Old ERP: Gambling with Regulatory Compliance

December 11, 2013

Rules, rules and more rules. You know the drill. While your company is doing its best to compete in its industry, it’s also trying to stay current with a seemingly never-ending barrage of accounting(opens in new tab) and regulatory challenges. These include everything from sales and corporate tax changes to more stringent governmental requirements such as FASB’s recent EITF 08-01(opens in new tab) and 09-03 rules governing revenue recognition for “multi-element” products and services.

How well you can handle these has a lot to do with how effective your ERP software(opens in new tab) is.  But just because you spent millions on installation and you’ve paid hundreds of thousands for maintenance doesn’t mean it’s up to the task. 

Legacy ERP doesn’t take to changes well, because it couldn’t have anticipated the kinds of regs—like revenue recognition(opens in new tab)—that your company is facing today.  Yes, you get patches and upgrades and add-ons, but they only add to the time and effort required for maintenance, and they’re often outdated by the time you’ve got them working.  Plus, by the time your ERP software is updated, your operating environment has probably changed, too. To hold everything together, you’ve probably resorted to spreadsheets, CSV exports and manual data entry—and these don’t hold up well to scrutiny by today’s auditors.

Think Cloud, Two-Tier ERP

By contrast, today you’ve got an alternative choice—cloud ERP.

Not only is cloud ERP faster and way less expensive to get running than legacy ERP, it’s designed to be more agile in handling regulatory changes—or changes of any kind, for that matter.  It fully understands revenue recognition and all the subtleties, such as calculating commissions, that go along with it. And it’s versionless, so at any given time you’re running on the latest version, the most current regulatory processes. Compare that to legacy ERP, where your IT group dreads having to coordinate installation of new software versions across the company’s hundreds of users.

If you’re a newer company, your due diligence will show that bringing in cloud ERP over on-premise ERP is literally a no-brainer. And if you’re a subsidiary or division of a larger, older company, you can embark on a two-tier ERP strategy, bringing in cloud ERP instead of running on an extension of your parent company’s legacy ERP system.  More and more companies are doing that today, and there’s plenty of third-party help in doing the integration with SAP or Oracle ERP software.

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