Buying an ERP (enterprise resource planning) program does not mean buying financial control. I learned this the hard way during an early project. A mid-sized chemical raw materials importer in Istanbul was tracking foreign currency in three separate spreadsheets, writing customs costs in a separate ledger, and keeping supplier debt figures mostly in the accountant’s head. The company was about to install an ERP system. Everyone believed the software would fix everything. With 167 employees and two years of accumulated disorder, the firm loaded its chaos into the program — and the chaos came back faster than before, but it was still chaos. That is when I understood: if software is built on top of disorder, it only speeds the disorder up. In import companies, financial control is solved on paper first. The program becomes useful only after that.The flow of money in an import business has many layers. You place an order with a foreign supplier; that order immediately creates a foreign currency obligation. The goods travel; freight costs arrive, insurance is added. At customs, import duty, value-added tax, and sometimes warehouse fees pile on top. Some of these costs are in Turkish lira, some in US dollars or German marks. By the time goods reach the warehouse, the landed cost has four or five components. If you have no system that records each component separately, you never know with certainty what a product actually costs you. After the 2001 economic crisis, exchange rates kept moving in unpredictable directions. Import companies that could not keep clean currency records were constantly miscalculating their prices. That miscalculation looks small at first, but wrong stock costs lead to wrong selling prices, and wrong selling prices create imaginary profit margins.For an ERP program to fix this problem, the company must first answer a few questions on its own. First question: who records the exchange rate, and which rate do they use? Some firms use the rate printed on the supplier invoice; others use the rate on the day goods arrive at the warehouse. Neither approach is wrong in itself, but applying them inconsistently means stock costs never match up. Second question: how are customs charges distributed across individual products? If one container holds five different goods, do you split the import duty by weight, by declared value, or by some other method? Without deciding this first, the program will give you inaccurate costs no matter how well it is configured. Third question: in which currency are supplier balances maintained? Some firms convert everything to Turkish lira immediately; others keep the balance in the original currency and adjust for exchange differences at month end. Both approaches work, but each one requires a different setup inside the program. Answer these three questions before installation begins, and the project becomes noticeably shorter and cleaner.Now, what does the program actually do well? A mid-sized plastic raw materials wholesaler in Ankara went through a similar installation. Eight weeks after moving customs cost records from a manual spreadsheet into the ERP system, the purchasing manager noticed something. On several product cost cards, import duty had never been recorded at all. Those products had been showing higher profit margins than they actually earned. The error had gone undetected for years because the spreadsheets were separate files with no connection between them. The ERP program connected them. The result: the real profit margin on that product group came out 24 percentage points lower than the books had shown. That is not a rounding error. The firm had to rewrite its entire pricing policy for that range. This was not magic. The program simply gathered scattered information into one place and made the inconsistency visible. That visibility alone was worth the entire project cost.ERP programs typically consist of several main modules: finance, inventory, and purchasing are the most common. For an import-focused company, the finance module is the right starting point. Inside this module you can define multiple currencies, maintain supplier accounts in their original currency, and process exchange rate differences. But the word ‘automatic’ here is misleading. The program calculates exchange differences automatically — but you decide which date’s rate to use, which account to post to, and when the transaction is considered realised. If those decisions are made incorrectly, the automatic calculation produces an incorrect result. Making those decisions requires sitting down with the company’s accountant and walking through several real transactions step by step. In 2003, that work happened over fax printouts and face-to-face meetings; there was no other way. The technical team installing the software cannot do this part alone. It requires the company accountant and an outside consultant working through it together.The single most common problem in practice is user habit. In one firm, the purchasing officer wrote every incoming invoice first in his old notebook, then entered it into the program. When asked why, he said it felt safer. This double-entry habit wastes time and creates errors. If the program is meant to be the system of record, the information has to go into the program first, not second. Getting users to change that habit takes time; at some firms this transition stretched to fourteen months. Patience is required. The owner’s stance is decisive here. When the boss says clearly that everyone works from the program and the old notebook goes away, users change. When the boss quietly accepts both systems running in parallel, the transition never fully happens. If you want to manage import documents, currency obligations, and supplier balances from a single system, make that decision clearly and stick to it.One last point: for import companies, installing an ERP is not a technology project. It is a business organisation project. The choice of software matters, but it comes second. Ask yourself first: what do we already know, and what do we not know? Can you record exchange rates consistently? Do you know how to assign customs costs to individual product costs? Have you decided in which currency you will track supplier balances? If your answers are yes, moving to a good program will be faster and less painful. If your answers are no, build that order on paper first, then transfer it to the program. Trying to solve an unsolved business problem inside the software is more expensive, more exhausting, and takes longer than doing the groundwork first. The program is a tool. The people who use it with clear, consistent rules are the ones who actually achieve financial control.
This article was originally published in Turkish by Gökhan MERCANOĞLU on February 1, 2003. The English edition has been reviewed and edited by the author.