ERP systems are designed to handle many aspects of business management, but that comes at a costâboth financially and operationally. The upfront subscription fees can be high, and the consulting costs for implementation often match or exceed the subscription itself. Moreover, ERPs can be complex, often leading to increased training needs, frustrated teams, and, in many cases, failed implementations. In fact, research shows that 58% of ERP projects fail.
The misconception: Bigger business = ERP?
Itâs easy to understand why many finance leaders think growth requires an ERP system. The ERP industry has long positioned itself as the ânext stepâ once a company outgrows SME accounting software. NetSuite, Sage Intacct, and other ERP solutions promise comprehensive functionality to manage the complexity that comes with growth. However, moving to an ERP is not always the best or only option.
Scaling with Xero: A better path for many
The real issue isnât whether Xero or similar tools can scaleâitâs that the ERP sales narrative convinces finance leaders they canât. Many growing businesses are bombarded with messaging that suggests Xero is only for small companies and that moving to an ERP is the ârightâ next step. However, this messaging often overlooks the extensive capabilities that Xero can offer, especially when paired with specialised tools.
So how far can a company really grow while still using Xero? We ran the numbers and discovered that 13 of our customer groups had annual revenues of over ÂŁ100 million, four of them over ÂŁ200 million, and one even exceeded ÂŁ1 billion. These numbers show that Xeroâs capabilities far exceed what many assume.
ERP systems: Not always the best solution
The assumption that ERP is the only way forward overlooks the fact that scaling with Xero is not just feasible but often optimal. Many finance teams, after making the switch to ERP, report higher costs, greater complexity, and lower team satisfaction. Paresh Makwana, Head of Finance at Outernet London, transitioned his 50-entity group from Sage Intacct to Xero and found that Xeroâs functionalityâwhen supported by the right appsâoffered far superior performance at a much lower cost.
"Xero and its ecosystem are not only easier to use and more affordable; they can outperform large ERPs. In bigger systems, making even simple corrections can be a headache, often requiring multiple tries and awkward workarounds like issuing dummy credit notesâapproaches that just don't make sense. Xero and apps streamline everything, making our processes smoother and way more efficient. My jaw dropped when I saw what Xero plus Mayday were going to enable me to do in managing the intercompany requirements of our 50 entities." â Paresh Makwana, Outernet London
In many cases, companies switch to ERP not out of necessity but because it seems like the conventional path. Moving to an ERP is seen as a safer option, even when itâs not the best fit for the businessâs actual needs. Unfortunately, by the time many realise this, theyâve already committed to an expensive and cumbersome implementation process that doesnât serve their long-term goals.
When ERP might be necessary
Of course, there are situations where an ERP system is necessary. Itâs not about how big your team is, your turnover, or how many entities you have. What really matters are your specific business-critical needs. And when youâre figuring out how to meet those needs, think of Xero and its ecosystem as a whole package. Rather than defaulting to ERP, get creativeâuse apps for things like aggregated postings, ask for advice, and explore all your automation options. Only when those needs truly canât be met should you think about moving to an ERP system.
The one thing that unites us all
All businesses are different, and no two finance teams are alike. Some manage inventory, others offer services. Some are multi-entity. Some deal with deferred revenue. But thereâs one thing that unites all growth company finance leaders: there are so many priorities fighting for our time. Itâs impossible to overstate how little interest we have in changing accounting systems unless we absolutely have to.
We desire simplicity, cost-efficiency, and minimal disruption. Xero and its ecosystem offer a way to scale without needing to take that disruptive leap to an ERP, especially when the complexity of your business doesnât yet demand it.
Closing the awareness gap
As we wrap up this series, it's clear that more needs to be done to bridge the awareness gap around tech solutions for finance teams. Too often, we see companiesâperfectly positioned to thrive with Xero and its ecosystemâfalling into the ERP trap.
One recent example comes to mind: a growing software business that had the potential to scale beautifully with Xero. An ÂŁ8m turnover, single-entity software business, that had barely scratched the surface of using Xeroâs ecosystem.
We had mapped out a clear strategy for them, complete with the right tools and ecosystem apps to meet their needs. But despite all the signs pointing toward success, the company ultimately decided to move to an ERP system. The decision wasnât based on what was right for their businessâit was driven by the perception that sticking with Xero was the âriskyâ move, and ERP the safer, more conventional option.
The reality? The ERP migration brings unnecessary costs and complexity, and slows progress, all for a solution they simply didnât need at this stage.
Unfortunately, this story isn't unique. Many finance leaders are swayed by ERP marketing and make the jump too early, only realising the pitfalls once theyâre deep into the transition.
Thatâs why we need to keep pushing the conversation forward. We need to challenge the misconceptions and highlight the success stories of businesses scaling with Xero and its ecosystem. Thereâs so much potential in these tools, and weâre committed to helping finance teams make the right decisions for their needsâat the right time. Thereâs still more work to be done, but weâre here to help close that awareness gap.
.png?upscale=true&width=1196&upscale=true&name=Untitled%20design%20(42).png)
