How to Finance an ERP Project in Quebec

Investing in an Enterprise Resource Planning (ERP) system is one of the biggest projects that a manufacturing company will ever take on. Budgeting for and financing a new ERP system is a sizable financial undertaking for small- to mid-sized manufacturers, but there are funding programs and options available to manufacturing businesses in Quebec that can help with these costs.

Below we will explore how to determine the budget for an ERP project, plus look at various avenues and strategies that can help these companies secure the necessary funds to finance an ERP project, enabling them to streamline their operations, enhance efficiency and achieve long-term growth.

Budgeting for an ERP Project

The budget for your ERP project will depend on various factors, including the type and tier of ERP system that you have chosen, the pricing model of the system, implementation costs, as well as any fees you will have to pay to customize and tailor an ERP to your manufacturing operations.

A good rule of thumb to go by when budgeting for a new ERP system is that buying and implementing a new system will cost you approximately between 1-2% of your annual revenue. That means if you are a company with annual revenues of 5 million dollars, you can expect to pay between $50,000 and $100,000 for a new system, depending on the type of system and the level of customization needed.

This figure is not the annual cost that you will pay for subscriptions, licensing costs, upkeep and maintenance and upgrades but the initial dollar amount that you should expect to pay to get a new system in your shop.

Pricing Models

When selecting an ERP system, look closely at different providers’ pricing models. Some systems will have a perpetual pricing model where you buy the software upfront for a large initial investment, but other systems will have a subscription licensing model where you pay a lower upfront cost but higher yearly subscription fees.

Both of these models have pros and cons. Instead of bearing the full cost upfront, with a subscription-based pricing model, you can spread the fees out over time. Leasing or subscribing to an ERP system allows small- to mid-sized companies to benefit from the technology while conserving their cash flow. It also provides flexibility in upgrading or scaling the system in the future as your business needs evolve.

But subscription pricing models will also be more expensive over the long term. Perpetual pricing models require a higher up-front cost but will have much lower annual fees as only upgrades and maintenance need to be paid. Under a perpetual model, you buy and own the software, giving you certain advantages. For example, as you own the system, you will never risk losing access to your data, which can be a risk with subscription-based ERP systems.

Contingency Funds

When planning your ERP budget, also be sure to set aside some money in a contingency fund for unforeseen costs. Implementing an ERP is an immense undertaking, and it will disrupt day-to-day operations. You need to have money set aside to cover things like employee wages for when they are pulled off the production floor while they are training, as well as to cover other costs like unexpected customizations or any costs associated with process reengineering. You should set aside an additional 10-15% of your overall project budget in a contingency fund to prepare for these unexpected expenditures.

Financing an ERP Project in Quebec

Quebec manufacturing companies have different options and strategies available to them to help them finance an ERP implementation project.

Before seeking external funding, manufacturing companies should assess their current operations and identify areas where cost optimization is possible. By optimizing processes, reducing waste and improving efficiency, you can free up funds to finance the ERP project.

Conducting a thorough cost analysis and working closely with employees to identify improvement opportunities will not only make you more attractive to potential funders but also ensure a smoother transition during the ERP implementation phase.

Government Funding Programs

Quebec offers several government funding programs specifically designed to support small- and medium-sized enterprises (SMEs) in implementing technology projects. These programs provide financial assistance, grants and tax credits to eligible businesses.

Manufacturers should explore options such as the ESSOR program offered by Investissement Quebec and the Canada Digital Adoption Program (CDAP) offered through BDC. These initiatives aim to stimulate innovation, productivity and competitiveness, making them potential sources of funding for ERP projects in Quebec.

ESSOR

The ESSOR program aims to support investment projects in Quebec by Quebec-based companies to increase productivity and competitiveness. The objective of ESSOR is to accelerate the realization of investment projects and boost productivity and growth for companies based in Quebec through the acquisition of new technologies.

Eligible projects under ESSO include the implementation of an ERP system, with up to $100,000 available depending on the project. Please refer to the Investissement Quebec website for more information on this program, which has funding options available through March 2024.

Canada Digital Adoption Program

The Government of Canada’s Canada Digital Adoption Program (CDAP) supports small- and medium-sized enterprises in enhancing their competitiveness by adopting digital technologies. The program aims to empower SMEs by enabling them to harness the benefits of digitalization, improve their operational efficiency and stay ahead in today’s competitive landscape.

Qualifying businesses will receive a grant to develop their digital plan and then have the opportunity to access a 0% loan of up to $100,000 to execute their plan effectively. You can visit BDC’s website to find out more information about CDAP and start the application process.

Business Loans and Financing Options

Financial institutions and specialized lenders in Quebec understand the importance of technology adoption in manufacturing. They often provide tailored financing solutions to support businesses in their ERP implementation endeavors. Small- to mid-sized companies can explore traditional business loans, lines of credit and equipment financing options offered by banks, credit unions or private lenders.

By presenting a well-researched business plan highlighting the benefits and ROI of the ERP system, you can increase your chances of securing financing.

Need help? Call us.

While financing an ERP project may seem daunting for small- to mid-sized manufacturers, there are good options available to Quebec businesses to help overcome this challenge. If you would like help navigating the various government programs and other available financing options, please contact one of our business specialists.

As a Quebec-based ERP provider, we can help guide you through your options and create a viable plan for you to secure the necessary funds to implement an ERP system. Investing in an ERP system can empower you to enhance productivity, improve decision-making and unlock your full growth potential in today’s competitive manufacturing landscape.