can still perform FP&A without an ERP, albeit a tedious and not so efficient process, especially in manufacturing.
Filed Under:
FP&A