Startups - when is the right time to migrate to an accounting ERP?

Most local Startups use Xero* and some may have reached a point where they've had to ask themselves, "Is this the right system for our current and future needs?".

It's a tricky question to answer and your decision should not be taken lightly nor with haste.

As a general rule, you can use Xero for a long period of time. We know a few startups with over 500 employees who used it throughout their growth period and granted they might've experienced some degree of inefficiency but the system didn't blow up in smoke and this should give you some comfort that it can handle a fair few transactions.

Migrating away from Xero to an accounting ERP (such as Netsuite* or SAP*) comes with complexity, as it takes time to implement, requires substantial input from your existing resources, and costs a bit more than what you think - especially once you tick all the boxes for the add on features.

However, there is a definite time and place for such a migration and just when might that be?

Well, the answer to this question would be similar to a response to, how long is a piece of string? As not one shoe fits all, but we'd consider it when one or more of the following attributes are at play;

• You have significant expansion plans that are likely to come to fruition
• You can afford it
• Your control environment needs significant attention and this has been flagged by auditors or other parties
• You have experienced fraud or a control deficiency that led to errors in internal and external reporting
• The system will solve for at least 80% of your major operational inefficiencies
• Your accounts payable and receivables process is manual, time consuming and heavily reliant on employees (thereby restricting your ability to scale without adding additional headcount),
• As a guideline(apply this loosely though), when you have > 150 employees, more than one location, your revenue is >$20 million and maybe you are profitable (so that you can afford it) and
• There is a definite cost vs benefit to the system.

The items above should never be considered in isolation and just because you tick a couple of these boxes does not mean you absolutely need to migrate to an ERP. There are other ways you can solve pain points and before you make the decision be sure to also consider;

• Try to solve for your pain points internally using your Tech teams, after all that is a strength of being in a Startup
• Consider your long term strategy, will this implementation get you closer to your goals? and how?
• Lean on your peers in the industry, ask them for their feedback and what they have done, you will gain valuable insights here as many are walking the same path as you
• Engage an external advisor who can help you choose the right tool for your needs, and let's face it sometimes we don't have all the answers and neither does Google and advisors can pull rabbits out of hats.

With all that being said, we trust you'd be able to make the right decision when you need to and if you have any questions get in touch.

The Startup Nerds

*We do not have any affiliation with these products, nor receive a fee or any other incentive from them.