Enterprise Resource Planning System Selection and Implementation: Key Factors to Consider and Pitfalls to Avoid

JIM HOLMAN: Hello everyone and thank you for joining Key Factors to Consider When Selecting and Implementing an ERP System. This is part of our 2024 Not-for-Profit speaker series. My name is Jim Hullman and I'm a director at Cherry Bekaert.

JIM HOLMAN: This webinar will help organizations that believe they need a new system understand the key steps involved in the selection and deployment of a new ERP system. I'm pleased to introduce our guest speakers from the Kerr Consulting Group, which was recently acquired by Cherry Bekaert. You will be hearing from Dan Chrisman, Ryan Fleming, and Nathan Curry.

JIM HOLMAN: This webinar is divided into two sections. The first, which I will lead, relates to ERP selection and success factors in a successful ERP selection process. The second half will cover ERP implementation, key success factors, and deployment.

JIM HOLMAN: Our first polling question is: Do you believe your current ERP will successfully serve your organization's needs over the next three to five years? The answers are A: Yes, B: No, and C: Don't know. The results show 57% Yes, 36% No, and 7% Don't know.

JIM HOLMAN: ERP stands for Enterprise Resource Planning. Gartner coined the term in the early 1990s when it was focused on manufacturing and distribution companies. Today, an ERP is typically considered the business platform that operates an organization.

JIM HOLMAN: We approach ERP differently for for-profit organizations and for higher education institutions. The green circles on the slide represent core functionality that should be under the hood of your main ERP solution. These core functions should not require additional integrations or manual processes.

JIM HOLMAN: In a Not-for-Profit, core functionality typically includes general ledger, financial reporting and compliance, budgeting and financial planning, revenue management, accounts payable, and cash and bank management.

JIM HOLMAN: The orange rectangles represent ancillary or best-of-breed products that may integrate with the ERP. These might include donor CRM systems, grant management, volunteer management, program management, online giving, events, member portals, campaign management, and HR/payroll.

JIM HOLMAN: HR and payroll often sit outside the core ERP, which is a normal architecture choice. Twenty years ago, all of these functions might have been part of a single monolithic system. Today, strong purpose-built solutions integrate with ERPs through APIs.

JIM HOLMAN: In higher education, the green area still includes functions like financial aid, budgeting and planning, and grants and funds. The orange area includes student information, learning management, student housing, campus security, research grant management, ticketing, and point-of-sale systems.

JIM HOLMAN: The ERP is not expected to do everything anymore because purpose-built solutions now integrate effectively. If you answered No to the poll and do not think your ERP can serve you three to five years into the future, you may be running an old ERP or a legacy ERP.

JIM HOLMAN: An old ERP might be one you have not updated since 2010. A legacy ERP may be up to date functionally but have an outdated architecture or user interface. Many organizations still operate legacy ERPs.

JIM HOLMAN: Old ERPs create operational inefficiencies and strategic limitations for higher education institutions and Not-for-Profits, making it increasingly difficult to compete and serve effectively.

JIM HOLMAN: Common pain points include financial reporting challenges, integration challenges, data accessibility for reporting and business intelligence, administrative inefficiencies, compliance and regulatory issues, technology support and maintenance problems, and donor management or student experience limitations.

JIM HOLMAN: To understand how we got here, look at ERP through the decades. In the 1970s and 1980s, fund accounting and standalone solutions lived in accounting and on dedicated hardware such as mini computers and AS/400 systems. Some higher-ed and Not-for-Profit platforms still run on current generations of the AS/400, called the IBM Power Platform.

JIM HOLMAN: In the 1990s and early 2000s, client-server architecture and early cloud offerings emerged. Commercial cloud-born systems such as NetSuite and Intacct appeared around 2000. Higher education and Not-for-Profit adoption lagged by roughly 15 years and were often cloud-adverse with significant lock-in.

JIM HOLMAN: In the 2010s and into the 2020s, cloud adoption, integration, and SaaS increased. We now commonly see best-of-breed approaches with APIs, where the ERP does core financial work and purpose-built solutions augment other areas.

JIM HOLMAN: If you are beginning an ERP replacement, consider the risks of a do-it-yourself approach. Not-for-Profits often struggle to capture and prioritize requirements, have limited knowledge of modern SaaS ERPs, have risk-averse cultures that slow decision-making, and are frequently understaffed.

JIM HOLMAN: Understaffing leads to demo fatigue, where staff watch demo after demo and simply want the process to be over. On the higher education side, silos, entrenched opinions, limited SaaS knowledge, concerns about IT infrastructure alignment, and potential state system lock-in can stall or prevent selection.

JIM HOLMAN: Before you start, distinguish key requirements from organizational strategy. Key requirements are tactical and function-driven, such as month-end processing and day-to-day operations. Strategic considerations include whether the ERP investment supports your mission, growth, cloud strategy, and environmental initiatives.

JIM HOLMAN: Consider total cost of ownership, noting that SaaS changes the model to subscription-based total cost of operation. If you currently own your ERP, you are likely on an older legacy ERP with ongoing infrastructure costs.

JIM HOLMAN: Selection requires a process. Do not start with demos. If you demo without requirements, budget, or a defined current and future state architecture, the vendor will drive the process and comparisons across providers will be difficult.

JIM HOLMAN: Prioritize key requirements rather than creating an exhaustive list of thousands of requirements. Focus on what truly drives your organization and ensure vendors focus on those priorities. Prioritize requirements and have a decision framework for conflicts.

JIM HOLMAN: A careful selection takes time. Set expectations that this is not a two-week or one-month process. Plan, execute the process, and ensure roles and responsibilities are understood to avoid shortchanging results or failing to finalize a contract.

JIM HOLMAN: Polling question two: What is the number one reason for ERP implementation failure? Choices are A: Lack of leadership commitment, B: Poorly defined system requirements, C: Insufficient training and change management, and D: Inadequate budgeting and resource allocation.

JIM HOLMAN: The top choice was poorly defined system requirements, which aligns with Gartner research. Training and change management is a close second, and leadership commitment and budgeting/resource allocation are also on the list.

JIM HOLMAN: Knowledge transfer is critical at the handoff between selection and implementation. Your selection team will be highly experienced with the chosen system and must transfer knowledge to the implementation team within your organization.

JIM HOLMAN: Document and prioritize requirements, record vendor commitments and decision rationale, share demo insights with users, and maintain selection criteria documentation to prevent second-guessing.

JIM HOLMAN: The vendor's sales team often differs from the implementation team. Ensure the vendor transfers knowledge about your organization to their implementation professionals to avoid re-educating a new group and creating project distress.

JIM HOLMAN: I will now turn the presentation over to the team from Kerr Consulting Group. You will hear from Nathan Curry, Dan Chrisman, and Ryan Fleming. I will continue to operate the PowerPoint and go off camera and mic while the Kerr team presents.

NATHAN CURRY: My name is Nathan Curry. We will cover ERP implementation in this section. We will discuss four critical foundational elements, common Not-for-Profit-specific challenges, key implementation components, system design and configuration considerations, project team structure, common failure points, and post-implementation success.

NATHAN CURRY: The four critical foundational elements are stakeholder commitment, resource allocation, project governance structure, and change management strategy. Some elements you can define before the project; others require collaboration with your implementation partner.

NATHAN CURRY: Stakeholder commitment means identifying key stakeholders and champions who advocate for the project. Champions are often department heads who desire change and drive success.

NATHAN CURRY: Resource allocation recognizes that implementations are difficult and stakeholders must allocate time while maintaining daily duties. Define authority, decision-makers, key communication points, and responsibilities.

NATHAN CURRY: Determine how much time your team can commit to implementation. If internal capacity is limited, a qualified implementation partner can shoulder more of the work.

NATHAN CURRY: Project governance defines how the project will be managed. Manage scoping during sales and selection, define change control to prevent scope creep, and designate a project manager and single point of communication.

NATHAN CURRY: A project manager helps govern pace, track tasks, and ensure alignment. Clear governance helps anticipate and manage risks.

NATHAN CURRY: Change management strategy includes proactive scoping and statement of work creation. Anticipate wishlist items and decide whether they belong in the initial implementation or a subsequent phase.

NATHAN CURRY: Define project cadence, such as weekly calls, budget-to-actual tracking, task assignments, and a process to approve change orders when necessary.

NATHAN CURRY: Our ERP implementation methodology for modern SaaS solutions begins with a kickoff meeting and functional discovery. Implementation kickoff is distinct from sales discovery and focuses on detailed use cases and project planning.

NATHAN CURRY: During discovery we workshop scope, iterate on plans, and align resources. After discovery we configure the system and begin user acceptance testing (UAT), overlapping configuration with UAT where appropriate.

NATHAN CURRY: We like to get users into the system early to start training and exposure. Running old and new systems in parallel is not a recommended best practice because it creates unnecessary complexity and is a recipe for failure.

NATHAN CURRY: During UAT we test configurations against use cases, confirm functionality, and familiarize users with benefits. Going live means leadership determines when the organization stops using the old system and starts using the new system.

NATHAN CURRY: Implementation is challenging and some issues are inevitable. Following a structured methodology helps navigate go-live hurdles and move toward full adoption.

RYAN FLEMING: I will cover common challenges Not-for-Profits face during ERP implementation. Knowing these challenges upfront allows proactive mitigation and smoother transitions.

RYAN FLEMING: Implementation is not just about selecting a system; it is about configuring it to fit unique operational needs such as fiscal period handling, grant reporting, fund management, and integrations.

RYAN FLEMING: Fiscal year timing is critical. Address fiscal year setup early so the system supports reporting timelines. Schedule go live during the slowest period of the fiscal year to minimize disruptions.

RYAN FLEMING: Modern systems allow go live in any month, so choose timing that aligns with operational needs rather than assuming you must go live at fiscal year start. Coordinate with stakeholders across finance, operations, and programs.

RYAN FLEMING: Grant reporting and site-specific needs require configuration to meet unique grantor formats, spending limits, and compliance measures. For multi-site organizations, configure data segmentation by location.

RYAN FLEMING: Use dimensions to tag and track data by grant, location, program, or other attributes. Test segmentation and reporting setups before launch to reduce disruptions at go live.

RYAN FLEMING: Fund accounting complexity requires tracking restricted, temporarily restricted, and unrestricted funds according to donor restrictions. Establish project-level tracking to ensure accountability.

RYAN FLEMING: From day one, create reporting templates for internal and external stakeholders. Collaborate with finance and program leaders early to design templates that provide consistent oversight.

RYAN FLEMING: Integration challenges often involve donor management systems. Plan which data elements must be synchronized and test integrations to ensure contributions, pledges, and allocations align with financial records.

RYAN FLEMING: A sandbox environment is an effective strategy. A sandbox allows validation of data flows and integrations without impacting production and helps ensure donor data syncs reliably before go live.

NATHAN CURRY: Data migration is a key implementation component. Decide what data and how much to migrate. Our best practice is to migrate minimal historical data and bring open balances forward where possible.

NATHAN CURRY: Typically, one to two years of detailed transactional data is common to migrate. Ask implementation teams how data migration is funded and what their approach is, since migration services are often charged separately.

NATHAN CURRY: You can retain the legacy system as a reporting repository or create a separate data structure for historical reporting. Legacy systems often lack data dictionaries and can have segmented chart of accounts that complicate migration.

NATHAN CURRY: Modern dimensional setups reduce chart-of-accounts complexity by tagging transactions with dimensions. Legacy migrations require additional time and expense, so plan accordingly.

DAN CHRISMAN: We start with the end in mind for reporting frameworks. Design reporting requirements first to inform dimensional and system structure. Tailored reports help boards, donors, and regulators understand fund usage and outcomes.

DAN CHRISMAN: Dimensional accounting replaces unwieldy linear charts of accounts with a core account plus transactional attributions such as fund, grant, location, department, activity, and task. This enables detailed tracking and reporting for each dollar.

DAN CHRISMAN: Thoughtful fund structure design helps track restricted and unrestricted funds and supports interfund and intercompany transactions. Proper grant tracking aligns spending and reporting to funder guidelines.

DAN CHRISMAN: Workflow automation should capture approval matrices and repetitive tasks. Automating approvals and routine tasks reduces manual effort and creates auditable processes.

DAN CHRISMAN: Common failures in data migration and testing include insufficient testing and poor data mapping. Insufficient testing leads to errors, retraining, and a poor go-live experience.

DAN CHRISMAN: Poor data migration without a clear mapping framework results in reporting breakdowns. Establish a migration blueprint to map legacy data to the new structure.

DAN CHRISMAN: Lack of change management causes resistance. Communicate benefits early and often to build buy-in and reduce reluctance. Change is cultural and requires ongoing communication.

DAN CHRISMAN: Project team structure includes executive stakeholders, project team members, department heads, end users, champions, and super users. Champions advocate for the project and combat resistance.

DAN CHRISMAN: Vet your implementation partner carefully. Ask whether they speak your language, how long they've been in business, how many implementations they have done with your industry, and how many consultants they have dedicated to your sector.

DAN CHRISMAN: Ask how knowledge is transferred from the sales team to the implementation team to avoid repeating information and wasting client hours.

RYAN FLEMING: Cutover strategy is important. A clear cutover plan minimizes disruption and helps the organization run on go-live day. Running old and new systems in parallel is generally not recommended with modern systems.

RYAN FLEMING: Parallel runs add complexity, increase data inconsistency risk, and can slow adoption. A well-planned cutover with thorough testing and pre-launch validation builds confidence without parallel processes.

RYAN FLEMING: Training is critical. Offer a blend of self-paced learning, instructor-led sessions, certification programs, and ongoing learning packages. Match training to different learning styles and skill levels.

RYAN FLEMING: Choose an implementation partner that provides a range of training options so all users feel confident with the new system.

RYAN FLEMING: Support services should include self-service resources, a community of users, and tiered support with escalation paths. Confirm what support is included and what requires separate agreements.

RYAN FLEMING: Post-implementation success includes monitoring activation rates and user adoption, measuring churn, and running internal satisfaction surveys such as Net Promoter Score. Not everything will go perfectly, but proper follow-up ensures continued progress.

JIM HOLMAN: Thank you to our presenters and attendees. If you have any questions, reach out to me or the team at Cherry Bekaert. Our final session in the 2024 Not-for-Profit speaker series will be on December 4th and will cover the 2024 tax update, changes to IRS Form 990, current IRS compliance priorities and examination programs affecting Not-for-Profits, and highlights from the IRS strategic plan related to the tax-exempt sector.

JIM HOLMAN: We value your feedback and ask that you complete the short survey that will appear when you leave the session. A recording will be available in about a week. Thank you.