7 Steps Methodology of a Meaningful Enterprise Resource Planning (ERP) Auditing
March 9, 2021
- Posted by: Team Prudence
- Categories: ERP, ERP Auditing
- March 9, 2021
- Posted by: Team Prudence
- Categories: ERP, ERP Auditing
Enterprise Resource Planning (ERP)
ERP refers to the process that companies use in order to manage and merge the important parts of their enterprise. With the help of a single ERP software system, the companies are able to integrate all processes and then implement resource planning for their companies. ERP software is capable of integrating purchasing, planning, sales, finances, human resources, and marketing, etc.
Enterprise Resource Planning (ERP) audit
ERP audit means a thorough investigation into the aspects of the ERP systems of an organization which also tracks the effectiveness of the ERP and helps the organization form an opinion on it. Compliance audit, process audit, risk audit, system audit, security audit, and waste audit, are all parts of an ERP audit.
· Compliance audit – compliance audit is an internal audit that shows whether there are documented processes for all proceeds and if these documented procedures are being followed or not. Compliance audits can also be external.
· Process audit – specifically looking at one process for the purpose of auditing is known as process audit.
· Risk audit – Risk audit focuses on the possible risks, their analysis, and the management of these risks.
· System audit – System audit analyzes the failure of the system and sees if the systems are running smoothly within the organization. If anyone is having a slow processor and is unable to work because of obsolete computers and all other shortcomings of the systems are analyzed.
· Security audit – EPR security audit looks if there can be an improvement in security is very essential. The users who have access to the information are examined. Different records are specific to different departments and access should be granted to specific departments only.
· Waste audit – the waste in the ERP is searched for in this type of audit. Overproduction, waiting, transporting, inappropriate processing, unnecessary inventory, excess motion, and defects are all types of waste.
7 steps of meaningful ERP implementation methodology
ERP revolutionizes your company by efficient manufacturing and engaging customers. Meaningful ERP is important because a fair amount of time and cost is invested in it so the last thing a company wants, is the ERP to fail. The seven steps that can ensure the meaningful ERP implementation are:
· Planning of the project
·Installing the software
·Migration of the data
· Testing of the system
· Training the users to use ERP
·Deploying the software
·Evaluation of the ERP project
1.Planning of the project
Once the company plans on installing an ERP system, a lot of research goes into it. it is a process that needs planning and researching before the implementation. Planning rough procedures before making concrete decisions is very important. ERP demands knowledge and commitment and for that matter, a team is to be formed.
The team will include an executive sponsor that communicates overall strategies and oversees the goals of the project, project manager coordinates and communicates about the project, the users who define ERP requirements, an application analyst who migrates data from legacy to ERP system, an application developer who will customize and install the software and a quality assurance test engineer who tests data integrity and performance of the new system.
The team ensures the smooth running of the system and the flow from one department to another. A better understanding of the processes will help in setting goals and objectives for the ERP implementation. A reasonable timeline and budget should be mapped out in this phase.
2. Installing the software
Installing the software is the second step after planning. Software installation also serves as an opportunity to evaluate the current processes of the organization and redesign the existing business process into standard operating procedures. Also, find out the processes that need to be kept manual rather than int the ERP. Most successful implementation plans are successful only when there is a project manager who is dedicated and committed fully to see if the project is moving in the right direction. Unless there is ownership by the team for their project, the success is not possible. Ownership comes from ensuring that the entire team is involved in the project and when there is ownership, there is a greater chance of successful running of the ERP systems.
A vendor will help you in the implementation of the software. The application developer, in your team, is also responsible for the installation of the software and building of the infrastructure.
Make sure that you trust your application manager because if there would be no trust between you and the application manager then the project is very much likely to be unsuccessful. Do not keep your timeline too tight rather keep it a little flexible. Always keep in mind that you are more responsible for ERP implementation then your consultant or vendor
3. Migration of the data
After the installation of the software then comes the migration of the data. Preparation to migrate data means that all the information is transferred into the new system. The data is stored by many companies in different formats that might have errors. Before migration, the data should be looked for errors and then the migration should take place so there is accurate data in the new ERP system. The verified and updated data is then migrated by application analyst. A new database is set up, the database is mapped between the new and old system and data is transferred
4. Testing of the system
Testing is important for the smooth running of the ERPs system. The quality assurance test engineer forms the team is responsible for testing the system. The entire interfaces, reports, and functionality should work according to real scenarios and transaction data. The flow of business between departments should also be smooth and the user should validate it. Long tests take place before they go-live data. Go live data should be tested as it is important for the system. User training can also tell if there are errors in the ERP system.
5. Training the users to use ERP
There are many ways that are suggested by people to train the staff but there is no shortcut. The easiest way to train the staff is to actually train the staff. Before training, ERP should be understood by the business. Understanding the business software and harmonizing the business can be put in the software and a training plan can be developed. The key members of the project can be trained initially in a specific format. Classroom sessions can be arranged for the members of the departments. It is important for the training of the end-users that the processes are aligned with the key team members so that the session delivers is understood according to the business by the members. The training can have many different formats but the most beneficial is hands-on sessions. Hands-on sessions are when the users are given access to the test system and given scenarios that they follow. Training is not the end of the process as trained users have to process training. The acceptance by the users is also necessary for the ERP system to run efficiently.
6. Deploying the software
For the deployment of the software and before going live, the companies can choose from three methods by looking at the resources available and the extension of the ERP system. The three methods are:
· Big bang approach – the fastest way to transit is the big bang approach. It is the transition from the old system to the new system in a single day by all users but due to the technical difficulties, there can be major operational problems.
· Phased approach – this may take time as it happens in phases. The transition takes place group by group according to the unit or function. The process can be improved with each group.
· Parallel approach – this approach takes more time because users work on both the systems simultaneously, the old system, and the new system. As the users have a system they are used to, there are lesser risks involved. This approach is a little expensive.
There may be unexpected errors involved so always have extra IT staff on hold for any such misfortune. After the deployment of ERP software, testing and auditing the system for reliability, speed, and accuracy are important.
7. Evaluation of the ERP project
Going live is not the finish line; it is actually the start of a new phase. The new software requires maintenance and support for the users. The budget and resources for upcoming errors and issues in the ERP system should be planned for the maintenance of the ERP system. After going live, you should evaluate how successfully the ERP system is running.
Common mistakes during ERP implementation to avoid
Implementing an ERP system is not an easy task. No matter the commitment, adequate time and cost that you put in, there are chances of mistakes and errors. These mistakes and errors can result in the failure of the ERP system. The common mistakes are given below that should be avoided so that you can run a successful ERP system.
· Falling back on the practices of old business
Adjust with the new ways of the ERP software. For the entire business to learn and adjust with the change is difficult initially, but if done right, it will be very beneficial for the company and also the users of the software. Consider learning how to use the ERP solution to add into the running of your business and do not make duplicated efforts. Do not fall back on the old practices just because you are used to them.
· Not having the support of the senior leaders
The implementation teams should be available for assistance. Getting sponsorship early and managing the expectations throughout the process is important. The support from the senior leaders can be a great way to boost the productivity and adjustment of the users with the ERP systems.
· Pushing for more functionality than needed by the vendors
Know the needs of your business before getting a vendor so that you define the needs of your business. Do not let the vendor define the needs or charge you extra for features that you would not need. Define the requirements from ERP early during the process. Industry-specific solutions or sharing of data with the supply chain should be considered.
· Thinking about present business needs
ERP system is a long-term investment. Keep your long-term goals in mind that you may have. The future upgrades and increasing the software scale should also be considered during the implementation of the ERP system.
· Not having enough funds
Having enough budgets for the efficient running of the ERP is important to be considered. If your company is low on budget to implement a solution on-premise then get soft wares that are low on initial cost and fees are charged after considering the number of the users or the resources you consume as a company. Open source ERP or cloud ERP are common examples of such software that are low on initial cost so these can be suitable for your company. Planning according to the budget is important to save yourself from any misfortunes that you may face later on.
· Thinking ERP implementation is fast and inexpensive
Do not overestimate the time and money that is involved in the process of setting up an ERP system. The timeline and budgets should be made with extra consideration so that you are realistic in your goals. Do not cut on the resources for your project team and IT staff just because you are running low on your company’s budget. Give your project team and IT staff the resources that are needed by them so that they can put in their commitment and effort in the implementation of the ERP system.
Implementation of the ERP system is a process that involves time, money, and commitment but if done successfully it will help your company in a great way. Put in adequate time, money, and efforts to ensure the successful running of the ERP system and adjust to the new system by learning about it.