Introduction: The CFO's Dilemma
You're the CFO (or business owner playing CFO). Your operations team is begging for ERP. You're convinced there's a problem. But you need to justify LKR 3-5 million Year 1 investment to the board.
They'll Ask:
- "What's the ROI?"
- "When do we break even?"
- "Can you prove this pays for itself?"
The Honest Answer:
Typical ERP ROI for Sri Lankan SMEs is 12-18 months breakeven, with 150-200% ROI over 3 years. But this varies—let's calculate YOUR specific ROI.
Understanding ROI: The Basic Formula
📊 The Simple ROI Formula
ROI = (Gain - Cost) / Cost × 100%
Cost of Investment
LKR 4,000,000
Gain from Investment
LKR 6,000,000
ROI Result
50%
⏱️ Payback Period (More Important!)
Payback = Total Investment / Annual Savings
Example: LKR 4M investment / LKR 3M annual savings = 1.33 years (16 months)
Direct Cost Savings: The Easy-to-Measure Benefits
1. Labor Cost Reduction
| Task | Before ERP | After ERP | Hours Saved | Monthly Savings |
|---|---|---|---|---|
| Data entry | 80 hrs/month | 20 hrs/month | 60 hrs | LKR 90,000 |
| Reconciliation | 40 hrs/month | 5 hrs/month | 35 hrs | LKR 52,500 |
| Reports | 24 hrs/month | 4 hrs/month | 20 hrs | LKR 30,000 |
| TOTAL | 144 hrs | 29 hrs | 115 hrs | LKR 172,500/mo |
Annual Labor Savings: LKR 2,070,000
2. Error Reduction Savings (BIGGEST Category!)
| Error Type | Frequency | Cost/Error | Annual Cost | Reduction | Savings |
|---|---|---|---|---|---|
| Wrong shipments | 8/month | LKR 25,000 | LKR 2.4M | 90% | LKR 2.16M |
| Duplicate payments | 3/year | LKR 150,000 | LKR 450K | 100% | LKR 450K |
| Stockouts | 12/month | LKR 30,000 | LKR 4.32M | 85% | LKR 3.67M |
| Pricing errors | 15/month | LKR 8,000 | LKR 1.44M | 95% | LKR 1.37M |
| TOTAL | Annual Error Cost: LKR 8.61M | LKR 7.65M/year | |||
Annual Error Reduction Savings: LKR 7,650,000 (BIGGEST impact!)
📊 Direct Savings Summary
Labor Reduction
LKR 2.07M
Error Reduction
LKR 7.65M
Inventory
LKR 4.23M
Collections
LKR 1.00M
Total Direct Savings: LKR 14,941,575/year
Case Studies: 3 Real Sri Lankan Businesses
Case Study #1: Apparel Manufacturer, Katunayake
Industry: Manufacturing | Size: 45 employees | Revenue: LKR 150M/year
Investment
LKR 5.2M (Year 1)
Annual Benefit
LKR 14.5M/year
Results after 18 months:
- Eliminated 2 admin positions: LKR 1.44M/year saved
- Material shortages down 88%: LKR 3.6M/year saved
- Won 2 new large buyers: 22% revenue increase
Payback Period
14 mo
18-Month ROI
199%
"Biggest regret? Not doing this 2 years earlier. We wasted LKR 15M+ on inefficiency." - CEO
Case Study #2: Pharmaceutical Distributor, Negombo
Industry: Distribution | Size: 18 employees | Revenue: LKR 80M/year
Investment
LKR 3.8M (Year 1)
Annual Benefit
LKR 2.5M/year
Results after 12 months:
- Fraud prevention (3-way match): LKR 450K/year saved
- Expiry waste reduced 85%: LKR 323K/year saved
- Stockouts down 92%: LKR 960K/year recovered
Payback Period
18 mo
"Conservative ROI looks marginal, but we couldn't have opened 4th warehouse without ERP. Real ROI: 8 months." - Owner
Case Study #3: Construction Company, Galle
Industry: Construction | Size: 30 employees | Revenue: LKR 200M/year
Investment
LKR 4.2M (Year 1)
Annual Benefit
LKR 15.5M/year
Results after 9 months:
- Billable hours captured up 18%: LKR 7.2M/year additional
- Project profitability: 18% → 27% average margin
- Win rate improved: 28% → 35%
Payback Period
3.5 mo
9-Month ROI
177%
"ERP paid for itself in 3.5 months. Game-changer for project-based business." - CEO
Calculate Your ERP ROI Now
Use our free interactive calculator to see YOUR specific ERP ROI, payback period, and 3-year savings projection.
🧮 Launch ROI CalculatorIncludes: Real-time calculations, 3-year projections, printable reports, sensitivity analysis
Common ROI Calculation Mistakes to Avoid
❌ Mistake #1: Vendor-Provided ROI
Vendor says "500% ROI in 6 months!" Don't trust it. They cherry-pick best customers. Calculate YOUR ROI with YOUR numbers.
❌ Mistake #2: Ignoring Soft Costs
Missed: Internal project team time, productivity dip during go-live, change management. Add 20% contingency.
❌ Mistake #3: Overstating Benefits
"We'll eliminate 3 positions!" Reality: 1.5 positions reassigned. "Errors drop 100%!" Reality: 90%. Be conservative.
❌ Mistake #4: Not Tracking Actual Results
Calculate projected ROI, then never measure actual. Track metrics 6, 12, 18 months post-go-live.
Conclusion: ROI is Measurable, Not Magical
ERP ROI is real and calculable. Not "we'll be more efficient" (vague), but measurable savings.
Investment
LKR 3-5M
Annual Savings
LKR 3-8M
Payback Period
8-18 months
3-Year ROI
150-300%
Need help calculating your specific ROI? Try our free ROI calculator or contact us for personalized consultation.
📚 Related Articles
7 ERP Myths That Hold Businesses Back
Overcome objections with real data and examples.
Cloud vs On-Premise: Cost Comparison
5-year TCO breakdown for deployment options.
10 Signs You've Outgrown Spreadsheets
Calculate hidden Excel costs before ERP ROI.
ERP Modules Explained
Choose modules based on your ROI priorities.
Need help calculating your specific ROI? Contact us for a free consultation.
About ChaosHub: We help Sri Lankan businesses calculate real ROI—not vendor promises, but YOUR numbers.
Introduction: The CFO's Dilemma
You're the CFO (or business owner playing CFO). Your operations team is begging for ERP. You're convinced there's a problem. But you need to justify LKR 3-5 million Year 1 investment to the board.
They'll Ask:
- "What's the ROI?"
- "When do we break even?"
- "Can you prove this pays for itself?"
The Honest Answer:
Typical ERP ROI for Sri Lankan SMEs is 12-18 months breakeven, with 150-200% ROI over 3 years. But this varies—let's calculate YOUR specific ROI.
Understanding ROI: The Basic Formula
📊 The Simple ROI Formula
ROI = (Gain - Cost) / Cost × 100%
Cost of Investment
LKR 4,000,000
Gain from Investment
LKR 6,000,000
ROI Result
50%
⏱️ Payback Period (More Important!)
Payback = Total Investment / Annual Savings
Example: LKR 4M investment / LKR 3M annual savings = 1.33 years (16 months)
Direct Cost Savings: The Easy-to-Measure Benefits
1. Labor Cost Reduction
| Task | Before ERP | After ERP | Hours Saved | Monthly Savings |
|---|---|---|---|---|
| Data entry | 80 hrs/month | 20 hrs/month | 60 hrs | LKR 90,000 |
| Reconciliation | 40 hrs/month | 5 hrs/month | 35 hrs | LKR 52,500 |
| Reports | 24 hrs/month | 4 hrs/month | 20 hrs | LKR 30,000 |
| TOTAL | 144 hrs | 29 hrs | 115 hrs | LKR 172,500/mo |
Annual Labor Savings: LKR 2,070,000
2. Error Reduction Savings (BIGGEST Category!)
| Error Type | Frequency | Cost/Error | Annual Cost | Reduction | Savings |
|---|---|---|---|---|---|
| Wrong shipments | 8/month | LKR 25,000 | LKR 2.4M | 90% | LKR 2.16M |
| Duplicate payments | 3/year | LKR 150,000 | LKR 450K | 100% | LKR 450K |
| Stockouts | 12/month | LKR 30,000 | LKR 4.32M | 85% | LKR 3.67M |
| Pricing errors | 15/month | LKR 8,000 | LKR 1.44M | 95% | LKR 1.37M |
| TOTAL | Annual Error Cost: LKR 8.61M | LKR 7.65M/year | |||
Annual Error Reduction Savings: LKR 7,650,000 (BIGGEST impact!)
📊 Direct Savings Summary
Labor Reduction
LKR 2.07M
Error Reduction
LKR 7.65M
Inventory
LKR 4.23M
Collections
LKR 1.00M
Total Direct Savings: LKR 14,941,575/year
Case Studies: 3 Real Sri Lankan Businesses
Case Study #1: Apparel Manufacturer, Katunayake
Industry: Manufacturing | Size: 45 employees | Revenue: LKR 150M/year
Investment
LKR 5.2M (Year 1)
Annual Benefit
LKR 14.5M/year
Results after 18 months:
- Eliminated 2 admin positions: LKR 1.44M/year saved
- Material shortages down 88%: LKR 3.6M/year saved
- Won 2 new large buyers: 22% revenue increase
Payback Period
14 mo
18-Month ROI
199%
"Biggest regret? Not doing this 2 years earlier. We wasted LKR 15M+ on inefficiency." - CEO
Case Study #2: Pharmaceutical Distributor, Negombo
Industry: Distribution | Size: 18 employees | Revenue: LKR 80M/year
Investment
LKR 3.8M (Year 1)
Annual Benefit
LKR 2.5M/year
Results after 12 months:
- Fraud prevention (3-way match): LKR 450K/year saved
- Expiry waste reduced 85%: LKR 323K/year saved
- Stockouts down 92%: LKR 960K/year recovered
Payback Period
18 mo
"Conservative ROI looks marginal, but we couldn't have opened 4th warehouse without ERP. Real ROI: 8 months." - Owner
Case Study #3: Construction Company, Galle
Industry: Construction | Size: 30 employees | Revenue: LKR 200M/year
Investment
LKR 4.2M (Year 1)
Annual Benefit
LKR 15.5M/year
Results after 9 months:
- Billable hours captured up 18%: LKR 7.2M/year additional
- Project profitability: 18% → 27% average margin
- Win rate improved: 28% → 35%
Payback Period
3.5 mo
9-Month ROI
177%
"ERP paid for itself in 3.5 months. Game-changer for project-based business." - CEO
Calculate Your ERP ROI Now
Use our free interactive calculator to see YOUR specific ERP ROI, payback period, and 3-year savings projection.
🧮 Launch ROI CalculatorIncludes: Real-time calculations, 3-year projections, printable reports, sensitivity analysis
Common ROI Calculation Mistakes to Avoid
❌ Mistake #1: Vendor-Provided ROI
Vendor says "500% ROI in 6 months!" Don't trust it. They cherry-pick best customers. Calculate YOUR ROI with YOUR numbers.
❌ Mistake #2: Ignoring Soft Costs
Missed: Internal project team time, productivity dip during go-live, change management. Add 20% contingency.
❌ Mistake #3: Overstating Benefits
"We'll eliminate 3 positions!" Reality: 1.5 positions reassigned. "Errors drop 100%!" Reality: 90%. Be conservative.
❌ Mistake #4: Not Tracking Actual Results
Calculate projected ROI, then never measure actual. Track metrics 6, 12, 18 months post-go-live.
Conclusion: ROI is Measurable, Not Magical
ERP ROI is real and calculable. Not "we'll be more efficient" (vague), but measurable savings.
Investment
LKR 3-5M
Annual Savings
LKR 3-8M
Payback Period
8-18 months
3-Year ROI
150-300%
Need help calculating your specific ROI? Try our free ROI calculator or contact us for personalized consultation.
📚 Related Articles
7 ERP Myths That Hold Businesses Back
Overcome objections with real data and examples.
Cloud vs On-Premise: Cost Comparison
5-year TCO breakdown for deployment options.
10 Signs You've Outgrown Spreadsheets
Calculate hidden Excel costs before ERP ROI.
ERP Modules Explained
Choose modules based on your ROI priorities.
Need help calculating your specific ROI? Contact us for a free consultation.
About ChaosHub: We help Sri Lankan businesses calculate real ROI—not vendor promises, but YOUR numbers.
