NEW EXECUTIVE BRIEFING: Optimising Working Capital Using Technology

Survive ERP migration: How to avoid fraud and transaction risks

This blog dives into ERP migration risks including fraud and duplicate invoices, and gives advice on how to minimise and mitigate them.
A flock of birds migrating, with a digital dot matrix going through the image, to symbolise ERP migration

Enterprise Resource Planning software (ERP) migration is a significant undertaking for any organisation.

While it promises improved efficiency and data management, there is also the risk of duplicate invoices and overpayments to consider, and with it, financial and operational challenges.

This blog will examine these specific risks and provide strategies to minimise them.

Understanding ERP migration risks.

While your daily accounting processes are running, you now have a huge change to manage. You’re getting staff trained, integrating your existing systems, data, and workflows and ensuring costs don’t overrun. What’s more, a key issue with any new system is ensuring you get buy-in from your team. After all, they’re the ones who will be completing training, using it every day, and will be sharing the extra workload as it is implemented. It’s easy to see how the upheaval and confusion of such a large task can cause errors to slip through the net. The crossover period from one system to the next can often be the most confusing.

ERP migration is a complex process that involves extensive data handling and transfer between systems. It is fraught with risks such as data integrity issues, system downtime, and business disruptions. Among these, fraud risk and transactional errors are particularly concerning.

Fraud risk during the crossover

According to the Association of Certified Fraud Examiners (ACFE), each year organisations lose 5% of their revenue to fraud (ACFE Report to the Nations, 2022).  This is a risk exacerbated during system changes. To mitigate this, you should implement robust internal controls, and regular audits. For more information about practical fraud controls, please read our ultimate guide.

Transaction errors and duplicates

Transactional errors such as duplicate invoices are common during ERP migrations, especially where multiple systems or business units are being combined into a single ERP system, or when migrating a system that has information added and updated on a daily basis.

The Institute of Finance and Management (IOFM) reports that 3.6% of invoices are duplicates. Gartner estimates that organisations can overpay by 0.5% to 1% of their total annual spending due to these errors. These problems usually stem from data entry mistakes, lack of standardised processes, and inadequate training.

Imagine how compacted these issues get with a brand-new ERP, where processes need to adjust, users are new to the software and workload is high. During this upheaval, and with so much data to transfer, it’s common for staff to miss errors and duplicates, and overpay suppliers.

Unfortunately, the consequences for these overpayments don’t only include an inaccurate ledger. Financial losses, strained supplier relationships, and increased workload for accounts payable also ensue. The recovery process itself can be time-consuming and is not cost-effective. Moreover, some cash may be unrecoverable.

Strategies to minimise ERP migration risks

To ensure a successful ERP migration, detailed planning is key. It is useful to compare how staff will use the new ERP, creating a new process if required. Thorough testing will help you fine-tune this to find broken processes or functionality. A risk and control matrix is also beneficial to ensure every risk is covered.

Before your migration, consider comprehensive data cleansing so you only migrate the data you need. Having a smaller master supplier file and fewer invoices makes dealing with exceptions less confusing, decreasing errors. Consider an internal audit or using risk identification solutions and services in combination to recover past and prevent future overpayments and issues, such as FISCAL’s.

We recommend careful planning to allow time for a teething period, where your staff can learn the system before it is in use, and to minimise workload where possible.

Specific measures to prevent fraud and transactional errors include utilising automated risk management systems like FISCALs, implementing strict access controls, and regularly updating and testing the ERP system.

Conclusion

Addressing fraud risk and transactional errors during ERP migration is crucial for minimising financial losses and operational disruptions. By adopting proactive measures, finance leaders can ensure a smoother migration process and safeguard their organisation’s working capital. Now is the time to review and strengthen your current systems and controls to prepare for a successful ERP migration.

How FISCAL Technologies helps you prevent fraud and overpayments during ERP migration

During migration, the difficulty is in having time to check your data to ensure accuracy and prevent fraud. Our software solution makes this process simple. We do the checking for you to find a broad range of risks. Once a transaction enters your ERP, our software conducts AI-assisted analysis to identify your risks. It shows any risks immediately so your team see only the duplicates and exceptions we find and can solve them before the payment run.

The benefits? A reduction in overpayments, an accurate ledger, and an easy crossover from one ERP to the next. The software can complete this for current data and historic data, ensuring that past transactions are also covered.

So, you can use this software on your existing ERP to cleanse data, and on your new ERP to ensure no duplicated data, thus preventing duplicate payments.

We also offer an audit service to facilitate data cleansing before the migration.

Discover how our software can help you.

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Would you like to know more about what FISCAL can do for you? Contact us at:
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