How ERP systems improve communication and collaboration

An ERP system improves collaboration between departments because every handover happens in the same system. Sales, planning, the warehouse and finance work on the same order, and the system lines up the next step for whoever is next. It only works once you have agreed who takes which step.

If you manage several departments, communication between them is probably one of your biggest challenges. An order gets stuck or an invoice goes out late, and you only hear about it when the customer calls. In this blog, Erik Koevoet, Manager Central Support Office at Eqeep, shares how ERP systems improve communication. We add three handovers in an order process: an order change, a credit block and the invoice.

How does an ERP system stop tasks being forgotten?

By showing open tasks to the person who has to pick them up. Take an ordinary day. You have just agreed something with a colleague, and then something urgent comes up. Before you know it, you have forgotten to approve an invoice.

The system lists open tasks, such as approving an invoice. You can even set up rules so that payments are prepared automatically and you only have to approve them. That prevents delays. Suppliers, colleagues and the budget holder all see that things are dealt with on time.

In IFS Cloud, rules pick the approver of a supplier invoice by supplier, posting code parts, recipient or amount. Read how Eqeep and TRAILD automate and secure accounts payable.

Other colleagues get a nudge through field subscriptions and events, which can send an e-mail or create a task. See which features are already in your IFS Cloud, such as workflows and lobbies.

Why does one system give clearer information?

Because everyone looks at the same record. Erik gives an example from NetSuite, where the bank data is updated every afternoon at 1pm. Everyone then sees the 1pm position, not the minute after, but it is a reliable basis for decisions.

The same goes for time recording. When a project manager receives a spreadsheet of hours worked, they can’t tell whether those hours are already in the project. Hours submitted through the ERP system are recorded correctly.

Whether the data is right still depends on your agreements. If your projects have billable and non-billable hours, keep them clearly apart, or your figures will be wrong. Faultless communication remains a utopia, because people interpret things differently. Even so, an ERP system reduces the chance of mistakes considerably.

Where do handovers between departments go wrong?

When work passes from one department to the next. Take an imaginary order at a manufacturer. Sales takes the order, planning releases a shop order and buys material, the warehouse delivers and finance invoices. It can get stuck at three points:

• An order change. The customer wants the order a week earlier, while the shop order has already been released. The planner and buyer need to know before work goes further.
• A credit block. The warehouse has prepared the order, and only at delivery does the customer turn out to be over their limit.
• The invoicing moment. This customer wants to approve every delivery first. Finance needs to know when that happens.

Does an order change reach production and purchasing automatically?

Partly. In IFS Cloud, a customer order line can be pegged to the order that supplies it, such as a shop order or a purchase order. If sales changes the date or quantity, or cancels the line, IFS can replicate that change to the pegged orders. For a purchase order, IFS can also send a change request to the supplier, if that message is set up.

There is a limit. According to IFS, a date or quantity change only carries over while the shop order is Planned, Released or Reserved. The purchase order must not yet be fully received. In the example, the shop order is Released, so the earlier date can still go through.

After that, an order change is a conversation between sales, planning and purchasing. People decide: you agree up to which point sales may change an order without consulting anyone.

Who stops an order when a customer goes over their credit limit?

The system, at the moments you choose. Among other things, IFS Cloud checks whether the customer is credit-blocked and whether outstanding orders and invoices exceed the credit limit.

In a customer’s credit control group, you set when the check runs: at release, reservation, picking or delivery. If the customer itself is credit-blocked, IFS always checks. In the example, IFS only checks at delivery, after the warehouse has prepared the order.

On the Handle Blocked Customer Orders page, finance chooses how a blocked order goes ahead. With Release Blocked Order, the order may be blocked again later; with Release from Credit Check, it will not.

If the block is on the customer itself, no order goes ahead until it is switched off on the customer record. So agree who keeps an eye on the overview and who tells sales.

When does the system create the invoice?

Normally after delivery, as you have set it up per customer and order type. According to IFS, a customer order is invoiced once the goods are fully or partly delivered. Whether that happens manually or automatically depends on the order type. An advance invoice before delivery is also possible, except for orders that need delivery confirmation.

For each customer, you choose an invoice per order or a collective invoice, issued every set number of days or on fixed closing dates. The customer in the example approves each delivery first. With delivery confirmation, IFS invoices only after that approval.

So an agreement made by sales becomes a setting in the master data. Record it when the customer is created, before the first order. Otherwise the system follows whatever setting is there, not the agreement.

What goes wrong when a step is missing at the start?

Then the process stalls later, even when everyone does their own step right. Suppliers are no different. Erik Koevoet gives an example from his own work.

Recently I was told by HR that the invoices of a certain supplier were still pending, although they had already been approved. In the ERP system, I indeed saw that all invoices had been approved, but not paid.

As it turned out, this supplier was not signed up for electronic payment, so its bank details were not known to the bank. As a result, the payments could not be made. When you create a new supplier, you need to arrange standard things like electronic payment and bank and address details.

The same applies to approving hours, giving new employees their login details and invoicing customers. When all processes are set up properly, you have little to worry about. But if you don’t make clear agreements in your procedures beforehand, no ERP system will function properly.

Who should own supplier and other master data is covered in our article on gaining control of inefficient processes.

Where do you start improving handovers?

With one order flow, from order to payment. Bring the leads of sales, planning, the warehouse or service, and finance around one table. For each handover, record what triggers it, who takes the next step and how that person finds out.

In an IFS implementation, we map each handover with the people who own it. How that design comes about is explained in our article on analysis and design.

An ERP system is not always the answer. For a small administrative requirement, the implementation effort may outweigh the benefits. Download the IFS Implementation Methodology white paper (2020).

Questions about collaboration with an ERP system

How does an ERP system improve collaboration between departments?

All departments work on the same order in the same system. A change, block or approval is visible straight away. IFS Cloud can pass on an order change, hold an order over a credit problem and route an invoice to the right approver.

What does IFS Cloud do with an order when the customer goes over their credit limit?

The credit check can block the order at the moments you set per customer, such as release or delivery. The order then appears on an overview of blocked orders, where finance decides whether it may go ahead.

Can IFS Cloud alert colleagues automatically when something changes?

Yes. Users can subscribe to fields and receive a notification when they change, by e-mail if they wish. Administrators can set up events that send an e-mail, create a task or start a workflow.

Which handover costs you the most time?

Tell us where you stand with IFS. After one conversation, you will have a clear next step. Bring the handover where most of your orders get stuck. Discuss your IFS question.