When it comes to picking the right financial ERP system for startups, let's talk about the juicy stuff – the features and functionalities that matter for managing money effectively and scaling up smoothly. Picture this: your startup has moved past the MVP phase but has yet to be quite ready for the big leagues. It's like picking out the perfect outfit for your initial big event – you want something that fits just right and makes you look good. So, let's break it down.

First off, think about your investors – they're like your VIP guests. You want to make sure your accounting aligns with their standards, whether it's GAAP or IFRS. Luckily, most modern ERP systems have got you covered on that front. Next up, consider the legal side of things - how many entities do you see in your startup's future, and where will they be based? It's like planning your guest list for future parties - you want to make sure everyone's invited. For example, once, we wanted to implement Sage Intacct but they didn’t support Malta-based holdings. And a lot of less complicated ERPs don’t support more than one legal entity at all. These decisions might sound daunting, but we're here to find the perfect financial ERP system for your startup's big debut.

To get closer to the proper ERP you should pay attention to these points:

• Cloud-based ERP: for sure, in 2024 we should select only cloud-based solutions that can be easily accessed from any device.
• Simplicity: don’t try to find a complex solution as soon as possible, it will only harm your business. I.e., there is no need to have plan-fact analysis and a difficult budgeting process if you are creating a new market, as it can be unpredictable.
• Integrations: any software can’t be perfect in everything. Happily, a lot of actual ERPs have their market of integrations where you can select with which products you want to integrate your data: analytics tools, expense claims, HR tools connectors and so on.

Can your ERP keep up with business growth?

So, you've taken the plunge and implemented your first ERP system - a significant step for any startup. Now, it’s essential to talk about scalability. If you've chosen wisely from the start, your system should serve you well for the foreseeable future. Stay vigilant with updates to maintain compliance and ensure seamless integration with any new software to uphold the integrity of your data.

Now, let's address the elephant in the room: budget constraints. Regardless of the software type, the approach remains consistent: thorough evaluation through demos, pricing analysis, and selection of the most suitable option. Avoid the allure of excessive functionality at the outset, prioritising simplicity and efficiency.

In terms of recommendations, Xero stands out as a reliable choice for startups. Its user-friendly interface, comprehensive functionality, and affordability make it an attractive option. Moreover, its extensive range of integrations streamlines operations, while its seamless migration capabilities offer added flexibility and peace of mind.

Integration capabilities wield considerable influence over decision-making in startup system selection, playing a pivotal role in maintaining a unified source of truth for financial information. Without such integration, the absence of a central repository for data could lead to disparate decision-making across departments. Consider the scenario: the HR department may inadvertently hire overpriced specialists due to a lack of awareness about taxes paid for every employee, while the marketing department might overlook hidden costs and commissions, resulting in inaccurate profitability assessments of advertisements. Similarly, the board of directors might rely on incomplete data from operational departments, potentially setting unrealistic KPIs for managers, leading to losses. Furthermore, overlooking future payments' liquidity positions could result in delayed payments or loss of interest gains. Thus, robust integration capabilities are imperative for ensuring informed decision-making and streamlined operations within startups.

User-friendly design, cloud comfort and security

When diving into the world of ERP systems, one can't ignore the importance of user experience (UX) and ease of use, especially for startups with limited training resources and time. Let's face it - introducing new software in any company can be met with scepticism, but financial software takes the cake for complexity and bureaucracy. That's why it's crucial to prioritise a user-friendly design and provide a guided, step-by-step introduction to the ERP for everyone in the company, from founders to individual contributors. Convincing them that it's comfortable and time-saving is key, with demo videos, FAQs, and in-person meetings to smooth the transition.

As for cloud-based versus on-premise deployment options, the scales are heavily tipped towards the cloud for startups. While on-premise systems boast security, it's not a major concern for startups - let's be real, your competitors aren't targeting your data. Cloud solutions offer scalability, lower maintenance costs, and accessibility without compromising security, making them the clear winner for startups. But remember there is no 100% safe platform, consider these steps to bear in mind:

• Choose an ERP system that is certified for compliance with relevant financial and data protection regulations (i.e., GDPR, SOC 2, HIPAA).
• Data Encryption: Ensure the system provides end-to-end encryption for all data, both at rest and in transit.
• Implement Role-based Access to ensure employees can only access information necessary for their roles and to minimise the risk of internal data breaches.
• Choose a system that offers robust data backup and recovery solutions to prevent data loss and ensure business continuity in case of a cybersecurity incident.

Always keep in mind that any migration from one system to another will be a complete hell for plenty of people in the company, and sometimes systems become so overgrown with add-ons and specific developments that it will be almost impossible to migrate or will cost an extra huge amount of money. So, consider your choice wisely, always ensure that all the data can be exported easily don’t implement undocumented updates to the platform that will be hard to repeat on the new one, and try to standardise all the processes according to orthodox methodology, it will be much easier to support it and hire new employees without long training.

The most important modules, any financial ERP must have:

• General Ledger - a vault of all transactions, the heart of the system.
• Chart of accounts that you can set up according to your needs
• Bank statements vault and reconciliation module, preferably with flexible rules or even AI integrated.
• Accounts receivable and Accounts Payable modules. In other words, ability to pay and receive payments, proof them with documents and collect all the debts.
• Standard reports as Cash Flow, Profit&Loss Statement and Balance Sheet.
• Advanced reports for the deeper analysis of your financial data
• Active Links between any numbers on any page: you should clearly understand all the figures and where they come from
• Export of any data so you can provide ad-hoc analysis of it
• History of all changes
• Roles in the system
• For some business models, it would be profitable to have project finance management at the core of ERP.