This ERP ROI calculator turns the cost of manual work into a yearly figure in Saudi riyals: staff hours spent keying data and closing the month, stock variances, errors and returns, and sales lost when an item runs out. It then sets that figure against the system cost in the quotation you received and gives you the payback period in months. The improvement rate is your own assumption, so the result is also shown at a lower and a higher rate.
How to calculate the return on investment of an ERP
The return here is money you stop losing, not new revenue. The calculator adds four monthly items, multiplies them by 12, then takes the share you assume the system saves. Stockouts count at their lost profit, not the full sale value, because had you sold the item you would also have paid for it.
Annual cost = 12 × (Hours × Rate + Stock variance + Errors + Lost sales × Margin)
Saving = Annual cost × Improvement % · Payback (months) = System cost ÷ (Saving ÷ 12)
ERP cost: what to enter in the calculator
Put everything in the year-one quotation into the system cost: licence or subscription, implementation and data migration, training, and point of sale terminals and printers if you need them. In the detailed mode, split the one-off amounts from the annual subscription, because the subscription comes round every year and is deducted from the saving, while implementation is recovered once. Do not use a figure from a website or an advert here; use the one quoted to your business in writing, and check whether it includes VAT so you compare like with like.
How to estimate manual hours and the improvement rate
Ask everyone who touches the figures how many hours a week they spend writing invoices, moving numbers from one file to another or reconciling statements, then multiply the total by 4.3 for monthly hours. Add the days spent on the month-end close. An hour of staff time in Saudi Arabia costs more than the salary: add the employer's social insurance (GOSI) share, and for expatriate staff the iqama and work permit fees. As for the improvement rate, do not take it from any vendor, us included. Start with a cautious rate and look at the payback at 10%, 25% and 50% under the result: if the decision holds at the lowest rate, it is a safe one.
Common mistakes when calculating ERP ROI
- Counting lost sales at their full value instead of their profit.
- Forgetting the annual subscription and using only year-one cost in a three-year comparison.
- Assuming the system removes all manual time, when some entry and checking always remain.
- Ignoring the implementation period itself: in the first months the team runs both systems side by side.
What to do with the result
Download the calculation in Excel if you want to change the figures with your partner or finance manager: each item sits in its own cell, the rates in a separate column, and the formulas update with any change. Or download it in PDF to file alongside the quotations you are comparing. If the payback period is longer than the system contract, revisit the scope: point of sale with accounting software may be enough instead of a full system.
When you do not really know what manual work costs you
The hardest part of this calculator is its first figures, because the cost of double entry and stock differences shows up in no report. At Microtec we offer businesses in the Kingdom accounting software (ERP) that ends the scattered books: sales, purchasing, inventory, finance and HR in one place. Try it on your own data before any commitment.