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Which comes first – ERP or FP&A?

 

"Is it really important to have a fully functional ERP before you can set up an efficient FP&A organization and processes?"

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!

Answers

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

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 management reporting/forecasts may help add value to configuration decisions. Examples: are certain master data records richly defined: e.g. how many attributes on the item master record would really help you analyze product and/or customer results?

The ultimate Go live of the ERP system should just make your work better.

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

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-learning-accept-both-sides-argument

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

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).

Richard Barrett
Title: Consultant
Company: Independent
(Consultant, Independent) |

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.

Mayuresh Deosthale
Title: CFO
Company: Quality Kiosk Technologies Private Limit..
(CFO, Quality Kiosk Technologies Private Limited) |

Answer to the question depends on the size of the organisation.

Gary Cokins
Title: Founder
Company: Analytics-Based Performance Management L..
(Founder, Analytics-Based Performance Management LLC) |

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.

Mayuresh Deosthale
Title: CFO
Company: Quality Kiosk Technologies Private Limit..
(CFO, Quality Kiosk Technologies Private Limited) |

I would prefer a BI/Reporting tool talk to the legacy accounting system to meet the FP&A requirements Vs investing in a ERP upto a size of 1500 to 2000 Employees or $50 Mio Revenue. After that the Statutory/Mgt. reporting requirements go to the next level and it makes sense to invest in ERP. Thanks

Theresa Wilt
Title: Consultant - DCAA/ FAR/ CAS Guidance + A..
Company: T W Consulting, Inc.
LinkedIn Profile
(Consultant - DCAA/ FAR/ CAS Guidance + Accounting system setup , T W Consulting, Inc.) |

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 Excel file
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.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

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.

Randall Bolten
Title: CEO
Company: Lucidity
LinkedIn Profile
(CEO, Lucidity) |

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?

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

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.

Mark Matheny
Title: VP - FInancial Planning and Analysis
Company: Novolex (formerly Hilex Poly)
(VP - FInancial Planning and Analysis, Novolex (formerly Hilex Poly)) |

I don't see where FP&A requires an ERP. There are lots of ways to capture information and analyze without one.

Anonymous
(Chief Financial Officer) |

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.

Nick Shepherd
Title: Owner
Company: EduVision Inc.
(Owner, EduVision Inc.) |

FP&A successfully existed way before ERP (early in my career I was an Manager of FP&A) so there is no dependency or need for one before the other. HOWEVER the understanding of linkage between operational information and accounting information is key to successful FP&A so they should by considered inter-dependent as well as iterative in that better knowledge of one drives the effectiveness of the other. Effective analytics architecture enables effective FP&A so knowing what is out there today I would want effective analytics through a good ERP approach to better enable me to do my job.

James Scott
Title: Consulting CFO
Company: Early Growth Financial Services
LinkedIn Profile
(Consulting CFO, Early Growth Financial Services) |

No.

Nick Mends
Title: MD/CFO
Company: BoulderRock Investments Inc.
(MD/CFO, BoulderRock Investments Inc.) |

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.

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