ERP Requirements Checklist: Template + 10 Things To Consider
Importance of Tailored ERP: Creating an ERP requirements checklist, including importance scores, is vital. This eliminates confusion and aids in selecting the right system without getting overwhelmed by numerous complicated options.
Core Functionalities Overview: ERP core functionalities include finance, HR, inventory, and CRM modules, each essential for managing company resources and customer relationships efficiently.
Effective Requirements Gathering: To gather ERP requirements, involve cross-departmental teams, map current processes, identify pain points, and use real scenarios to define essential system functionalities.
Prioritizing ERP Features: Using the MoSCoW method (Must, Should, Could, Won’t have) helps prioritize ERP features based on business goals, ensuring a balanced and manageable system.
Setting a Realistic Budget: Budget planning should include costs for licensing, implementation, training, and unexpected expenses, ensuring the ERP investment aligns with business ROI expectations.
Choosing the right ERP system can make or break your business operations. With so many options out there, having a clear list of your ERP requirements (complete with relative importance scores) is no longer just a good idea — it’s essential.
Here’s how to build an ERP requirements checklist. Oh, and a checklist my team and I built for you — so you can get back to doing your job instead of shopping for software.
Introduction To ERP Requirements
ERP, or Enterprise Resource Planning, is a comprehensive software solution that brings together all the moving parts of your company — from finance to inventory, HR to customer relations — within a single system. ERP becomes your business’ central nervous system, making sure everyone's on the same page with up-to-the-minute information.
When choosing a solution, it’s all about your specific requirements. The top ERP tools are all pretty dang good, but the best one for you is all about you. Here's why:
- Tailored fit: No two businesses are alike. Your ERP should match what you need.
- Cost-effectiveness: The right requirements help avoid costly customizations later.
- User adoption: When the system meets actual needs, employees are more likely to use it.
Be thorough, but don't go overboard. An overly complex system can be as problematic as an inadequate one. I know — the balancing act here can feel more complex than it should. If you’d rather start from a pre-built ERP requirements checklist, download it here:
Core ERP Functionalities
Understanding the core functionalities (commonly referred to as components) of an ERP system is the first step toward making an informed decision. They are:
Finance and Accounting
The financial module is the heart of any ERP system, as it's where the money talks. Here's what to look for:
- General Ledger: The core financial system that records all transactions and summarizes accounting data.
- Accounts Receivable and Payable: Manages incoming and outgoing payments to maintain cash flow; tracks money owed by customers and to suppliers.
- Budgeting Tools: Supports strategic planning with variance analysis, forecasting, and scenario planning.
- Tax Management: Automates tax calculations, filings, and compliance for various jurisdictions.
- Revenue Management: Manages revenue recognition, adjustments, and deferrals, essential for financial compliance and accuracy.
- Cost Accounting: Monitors and controls costs to highlight profitability and cost-heavy areas, crucial for manufacturing sectors.
- Asset Management: Oversees the lifecycle of assets from acquisition to disposal, optimizing depreciation and maintenance.
Human Resources
Unless you have the Krabby Patty formula, your people are your greatest asset. A good HR module helps you manage them effectively:
- Employee Data Management: Centralizes records like personal info, job roles, performance reviews, and employment history.
- Payroll Processing: Automates payroll by syncing with time and attendance systems to calculate pay, deductions, and benefits.
- Benefits Administration: Manages benefits programs with easy enrollment and self-service options for employees to manage their selections.
- Recruitment and Onboarding: Streamlines hiring from job postings to integrating new hires, managing applicant tracking and employee integration.
- Time and Attendance: Tracks employee hours and attendance, crucial for managing shifts, scheduling, and payroll accuracy.
- Performance Management: Supports employee evaluations with goal setting, reviews, and ongoing feedback to align with business objectives.
- Learning and Development: Enhances employee skills and growth through managed training programs and resource scheduling.
- Compliance Management: Maintains adherence to labor laws and regulations, ensuring proper record-keeping and reporting for audits.
Inventory and Order Management
For businesses dealing with physical products, this module is a game-changer:
- Real-time Inventory Tracking: Know what you have, where it is, and what it’s committed to, helping prevent stockouts or overstock situations.
- Order Processing: From quote to cash, all in one system. This includes order entry, confirmation, fulfillment, shipping, and invoicing.
- Warehouse Management: Optimize your storage and picking processes.
- Inventory Forecasting and Analytics: Utilize historical data to forecast future demand and better plan inventory levels.
- Return Management: Efficiently handle returns with capabilities to manage and restock returned items, and process refunds or replacements.
- Vendor Management: Manage relationships with suppliers including costs, lead times, and quality of goods. Effective vendor management helps negotiate better terms and ensure a reliable supply chain.
Customer Relationship Management (CRM)
I don’t have to tell you how important managing customer relationships is for your business, so I won’t. Instead, I’ll tell you how an ERP system can help. A good CRM module should offer:
- Customer Data Management: Centralizes customer details including contact info, interaction history, transactions, and preferences.
- Sales Pipeline Tracking: Helps your sales team track potential deals from initiation to closure, identifying stages, bottlenecks, and outcomes for continuous improvement.
- Marketing Campaign Management: Oversees marketing efforts with tools for automating workflows, segmenting lists, scheduling campaigns, and tracking engagement and ROI.
- Customer Support and Service: Manages support tickets and service requests to ensure quick and efficient resolution of customer issues.
- Lead and Opportunity Management: Utilizes tools to track and nurture leads, score potential sales opportunities, and convert prospects into customers.
When it comes to implementing an ERP software system, you have three main deployment options. Each has its own set of features, pros, and cons:
Cloud-Based ERP
Cloud-based ERP systems are hosted on the vendor's servers and accessed through a web browser.
Key Features:
- Accessible from anywhere with internet connection
- Automatic updates and maintenance
- Scalable resources
- Subscription-based pricing
Pros:
- Lower upfront costs as there is no need for physical infrastructure
- Faster implementation
- Reduced IT burden on your team
Cons:
- Potential security concerns
- Less control over the system and data security, as data is stored off-site
- Ongoing subscription costs can add up
Use Cases:
- Ideal for small to mid-sized businesses that need flexibility and have limited IT resources
- Companies with remote or distributed workforces.
On-Premises ERP
On-premises ERP is installed locally on your company's hardware and servers and managed by your IT staff.
Key Features:
- Complete control over the system; installation, customization, and security
- Customizable to specific needs
- Data stays within your organization
- One-time licensing fee, often with annual maintenance fees
Pros:
- Higher level of customization
- Total control over data and security
- No ongoing subscription fees
Cons:
- High upfront costs
- Requires in-house IT expertise
- Responsible for updates and maintenance
Use Cases:
- Suitable for large enterprises with complex business processes that require deep customization
- Businesses with strict data security requirements or those operating in industries with stringent compliance regulations
Hybrid ERP
Hybrid ERP combines elements of both cloud and on-premises systems, offering a middle ground.
Key Features:
- Core functions on-premises, others in the cloud
- Flexibility to choose which modules are where
- Gradual transition possibility
Pros:
- Balances control and flexibility
- Can be more cost-effective than full on-premises
- Allows for phased cloud migration
Cons:
- Can be complex to manage
- Potential integration challenges
- Requires careful planning
Use Cases:
- Best for businesses that require the security of on-premises for critical data but want the flexibility of the cloud for less critical operations
- Companies undergoing digital transformation that are looking to gradually move from on-premises to cloud without full commitment
Here's a structured table that compares and contrasts pros, cons, and use cases of each ERP deployment type:
ERP Requirements Gathering Best Practices
The data surrounding your ERP requirements isn’t going to all come from one place. Here’s what to do and who to talk to, to put your best foot forward:
People
Involving the right people is essential for comprehensive requirements gathering. Here's how to do it:
- Form a diverse team: Include key representatives from all departments.
- Engage end-users: In this context, end users means whoever will be interfacing with the ERP most often. They know the day-to-day pain points best.
- Secure executive sponsorship: This ensures buy-in and resources.
Change Management, communication, engagement from the beginning… these are all important. Employees will like to know they are heard, and we have to balance their views with the holistic benefits to the entire organization.
Ultimately, such changes are 20% tech, 80% people, mindset and behavior. Make or break, their involvement will be a huge contributing factor.
Processes
Understanding and mapping your processes is key to defining accurate requirements:
- Document current processes: Start with what you're doing now.
- Identify pain points: Where are the bottlenecks and inefficiencies?
- Envision ideal workflows: How could things work better?
- Define use cases: Create specific scenarios the ERP should handle.
The goal isn't to replicate your current processes in a new system. It's to improve and optimize them.
Flow charts and process maps can be very useful when explaining processes to users. They are the best way of describing how the different processes connect together and flow from end to end… giving them the opportunity to spot problems before the ERP configuration is finalized.
Priorities
Not all requirements are created equal. Prioritizing is crucial:
- Align with business goals: How does each requirement support your overall strategy?
- Use the MoSCoW method: Categorize requirements as Must-have, Should-have, Could-have, or Won't-have.
- Consider a phased approach: Implement critical features first, then add others over time.
The MoSCoW Method
The MoSCoW method is a prioritization technique used in project management, business analysis, and software development. It's particularly useful when defining requirements for systems like ERP. Here's a breakdown of what it means:
M - Must have: These are critical requirements that must be included for the project to be considered a success. Without these, the system or project would fail.
S - Should have: These are important requirements that are not vital, but add significant value. They're often as important as the "Must haves" but might have workarounds or alternative solutions.
C - Could have: These are desirable requirements that would be nice to include if time and resources permit. They're typically seen as "want to have" rather than "need to have".
W - Won't have (this time): These are requirements that stakeholders have agreed will not be implemented in the current project, but may be considered for the future. This helps manage expectations and scope.
Using the MoSCoW method for ERP requirements might look like this:
Must have:
- General ledger functionality
- Accounts payable and receivable modules
- Basic reporting capabilities
Should have:
- Inventory management integration
- Customer relationship management (CRM) features
- Advanced financial reporting
Could have:
- Mobile app for on-the-go access
- AI-powered predictive analytics
- Integration with e-commerce platforms
Won't have (this time):
- Blockchain-based supply chain tracking
- Virtual reality training modules
- Fully automated AI customer service
ERP System Evaluation Criteria
When evaluating ERP systems, consider these key factors:
Scalability
The ERP system should accommodate future growth in terms of users, transactions, and data volume. This means looking for systems that can scale up without major disruptions or costs.
Your ERP should grow with your business. Look for:
- User scalability: Can it handle an increasing number of users?
- Data scalability: Will it manage growing data volumes efficiently?
- Feature scalability: Can you add modules or features as needed?
Integration Capabilities
The ERP should integrate with existing software systems, such as CRM, HRM, or e-commerce and logistics platforms. This reduces the risk of data silos and enhances operational efficiency.
- Look for well-used, well-documented APIs
- Check if the ERP offers ready-made connections to common tools
- Ensure the vendor can help with unique integration needs
User-Friendliness
A user-friendly ERP boosts adoption and productivity. Evaluate:
- Intuitive interface: Is it easy to navigate?
- Customizable dashboards: Can users tailor their view?
- Mobile accessibility: Does it work well on smartphones and tablets?
Customization
Every business is unique. Your ERP should adapt to your processes, not vice versa. Look for:
- Configurable workflows
- Custom field creation
- Personalized reporting options
But don’t overdo it — over-customization can lead to hugely bloated budgets and upgrade difficulties. Ideally, it’s perfect right out of the box, so consider customization requirements a mark against vendors.
Reporting and Analytics
Data is only valuable if you can derive insights from it. Ensure your ERP offers:
- Real-time dashboards. These dashboards should be interactive, allowing users to drill down into the data for deeper analysis.
- Custom report builders. Allow users to create and customize reports without needing extensive technical knowledge. These tools should offer a variety of reporting templates and the ability to pull from various data sources within the ERP.
- Advanced analytics and business intelligence (BI) capabilities. Advanced analytics extend beyond basic reporting; they should offer predictive analytics, data mining, and complex data visualizations. Business Intelligence functionalities should aggregate data across the entire ERP system to provide comprehensive insights, identify trends, and support strategic planning.
Compliance and Security
Protecting your data and meeting regulatory requirements is non-negotiable. Key features to look for:
- Role-based access control (RBAC)
- Data encryption (at rest and in transit)
- Audit trails
- Compliance certifications (e.g., GDPR, HIPAA)
Customizing Your ERP Requirements Checklist
If you’ve downloaded our requirements checklist already, there’s a chance you need to tailor it a little. This section guides you through customizing the checklist, helping you create a roadmap that aligns perfectly with your organization's goals and processes.
A. Survey Team and Establish Business Requirements
Start by conducting cross-departmental workshops. Gather representatives from each department to identify pain points and prioritize needs. Use techniques like the MoSCoW method to categorize requirements effectively.
Next, map your current business processes. Document existing workflows, identify bottlenecks, and determine which processes need improvement. This will help you define functional requirements that address your specific challenges.
- List must-have features for each department
- Specify any industry-specific requirements
- Consider future growth and scalability needs
Create use cases that reflect daily operations, including edge cases and exception handling. Ensure these scenarios cover all critical business processes to guide your ERP selection and implementation.
B. Consider In-House Expertise and User Support
Assess your current IT capabilities by evaluating the technical skills of your in-house team. Identify any skill gaps that need addressing and determine if you need external consultants or additional training.
Planning for user adoption is crucial. Identify potential resistance points and develop strategies to encourage user buy-in. Create a comprehensive change management plan to smooth the transition.
Design role-based training programs that cater to different learning styles. Plan for ongoing training and refresher courses to ensure continued proficiency.
- Develop hands-on, visual, and written training materials
- Schedule regular training sessions
- Create FAQs and troubleshooting guides
Establish robust support structures. Set up an internal help desk or support team and plan for ongoing vendor support and maintenance.
C. Set a Realistic Budget
- Calculate the total cost of ownership (TCO) for your ERP system. Include software licensing fees, implementation costs, and ongoing maintenance and support expenses.
- Estimate integration costs by assessing the complexity of integrating with existing systems. Include costs for any necessary custom development and budget for potential data migration expenses.
- Plan for onboarding expenses, including user training costs and potential productivity dips during the transition period. Don't forget to budget for change management activities. For instance, add a 10-20% buffer for unexpected costs and consider a phased implementation to spread costs.
- Calculate expected financial benefits and estimate time to break-even. Ensure your budget aligns with the overall business case for ERP implementation.
Setting The Stage For Effective ERP Implementation
Alright, let's bring it home. We've covered a lot of ground in our ERP requirements journey, and if your head's spinning a bit, don't worry — that's normal. Choosing and implementing an ERP system is no small feat, but with this checklist, you're already ahead of the game.
Remember, the key isn't just ticking boxes. It's about understanding your business and selecting a system that will grow with you. Take your time. Rush it, and you'll end up with a costly system that doesn't fit. Do it right, and you'll have a powerful tool that streamlines operations and boosts productivity.
So, take this checklist, make it your own, and get ready for your ERP journey.
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