It’s never too soon to start mapping out your post-merger ERP integration plan.
It’s never too soon to start mapping out your post-merger ERP integration plan. Typically, this isn’t something most companies think about during the heat of an acquisition deal. However, once the papers are signed and the excitement subsides, it’s time to face the merger’s practical realities.
Strategic plans must be put in place as early as possible to help both companies work together as seamlessly as possible. The initial months of a merger can become an administrative nightmare if a roadmap doesn’t exist for integrating each company’s cultures, processes and systems.
One of the most critical systems neglected in the early stages of a merger is the ERP. Companies assume that what they’re currently using will make do. Although most are aware that integrating two disparate systems can be complicated, they often postpone this decision and its complications indefinitely.
In the early stages of a merger, every decision and action will be closely observed by investors, media, analysts, employees, and other stakeholders—and so there is little room for error in the success of the merger. You need to sort out the ERP systems before the complications that arise become disruptive to the business.
A merger brings increased scrutiny to all your accounting practices. Many things will shift overnight. The first close after a merger is stressful for any accounting team, not least because investors and stakeholders regard it as a simple task and aren’t tolerant of error. It can be challenging to quickly produce accurate consolidated financial statements when it’s likely that two companies are struggling to align reports and data from different ERP systems.
Aligning accounting processes and policies across two teams is crucial to post-merger success. Of equal importance is the ability to consolidate and integrate all financial data into first close financial statements. All of this creates time pressure (particularly if the merger occurs near the end of a quarter). Without the right tools, many teams will make errors in the data transition between disparate systems. As a result, it’s best to start creating a roadmap for post-merger integration as early as possible.
Recommended reading: 7 common financial consolidation challenges that companies face
You may save money upfront by not investing in a global ERP integration. However, over time, multiple ERPs are more expensive to run. They eat up resources and time, and often each system will require a different network of hardware and people to manage it. Consolidating your ERPs into a single cloud-based system will cost far less in the long run as you can streamline your teams and processes as part of the post-merger process.
It can take months to consolidate data from multiple systems. Accountants have to go back and forth between systems and teams, double checking data and correcting inconsistencies. It’s wise to invest in a system in a merger that can cut this time down to days rather than months. Streamlining all processes and saving your team weeks of unnecessary labour.
During post-merger ERP integration, it can be easy to overlook regulations and tax obligations. Often, teams are focused on how to align day-to-day tasks and processes, as well as to make data consistent and accessible to all the necessary parties. Tax season, compliance and audits can seem like something to worry about later.
However, they need to be taken into consideration as soon as you start thinking about ERP integration. What are the new requirements and regulations you need to meet? And even more importantly, which systems enable you to meet them? ERPs do not automatically result in compliance, and you need to look for a system that allows you to meet your industry’s accounting standards.
When it comes to post-merger ERP integration, many companies will go with whatever system the larger entity uses. However, this may not be the perfect solution for every merger. It’s better to gather together key members of each company and create an ERP checklist that aligns with new business goals and the functionality required to reach them.
Successful integration will require both teams to do a full inventory of systems that feed into the ERP or hardware that supports it and outline the functions they use within their current systems. By creating a thorough list, it’s possible to settle on a solution that isn’t just one company bending to the whim of the other, but a system that serves the business overall.
