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4 Reasons Why ERP Systems Can't Process Recurring Revenue

Scott Frew
Scott Frew

Enterprise Resource Planning (ERP) systems such as Oracle, SAP, NetSuite act as the transactional financial backbone of all well-run large organizations. From manufacturing, inventory, purchasing, sales, marketing, accounting and finance, ERP systems touch every part of the business. Given their “mission-critical” role, many organizations have invested tens of millions of dollars (some even hundreds of millions), to help implement and maintain their ERP over the years.

Born in the early 90’s when traditional, one-off sales were the norm, traditional ERPs are not equipped to take on recurring revenue transactions inherent in today’s XaaS world. But, given the significant amount of money, time, and effort that has been spent (and still goes into maintaining) these legacy ERPs, maximizing ROI is key. This is why it’s not surprising then, to see technology organizations trying and failing to process their subscription and consumption business using these systems.

ERPs simply cannot process recurring transactions efficiently or effectively. Here are four reasons why.

1. ERP systems lack required data fields


Serial Numbers

There are many of these. While many ERP systems may track “a” hardware serial number, they fail on tracking other critical information such as software license numbers, support contract numbers, or the related channel parties related to the transaction. In the context of a renewal, these are essential for tracing the ownership of the software and the physical location of the product.


Contract End Dates

Another essential field is the contract or maintenance end date. To accurately pre-plan renewals (indeed any recurring transaction), you must know what the expiry date is.


Historical Sales and Contract Information

The historical sales data or original contract information is also essential information for a renewal. These details are critical when a renewal has been lost to a competitor, but the data should always be maintained so you can win the renewal back at the next cycle. None of this information is available in your ERP; it is not usually linked to the original product sale and requires a time consuming and inefficient process to extract it if that is indeed possible.

2. ERPs don’t generate quotes

Unless you buy an add-on (if available) and spend time and money integrating it, ERPs are not designed for quoting. They are designed to be a repository of data, a track record if you like – and a report generating engine. Quotes, however, are the vital parts of both net-new and the subsequent renewal process, and ERP systems were never designed with this functionality in mind.

3. Nor can they track cloud consumption

Again, these systems were never designed to track and bill for the usage or consumption of a service. Specialist systems are needed to “tell” the ERP how much to bill, but the critical information surrounding the invoice (such as the number of users or sessions) will be missing without these other systems.

4. ERPs are focused on financial reporting rather than transactional tracking

As mentioned, an ERP is more of a history of company transactions. It absorbs inputs, classifies data, and then produces reports. As a result, the focus is more on reporting outputs, rather than tracking transactions through a process.

A recurring revenue transaction is a process with specific stages, which must be tracked through to closure. In the same way, a CRM has evolved to track opportunities and your ongoing relationship with your customers or prospects, a successful “recurring revenue” sale needs to be tracked to an even greater degree.

There’s no doubt that the ERP is an essential component of companies today. However, like any system, it has its limitations and is not designed to address every business process.

Investing in a purpose-built platform for what you’re trying to achieve, such as managing recurring revenue, is essential to enabling maximization of your opportunity, improved productivity, and other workflow efficiencies. The key is to make all the systems work together by integrating them.

The platforms surround ERP systems to give you a far more intelligent outcome when it comes to your recurring revenue and cloud consumption transactions.

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