How to choose an ERP: a step-by-step selection checklist for Australian SMEs

Choosing an ERP well comes down to a disciplined sequence: write down what your business must do, shortlist two to four options in the right category, make each vendor demonstrate your processes with your data, check references from similar businesses, compare five-year costs on the same basis, and only then negotiate the contract. Skipping steps, especially the requirements list and scripted demos, is the most common reason businesses end up paying for the wrong system. This checklist walks through each stage with the outputs you should have at the end of it.

The guides in this category put numbers on each stage: the 3–5-year TCO example, the payback example, the renewal uplift example, how to compare ERP quotes, the implementation timeline and the tax treatment of ERP spending.

Stage 1: define the problem and the budget envelope

Before talking to any vendor, write one page answering:

• What is broken today? (For example: stock counts never match, month-end takes ten days, three entities consolidated in spreadsheets.)
• What will be different in two years? (New warehouse, e-commerce growth, acquisition.)
• What is the rough budget envelope over five years, and who approves it?
• Who is the internal project owner, and how much of their time can be released?

Output: a problem statement, a sponsor, a project owner and an indicative five-year budget range. Use the TCO estimator to sense-check the envelope.

Stage 2: requirements

List requirements by process (order to cash, procure to pay, record to report, plan to produce, hire to retire) and rank each one:

Include Australian requirements explicitly: GST and BAS, Payday Super, Peppol e-invoicing, state payroll tax reporting, and privacy and hosting needs. The 2026 compliance guide lists them.

Output: a requirements list of perhaps 60–150 lines for a small to mid-sized business, plus a list of the systems the ERP must integrate with.

Stage 3: long list to shortlist

• Decide the category first: accounting platform with add-ons, SMB suite, mid-market cloud ERP, industry-specific ERP or open-source with a partner. See the comparison table.
• Long-list five to eight products in that category.
• Send a short request for information: fit to must-haves, indicative pricing model, typical implementation size, Australian partners and reference customers.
• Shortlist two to four.

Avoid shortlisting on brand recognition alone or on the lowest headline price. Read what ERP covers to avoid overbuying.

Stage 4: scripted demonstrations

Give every shortlisted vendor the same script and a small set of your real data (items, customers, a typical order). For example:

1. Receive a purchase order for 3 items, one partially delivered, with landed freight costs.
2. Take a customer order with a customer-specific price list and a back order.
3. Run a pay event and show the STP Phase 2 report and the super payment created for that pay run.
4. Produce the BAS for a sample month and drill into a label.
5. Consolidate two entities with an intercompany charge.

Score each step on a simple scale, with at least two of your staff scoring independently. Ask at each step whether what you saw is standard, configured or custom-developed.

Output: a scoring sheet and a list of gaps.

Stage 5: references and partner checks

• Speak to at least two reference customers of similar size and industry, ideally in Australia, without the vendor present.
• Ask what the project cost compared with the original quote, how long it took, and what they would do differently.
• Meet the consultants who would actually work on your project.
• Ask how many similar projects the partner has delivered and how it handles change requests.

Stage 6: quotes and five-year cost

Ask every shortlisted vendor and partner for:

• the subscription by user type, edition, modules and base fee, in one currency and stating GST;
• the price for each year of a five-year term, including any renewal mechanism;
• a statement of work with assumptions, exclusions, day rates and milestones.

Normalise the quotes using the quote comparison guide, then calculate five-year TCO and payback.

Stage 7: contract review and negotiation

Before signing, check:

• renewal price caps and auto-renewal notice periods;
• service levels and support response times;
• data export rights during the term and on exit;
• termination rights and fees;
• liability limits and what happens if the partner fails to deliver.

The contract traps guide explains these clauses, and the ERP buying checklist records them. For a significant contract, have a lawyer review it.

Common shortcuts that cost money

• Watching unscripted demos and choosing the most polished presenter.
• Accepting a quote without an assumptions list.
• Not involving the people who will use the system daily.
• Choosing go-live dates around 30 June or the end of a peak season, when finance and operations staff are busiest.
• Signing a multi-year term without a price cap.

Frequently asked questions

How long should ERP selection take?

For a small to mid-sized business, an illustrative range is two to four months from requirements to signed contract. Rushing selection usually costs more time in implementation.

Do we need a consultant to run selection?

Not always. An independent adviser can help with requirements and negotiation, but make sure they are not paid commission by a vendor, or that any commission is disclosed.

Should we choose the vendor or the partner first?

Both matter. A good product with a weak partner often fails. Assess the partner's people and references as carefully as the software.

What if no product meets every must-have?

Revisit whether each must-have truly is one, then compare the cost of a customisation, an add-on or a process change.

Sources

• business.gov.au — choosing and implementing business software
• Australian Taxation Office — Single Touch Payroll, Payday Super, GST and record keeping
• ACCC — small business contract protections
• Australian Small Business and Family Enterprise Ombudsman — help for small businesses dealing with larger suppliers