Une of the questions we often ask ourselves before starting a project is how profitable it is to implement Odoo. It is a valid question. Unlike buying a machine that produces X units per hour, the benefits of an ERP are partly tangible and partly intangible, and that causes many companies to postpone the decision simply because they do not know how to quantify it.
The good news is that the return on investment of an Odoo implementation can indeed be measured accurately. You just need to define the correct indicators before starting, record the baseline, and re-measure after the go live. The problem is almost never that the benefit does not exist; the problem is that no one took the time to document it before starting.
At Business Insights Mexico, we have encountered companies that after implementing Odoo know perfectly well that their operation improved, but they cannot assign a number to it. This closes the door for them to justify the investment to a partner, a board, or a bank, and it also prevents them from replicating the same criteria when evaluating the next technology project.
Why is it so hard to calculate the ROI of an ERP
The most common mistake is trying to justify an ERP only by the cost of the license against the cost of not having it. That comparison almost never convinces anyone because it leaves out what really moves the needle in a company. The hours lost reconciling information between areas, the errors that are repeated month after month, the time it takes for an invoice to be issued. None of that appears in a cost spreadsheet, but that is precisely where the real return on investment lies.
Another frequent mistake is measuring too late. When the project has already been in operation for six months and someone thinks to ask how much was saved, no one remembers precisely how the company operated before. Memories tend to soften the bad from the past, and that makes the comparison lose strength just when it is most needed.
That’s why before implementing it’s advisable to sit down to define what will be measured and how. Without a baseline, there is no way to demonstrate afterward that the project was worth it, and that exercise takes no more than a couple of meetings if done with the right people in the room.
The items you can measure:
Reduction of time in administrative processes
Before implementing Odoo, measure how many hours your team dedicates to processes that will be automated. Report generation, reconciliation of information between areas, duplicate data entry, manual tracking of orders. After go live, measure those same hours again.
The difference multiplied by the hourly cost of the involved people gives you a concrete saving. If the administrative team saves 40 hours monthly at an average cost of 120 pesos per hour, the saving is 4,800 pesos per month or 57,600 pesos per year.
Reduction of errors and reprocessing
Before the project, record the frequency and cost of the most common operational errors. Invoices with incorrect data, duplicate orders, inventory discrepancies, misapplied payments. Do the same tracking after implementation. The reduction in the error rate has a direct economic value in hours of correction avoided and in the impact that these errors have on the customer.
Improvement in the collection cycle
If Odoo allows for faster invoicing and automated tracking of accounts receivable, the effect on cash flow can be measured very concretely. Compare the DSO or days sales outstanding before and after the project. A reduction of 5 days in DSO in a company with monthly sales of 3 million is equivalent to an additional 500,000 pesos of available liquidity.
Increase in the productivity of the sales team
If the sales area adopts Odoo CRM, measure the number of opportunities in follow-up, the conversion rate, and the average time of the sales cycle before and after. An improvement of just 2 percentage points in the conversion can represent a significant increase in revenue depending on the volume of opportunities the company handles.
Reduction in inventory costs
For companies with warehouse operations, compare the average inventory level, losses due to expiration or damage, and stock outs before and after. Odoo allows for the configuration of reorder points and automatic replenishment, which usually reduces the capital tied up in inventory without sacrificing availability.
These five areas do not apply in the same way to all companies. A professional services firm is likely to feel the greatest impact on collections and commercial productivity, while a warehouse company will see the clearest effect on inventory and reprocessing. The important thing is not to measure all five forcefully, but to identify which are relevant to your operation and focus the measurement effort there.
An example of how this looks in practice
A medium-sized distribution company that we supported in its implementation had a recurring problem of stockouts combined with sales reports that arrived a week late. Before starting the project, we documented three things: the hourly cost of the administrative team, the number of monthly stockouts, and the time it took to close the sales report each month.
After the implementation, the closing of reports went from taking five business days to being available on the same day that ended the month. Stockouts decreased significantly thanks to the automatic reorder points, and the administrative team freed up hours that were previously spent reconciling information between sales and warehouse. Translated to currency, those three changes alone justified the full investment of the project before completing the first year.
This type of exercise is what we recommend replicating in any project, regardless of the size of the company. It is not necessary to measure absolutely everything; it is enough to choose two or three indicators that truly hurt the operation and follow them up with discipline.
Common mistakes when measuring ROI
The first is not to involve the people who are going to use the system every day in defining what is going to be measured. They are the ones who know best where the real pain is, and leaving them out of the exercise usually produces indicators that look good in a presentation but do not reflect what really changed in day-to-day operations.
The second is to confuse activity with results. That the team uses the system more or that more reports are generated is not in itself a benefit; the benefit lies in what that activity allows to stop doing or do better. It is worth reviewing each indicator and asking what business decision is made better because of it.
The third is not to review the numbers after the first year. The ROI of an ERP does not end at go live; it often continues to grow as the team becomes more efficient using the system and as additional processes are automated that were not considered at the start of the project.
How to build the final number
ROI is calculated as total benefits minus implementation cost divided by implementation cost times one hundred.
To calculate it correctly, you must include in the implementation cost the license, consulting, training, and the internal time of the client's team during the project. The benefits include the quantifiable savings from the first full year of operation.
In most well-executed implementations, the ROI for the first year is between 40% and 150%, depending on the size of the company and the complexity of the operation. The important thing is to measure it with real data and not with generic estimates.
Measuring the return on investment of an implementation of Odoo is not an optional exercise, it is what turns the project into a business decision and not an act of faith. If your company is evaluating taking this step, at Business Insights Mexico we help you build the business case before starting any implementation.
Ready to stop operating blindly and make decisions with real data? At Business Insights Mexico we help you take that step.