Financial impacts of enterprise resource planning implementation

Before a company implement ERP system, their management team will expect that ERP system can reduce cost and increase productivity. They will use real time information from ERP system for their decision making. They also expect that there are good financial impacts of ERP implementation. In chapter 2 we went through the literature on the revenue cycle, the expenditure cycle, the production cycle, the human resources management and payroll cycle, the financial cycle, the fixed asset cycle and the investment cycle. This study focuses on the financial impacts of enterprise resource planning. We find that there are seven financial indicators to measure the impact which are 1. SG&A/Revenues 2. COGS/Revenues 3. Residual Income 4. Revenues/ Number of employees.5. Days in inventory 6. Days sales outstanding 7. Days purchases outstanding Using case study method for 11 companies in Taiwan which had implemented ERP system. The empirical results find that :
(1) ERP implementation is associated with significant decrease in selling, general and administrative costs divided by revenues.
(2) ERP implementation is associated with no significant decrease in cost of goods sold divided by revenues.
(3) ERP implementation is associated with no significant increase in residual income.
(4) ERP implementation is associated with significant increase in revenue divided by the number of employees needed to support a given level of revenues.
(5) ERP implementation is associated with no significant decrease in days in inventory.
(6) ERP implementation is associated with no significant decrease in days sales outstanding.
(7) ERP implementation is associated with significant increase in days purchase outstanding.
(8) Companies which have more financial index are improved have the same index are improved. They are 1. SG&A/Revenues. 2. Revenue divided by the number of employees. 3. Days purchase outstanding. 4. Top management support and the culture which accept new idea and new process.
(9) The number of ERP system module implemented is associated with no significant impact in financial index.