Spending £50,000 on an ERP system could help generate a cost benefit of in excess of half a million pounds within 10 years. It may sound too good to be true, but we’ve done the maths…
Dynamics 365 Business Central and Navision can be a significant driver of efficiencies within organisations. Here we run the numbers on a typical ERP solution for an SME manufacturer or distributor and the cost savings possible.
We've started from an assumption of £50,000 for development and implementation. Here's how the numbers play out:
Start: Save £14,400 on VAT reporting
Let’s start with a simple example: VAT. With Dynamics NAV or Business Central, you can fully automate your VAT reporting.
So how does this saving work? Well, let’s assume your accountant spends four hours every month preparing and reporting VAT to HMRC. What is the value across 10 years if you can fully automate this?
If you pay them £30 per hour, the calculation is straight forward:
(4 hours x £30) x 12 months
The resulting saving is £1,440 per year. Over the typical 10 year lifespan of an ERP, this results in savings of £14,400.
Next: Save £150,000 on other finance processes
If you can leverage 10 more efficiencies in the finance department, such as automated bank reconciliation, intrastat reporting, automated invoice chasing, automated payment suggestions and so on, then you can make a similarly large saving.
And the chances are, you’ll be able to automate more than 10 tasks, or partly speed up many more. Based on £15,000 of savings a year, a saving of £150,000 over 10 years is quite achievable.
Then: Save £250,000 in the warehouse or shop-floor
What if your ERP could help tell staff exactly where everything was, and how everything ran?
And what if by monitoring stats and creating more effective processes, you could help each of your workers save an hour a day?
For 10 workers at £10 per hour over an approximate working year, the calculation runs:
(£10 x 10 hours) x 250 days = £25,000
Over 10 years that’s £250,000.
Further savings & benefits
So far we’re at over £410,000. And there’s plenty of other cost-saving efficiencies that your Business Central or Navision ERP can drive.
What’s the value in cutting delivery times by increasing efficiency of route? Or reducing production delays by automating the component/raw material purchase based on predicted sales trends? Either could help towards the final £9,000 per year. Over 10 years, this would take you to the magic £500,000 figure.
Then there’s the areas where an ERP can make you money, such as being able to see what parts of your business are profitable and what parts are not. Having data from your ERP can help you make smarter business investments, driving improved performance and profitability. Equally, you can scale back investment in areas that are loss leaders and the money saved can be reinvested.
Then there’s your sales uplift. Managing your leads through Business Central's sales management solution can help increase sales by as much as 40% (dependant on your current procedures). So an ERP can help to generate revenue as well as save it.
So what’s the return of a Business Central or Navision instance to a company? There's some licence with these numbers, but a conservative estimate indicates business savings of 10 times your initial investment. And that's before any sales uplift is factored in.
Adopted correctly and with the right guidance, it’s possible for a company to see a complete return of investment within their first year. And with Business Central, development costs can be much less than £50,000, thanks to functionality pre-tailored to operational requirements.
There are few other investments that a company can make that will pay for themselves so quickly, and fewer still that will continue to generate revenue savings for such a long period of time. Better yet, you can continue to add new functionality to Business Central or Navision over the 10 years, finding further cost benefits.
If these numbers have you interested in an ERP, why not book a no-obligation demo and work out what your company could be saving: