Home Revenue Recognition ERP Augmentation: What It Is and Why You Should Care

ERP Augmentation: What It Is and Why You Should Care

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Posted by Martin Sachs on Jan 8, 2014 4:20:00 PM

ERP Revenue Recognition SoftwareThere’s something to be said for not messing around with something that works. When corporate technology expert Andy Ziegele told Profit Magazine in 2009 that companies should stick to “vanilla” implementations of their enterprise resource planning (ERP) systems as much as possible, it was at the tail end of a string of high-profile and costly ERP implementation disasters spanning the past decade. Companies, Ziegele argued, are not as different as they think, and often their desire for customization is driven more by politics than by a business process so unique that an off-the-shelf ERP can’t handle it.

Ziegele’s advice is good—to a point. It’s true that attempting to alter your company’s ERP system with custom code can lead to serious complications. Among them: what do you do when a major update to the ERP is rolled out? You will either have to update your custom code (hoping that the people who created it are still around) or remain on the pre-update version of the ERP, risking virus and malware attacks while losing out on potentially invaluable new features. Perhaps just as significant, as this article from Inside ERP points out, custom coding adds time and expense to any ERP project. In fact, it’s cited as the single most frequent cause of cost overruns and missed deadlines in ERP upgrades.

If Not Custom Coding, Then What?

For better or for worse, a lot has changed in the few years since Ziegele made his comments. Many areas currently handled by core ERP are changing.  This article focuses particularly on the area of Revenue Management, but these principles could be applied to any of the other core functions of ERP systems.   First, in the new “subscription economy” many companies have discovered that their off-the-shelf ERP systems just can’t handle the revenue management complications brought on by multiple element arrangements, value pricing, and the need to establish and maintain fair value. To make things even more difficult, new guidelines coming down the pipeline as a joint effort of the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are expected to include a host of additional provisions governing how and when companies with complex billing arrangements and subscription models can recognize revenue.

If custom coding isn’t the answer (and we’ve already established that spreadsheets aren’t), does that mean it’s time to throw away your trusty ERP and shop around for a new solution? The very prospect probably strikes fear into your heart. If your company is like most, your ERP is probably tied so tightly into all aspects of your business—customer relationship management, human resources, supply chain management, project management—that attempting to remove it could trigger a chain reaction of setbacks and delays across your entire enterprise as you scramble to implement the new system and train employees on its use.

Enter Augmentation

When we talk about ERP augmentation, we don’t mean supplementing your system through custom coding, spreadsheets, or any of the other cobbled-together solutions companies often use to deal with their revenue management nightmares.  For our purposes here, ERP augmentation is the practice of using an ERP plugin module supplied by a vendor that specializes in revenue management or other critical business areas.  Whether you’re running Oracle, SAP, Dynamics, or any of the host of other ERP systems available on the market today, it is likely you will have both the need and the option to augment these systems to fill gaps in functionality that would otherwise lead to manual efforts or expensive customizations.

There are many advantages in using a vendor-supplied solution over custom coding or spreadsheets. The biggest: a vendor who focuses on delivering one particular kind of product not only offers expertise and experience, but is more likely to have worked out the kinks in their solution. This leaves you with an upgrade that has already been tested and proven, and—another major advantage—one you won’t have to worry about adapting for new regulations and ERP updates. That responsibility will rest squarely on the shoulders of your vendor.

It’s not a good idea to over-customize your ERP, but when your ERP isn’t meeting your needs, neither should you throw the baby out with the bathwater, so to speak. For a complete guide to augmenting an ERP system to deal with the revenue recognition challenges of the modern era, click on the link below.

ERP Revenue Recognition Standards Sarbanes Oxley

Topics: Complex BillingSarbanes-OxleyAvoid Revenue Restatement