Conquering the challenges of consolidating data across different ERPs

Enterprise resource planning (ERP) systems are integral to helping companies manage their  day-to-day business activities, including accounting, project management, risk management, and compliance. They provide a cohesive framework for managing human resources, supply chains, and customer relationships. ERPs are also often integrated with budgeting software, financial forecasting tools and systems built for financial reporting to extend their capabilities. 

Almost every company out there has an ERP and in fact, many operate with multiple different ERPs. 

For a company working with multiple different ERPs, each is like a different instrument in an orchestra that contributes its own unique sound to the performance. However, they all must play in perfect sync to create the harmonious sound that only an orchestra can create.   

Similarly, different ERPs must work together to prevent data fragmentation and duplication across the different systems, which is critical to ensuring the company has accurate and comprehensive data to work with.

The problem is, consolidating data from different ERPs can be pretty challenging due to varying formats, security concerns, discrepancies, and a lack of standardization. 

In this article, we will look at how companies can consolidate data across different ERPs and examine the challenges they can expect to encounter and how to address them.

Why would a business use multiple ERP systems?

In a perfect world, every business would use the same ERP configured exactly the same for every one of its locations. However, in the world of business, there are plenty of reasons why multiple ERP systems might be necessary. Here are a few of the big ones:

• Historical mergers and acquisitions: Many businesses, especially in the SaaS industry, undergo mergers and acquisitions to meet geographical and service-based expansion needs. Often, the new businesses acquired are already using different ERPs. Immediately integrating systems is difficult and costly, so businesses continue using multiple software until they have a well-defined data consolidation strategy.

• Department or region-based systems: ERP systems may differ across departments depending on their workflows or across regional offices based on  localized business processes. Compliance needs may also vary based on specific business activities and/or geography requiring specific features only available in different ERP solutions. 

• Rapid growth and expansion: As companies grow and expand to tap global markets or cater to clients from different industries, they usually prioritize service delivery over standardization. Given this, they may have to adopt different ERPs to meet client needs in specific regions or business functions. 

The need for data consolidation across multiple ERPs

All of the scenarios described above can lead to fragmented and siloed data which can negatively impact the business as a whole. 

Consolidating data across multiple ERPs provides companies with a single source of truth across the entire organization, helping them more effectively track their KPIs, monitor budgets, and create accurate forecasts.

Consolidating data also eliminates the need for multiple software licenses, maintenance, and support costs. Reducing data duplication and discrepancies almost always leads to lower operational costs and better resource utilization.

How ERP data consolidation benefits companies

Consolidating data helps companies in the following ways:

• Streamlined processes: Centralizing data from different systems helps streamline processes and reduces manual efforts. It eliminates redundant processes and saves time—improving productivity and resource utilization. It also facilitates regular audits to help ensure data integrity.

• Improved data accuracy and security: Using data from varied systems increases the risk of errors and discrepancies. Consolidating data minimizes the chances of inaccuracy and ensures secure data usage in compliance with regulations, such as the General Data Protection Regulation (GDPR) and Health Insurance Portability and Accountability Act (HIPAA).

• Better decision-making: With a single source of truth for all departments, businesses can access real-time insights, enabling leaders to make data-driven decisions.

How do companies consolidate data across different ERP systems?

Consolidating data across multiple ERPs is complex as it involves integrating various systems and standardizing data across them. Companies must follow a structured approach to successfully consolidate data from different ERPs.

Here are some essential tools and practices that facilitate effective data consolidation:

• Data integration platforms: Specialized data integration platforms help ensure the seamless flow of data between different ERPs. Such platforms have connectors and APIs that enable consolidation of data across various ERP systems. 

• Extract, transform, load (ETL) processes: ETL tools help to standardize data from various sources before consolidating it. They extract data from diverse ERPs, transform it into a uniform format and then load it into a central repository or data warehouse. ETL processes by design ensure that all data is standardized and ready for comprehensive analysis.

• Middleware solutions: Middleware is an intermediary for routing and formatting data. Middleware solutions bridge data gaps by handling data transfer and mapping between disparate systems, both of which facilitate smooth data transfer across various platforms.

• Master data management (MDM): It is important to maintain a single, consistent, and accurate view across different ERPs. MDM, which is the practice working to ensure the uniformity, accuracy, and semantic consistency of the company’s data. This ensures data consistency for all key business entities and provides reliable data for customers, products, and suppliers.

‍Application programming interface (API) management: Businesses often use APIs to enable real-time data exchange between different ERP systems. API management tools help manage data exchange and protect data from unauthorized access and security vulnerabilities.

The important role of local charts of accounts in ERP data consolidation

The chart of accounts is a critical component of an ERP and one of the most important aspects of consolidating different ERPs. 

Local charts of accounts are used to comply with local accounting requirements. They provide the necessary detail for statutory financial statements and local taxable income statements and are used for financial reporting and analysis.

For the purposes of data consolidation, the accounting principles and structure of the parent company play a key role. Financial information in the consolidated accounts usually differs from that in the statutory financials because of:

• Differences between local and global accounting standards
• Mismatch in data formats and structures due to varied accounting practices
• Incompatibility of systems used for local accounting and global financial reporting

Companies operating across multiple countries must consolidate local charts of accounts from all their subsidiaries/regions with their global chart of accounts, which begins with a process called data mapping. 

Mapping the data from different ERPs for consolidation

Data mapping for consolidation is the process of standardizing all the different data types and formats used in different ERPs. 

Data mapping is pretty simple in concept, though enormously time-consuming depending on how many systems you're mapping. 

The goal of data mapping is to tell whatever system you're consolidating into how to interpret the data you're bringing into it. 

This is necessary because the two systems likely have different names or codes for the same type of data.  If you don't map (or translate) the data you're bringing into one system from another, the receiving system won’t know what to do with the data and may leave it out of the import.

Here’s the basic process of data mapping: 

1. You first must decide which ERP data set will be the "master" data set to which all the others will be mapped to. 
2. Then you go through each data set, one-by-one, mapping the fields in the dataset to the equivalent field in the "master" data set.

If this seems deceptively simple, that’s because it is. Data mapping for consolidation is in fact, not an easy task. To do it correctly requires a deep understanding of the data in each ERP, each of which is going to have its own proprietary data structure and which may also include custom formats created by local users. Also, the more complex your ERPs are, the more complicated and time consuming the data mapping exercise will be. 

Ultimately, the goal is to minimize the differences across your different ERPs so that consolidating them is easier. Here are a few tips that can help you do that:  

• Identify common data among all the charts of accounts in your different ERPs.
• If possible, develop a standardized chart of accounts template for use across the organization.
• Standardize codes and data types in each ERP to the extent you can to ensure more consistency across data sets.
• Clean up the data in each ERP system before attempting data mapping, correcting errors and omissions in the data. 
• Use a data aggregator or data warehouse capable of managing the consolidated data and monitor the flow of data to track any discrepancies.

Challenges consolidating multiple ERP systems

Data consolidation across multiple ERPs can be a daunting prospect for businesses as they need to keep up with customer expectations, technology advancements, and compliance needs. Also, since these systems are designed to work independently, integrating data within different ERPs can be complex and time-consuming.

The key challenges of consolidating data across multiple ERP systems are:

• Data silos: The incompatibility of systems and lack of integration leads to data silos, which makes gathering all the data needed for any kind of forecasting or analysis a big challenge.  

• Data quality and consistency: Data from multiple ERPs is inconsistent as individual systems have their own  unique structures and format. This leads to duplicate and/or conflicting data, which reduces the accuracy and value of any insights that might be gained from it. 

• Complexity of integration: Integrating multiple ERPs is resource-intensive and usually requires specialized expertise. It is technically challenging as each system supports different data models, APIs, and protocols. Using ETL tools to download and modify data formats is time-consuming and error-prone.

• Real-time data synchronization: Data update frequencies and batch processing times vary for different systems, making real-time data synchronization difficult. Data inconsistencies make mapping and validation challenging.

• Security and compliance: Ensuring data security and regulation compliance becomes more complicated with multiple systems. Each ERP must comply with all relevant regulations to avoid penalties and data breaches.

• Cost and resource allocation: The cost and resource allocation for maintaining integrations among ERPs, managing data quality after consolidation, and ensuring continuous operations are significant.

Why should you consider using financial planning and analysis software for data consolidation?

There are many types of financial management solutions that can help businesses streamline data consolidation across multiple ERP systems with features that offer:

• Ease of data integration: Tools that integrate with popular ERPs, make it easier to pull data from different systems onto a centralized platform.
• Data standardization: These FP&A tools consistently map data from various sources based on predefined rules to generate insights in a standard format.
• Real-time data updates: Tools that offer real-time data updates allow for more accurate and timely financial reporting.
• Data quality control: Software solutions that offer data validation features help to  eliminate discrepancies and data duplication issues to ensure the accuracy of consolidated data.

Overcome the challenges of multiple-ERP consolidations with Drivetrain

Using a robust financial planning and analysis (FP&A) platform like Drivetrain enables SaaS companies to overcome most of the challenges in consolidating data across multiple ERP systems. 

With 200+ integrations, which include all the most popular ERPs, you can bring your data in from all the different ERPs your company uses to create a single unified view of your business within the Drivetrain platform.  

With automations that provide real-time data updates, Drivetrain offers unprecedented visibility into your business data without the heavy lift of manual data mapping and consolidation.  

‍Check out Drivetrain today to see how easy consolidating different ERPs can be.