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3 Hard Truths About Using ERP Systems in China

Implementing an Enterprise Resource Planning (ERP) system and getting your staff to use it is a common challenge for many small businesses, which becomes even more critical when applying it to a country with a very different business culture and workplace habits, especially one as peculiar as China.

As a matter of fact, the ERP system that runs successfully in your home country may not bring the same benefits for your China operation and could even adversely affect working efficiency and increase operational costs if improperly implemented.

To help small businesses avoid falling into the same traps, this article focuses on three hard truths about using ERP systems in China and offers practical advice to help you achieve greater success.

1. Too much, too quickly

Many foreign companies inherit the same business models and management approach to their China operation as they applied successfully in their home country, assuming that it will be equally successful in China with minimal adaptation and localization. This causes immense problems from the top down, and from the inside out. When your ERP system fails, it might not be immediately clear that the ERP system is just the tip of the iceberg.

In China, striving for perfection can cripple a company. The key to winning in this fast-changing market is embracing pragmatism. Unlike in western markets, that have long-time established rules and relatively predictable supply chain behaviors, to maintain competitiveness in today’s Chinese marketplace businesses must be serving clients with incredible speed, extreme flexibility, in-depth local knowledge, and extensive connections.

Believing in having a perfect and all-in-one ERP system will solve all your business problems right away is short-sighted. The truth is you will encounter new problems every day, within your company and out in the market. Investing once to deploy a system including all the features will quickly lead to the realization that the business must adjust its operations to meet the needs of new clients.

2. Your employees do not take the ERP system seriously

How useful an ERP system could eventually largely depend on the employees who use it on a day-to-day basis. The hard truth in China is that many employees rarely take your ERP system as seriously as you do. It is easy to agree in a meeting when you make the announcement, but what happens after the meeting might be a different story.

Many of them lack the motivation, adequate skills, and professional attitude to use the system as instructed because often they do not understand the impact ERP tools have on their work performance and do not see the benefit it brings to the business. Naturally, they lose interests in understanding how the new systems and tools could help the company and team perform better as a whole. A system that is too complex for them to follow from the beginning does not last long. It could be an even worse situation if they do not receive proper training on how to use it.

On the other hand, it is very important to designate one employee to take charge of your ERP system that supports various functions of the entire organization. The person assigned to this job should stand at a management level and take responsibilities to continually improve and optimize the system. This will ensure the system remains functioning coherently even when significant changes happen to the business.

Your local team is the key to the successful implementation of the ERP system for your China business. As a manager, it is crucial you understand the current state of your team, their motivation, and competence when evaluating your ERP system and coordinating the implementation. Most often it is not the ERP system which fails, it is the users.

3. Know your vendor

Your ERP vendor runs their own businesses and maximizing profit is their ultimate goal. This often drives them to pitch a system that seems very comprehensive but might be impractical for your situation. Your staff might not be ready for such transformations of their duties and do not necessarily have the required skills and motivation to put all the features into effect.

Always be clear with the requirements and internal control procedures which you want the system to help address and stay focused on them. In China, the value of keeping it simple and remaining lean carries tremendous value. It will not only save you money but also avoid many internal issues that could be caused by misjudgement by the ERP vendors in the first place.

Secondly, don’t expect your ERP consultants to fully grasp the core of your businesses while they work for you, let alone offering expert advice on how to manage your business. Their commitment is temporary, and many of them are software configuration experts in short of experiences in accounting and business controlling. If you aim to fundamentally enhance the performance of your company’s financial management and internal control, get help from professional financial consultants. 

Our advice for small businesses

Remember after all you are not looking for a perfect system, instead, a pragmatic solution often yields the best results. The best ERP system is not necessarily the one that has all the features, but the one that your team finds useful, easy to learn and enables them to save time and work more efficiently.

When you find your system does not function as expected, take a holistic approach to examine all the internal and external factors related, before making your decisions on what to change. By focusing on solving the 20% most important and urgent issues in your company, you will bring the most significant impact on improving your operation.

Heres our advice for you:

Adopt a step-by-step approach 

The Chinese market is more complicated and changes faster than you think. As a manager here on the ground, your ability to adapt your business model and management approach is paramount to ensure your company’s success. Begin with the overall objectives you want to achieve with the system, then develop a step-by-step approach when putting them into actions. Ensure proper implementation and training at each step before further developing your ERP system.

Have a long-term goal as well as short-term objectives, milestones, and measurable KPIs you can use to track the progress and impact on your management. Align your expectations for the ERP system with concrete issues you would like to solve in your company in different stages and make sure to follow through on all your goals.

Find out if SaaS apps could already fulfil your business needs

Software as a Service (Saas) offers an excellent, solution right out-of-the-box for many small businesses. They come at a fraction of the price of incumbent ERP systems at the cost of the high degree of customizability that large businesses often require. There are plenty of SaaS applications supporting different business functions out there to look at. For small businesses, they are more affordable, accessible and user-friendly.

Seek professional help from virtual CFOs

Small businesses often think they need to take on all the difficult decision making themselves, even when they know they are not well equipped. With the rise of cloud-based business software, came a new kind of financial expert utilizing these technologies to work more efficiently with multiple clients over cloud technology. Small businesses for the very first time can get access to experienced and knowledgeable financial experts with a much lower cost, as they can be shared by multiple clients.

Empowered by SaaS applications, a virtual CFO can not only complete your routine accounting tasks, but also can help analyse your financial data, as if it was their own business, to help you gain more insights on how your business functions in reality, as well as raise potential issues that may hinder your company’s growth in the future. They are well-rounded professionals with expertise and unique skill sets in diverse areas including accounting, financial strategy and management, business software system selection and implementation. As their interests are usually in line with your company’s long-term objectives, a virtual CFO will spend more time understanding your businesses and seek the most practical solutions for your issues.

When selecting your ERP system, consult their advice before making your decisions. In many cases, you may find SaaS applications coupled with virtual CFO service turn out to be the most cost-effective and efficient approach to help your small businesses grow in China.


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About Aepoch Advisors

We are a boutique accounting and consulting firm servicing international businesses operating in China. We offers book keeping and business advisory service. We also help our clients select and implement SAAS business applications
Cloud technology significantly reduces cost foreign companies traditionally spent on tax compliance and ERP systems. Our cloud professionals can help with streamlining your management and controling structure, as well as advising you on how to reduce risks and maximize profits with software purposely built for Chinese business. Contact us today to learn more about our services.