3 Under-Used ERP KPIs

In a previous piece on ERP KPI’s entitled, "What Elements Define Key Performance Indicators In ERP?” the article was primarily driven by a focus on tactical metrics that offer one or more operational qualities that can lead to success or, if ignored, failure. While there are numerous relevant and highly useful strategic metrics that can be applied in the real-world, the sheer number of ERP KPIs applied can appear to be a roadblock for individuals who want to understand how a company is performing. These individuals potentially fail to pay attention to lesser areas of interest that may have offered earlier advantages or altered decision making.

In this case it is worth illuminating some of the more underutilized ERP KPIs that might be helpful, offering a couple of ways that company’s can miss ‘money on the table’ as it were, if for no other reason than to simply be aware of the potential sooner, rather than later.

Order-to-Cash (OtC)

OtC represents a series of ERP process transactions driven by the goal of efficiently receiving, and fulfilling customer orders. There are a host of useful applied metrics available in this case, although some of them typically end up at the bottom of most ERP KPI lists. These include:

Total order-to-cash process cost as a percentage of revenue

There is a difference between the administrative costs associated with ‘booked revenue’, versus ‘revenue in the pipe’, however, users frequently fail to monitor the latter. As a result a company’s overall OtC costs can be skewed negatively on a P/L when the revenue accounting is completed. Therefore, applying this metric percentile as a regular monitoring step can avoid one or more nasty surprises at the end of a quarter, or further out, when the time comes for end-of-year revenue accounting.

Total OtC process cost per OtC full time equivalent

Even though most ERP systems apply human resources metrics of one kind or another, it is rare that managers drill-down deep enough to measure the order efficiencies of individual employees, and rather, tend to group overall sales values that can mask individual weaker employees. However, as the saying goes; “A chain is only as strong as its weakest link’ so the implication here is to get into the weeds by applying this ERP KPI at the FTE level, to see where the company might be losing money in the back-office.

Percentage of automated order-to-cash key controls

This bit of apparently arcane ERP KPI development is actually quite useful if a system is fully integrated throughout the sales cycle. In this case, cash management automation is a big deal everywhere, but what percentile of the entire cash flow continuum is systemized? This kind of metric measurement can point out direct and in-direct weaknesses in the cash management process, thereby saving cents on the dollar every time money moves in the pipe.

As mentioned initially, these three illustrations are only a snapshot of the kinds of underutilized drill-down ERP KPIs out there. Nevertheless, the harder a manager pounds on the details of their ERP system’s hidden efficiencies, the better that system will provide value on the bottom line.

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Rick Carlton

About the author…

Rick Carlton dba PRRACEwire, has worked as a tech journalist, writer, researcher, editor and publisher for many years. In addition to his editorial work, Rick has also served as a C-Level executive/consultant for a wide-range of private and public sector U.S. and International companies.

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Rick Carlton

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