ERP systems and EURO – how do you prepare them?

The date of Bulgaria’s entry into the eurozone has yet to be definitively clear. Still, companies in the country need to adapt their software systems to work with the Euro. The main scenario that experts are working on is 1 January 2025. However, according to comments in the public website, this scenario does not seem realistic. The reserve dates for the changeover to the single currency under discussion are 1 March 2025 and 1 July 2025.

The exact timing is a starting point for businesses because it sets a deadline by which companies in the country will have to prepare their business software, update their fiscal devices, and make other significant changes if they want to continue to operate smoothly after our country joins the euro area.

Initial estimates suggest that this will take between 6 and 8 months, so it is crucial that implementation starts as early as possible.

Official sources of information on the subject, such as the website on the introduction of the Euro in Bulgaria, stress that for some larger businesses, the preparations will require many hours of work at the expense of employers. The institutions advise every manager to budget for the necessary resources.

Why is it complicated to change business software when switching from the Euro to the lev, and what should companies do to make the process as smooth as possible?

Answers to critical questions related to the implications of the introduction of the Euro for ERP systems are provided by the Balkan Services consulting team.

Business software for enterprise resource management will be affected by the introduction of the Euro in Bulgaria and will necessarily require a realignment. The significance of the change depends on the level at which a system has entered process management.

Each company may operate in different currencies, but one is the main one in which accounting records are kept. Of course, according to Bulgarian legislation, this is the Bulgarian lev. With the changeover to the Euro, it is the base currency to which companies equate their entire business—revenues, expenses, receivables, payables, inventories, assets—that is changing.

Separately, for a period before the introduction of the Euro, the base currency will be the LEV, and the systems will be required to produce certain documents and reports in both currencies. Thereafter, the base currency will be changed to EUR, and again, for a period of time, systems will be expected to produce certain documents and reports in both currencies (only this time, the conversion will be reciprocal).

These requirements make the overall process of changing software systems a complex project for any company.

The degree of complexity can vary from system to system as the systems differ in structure and process scope.

Some pure accounting systems can handle this problem relatively easily. Other systems focused on specific processes (POS systems, Web shops, etc.) may also convert relatively easily. On the other hand, complex business planning and management systems are a much more serious challenge.

Read more: Everything you need to know about ERP systems

Reconfiguring ERP systems – timelines and milestones

Switching from one currency to another in a relatively simple software system can happen within days, whereas in more complex systems, it can take months. The timeframe for each project depends on factors such as:

• functionality of the system and its specifics;
• the scope and variety of business processes covered by the system;
• how the data is organized and structured;
• the volume of modifications and customizations made;
• the number and complexity of integrations with other software systems.

It should also be noted that software producers do not build into the systems in advance the assumption that a country’s national currency will be changed. The products often lack structures and procedures for automatic base currency conversion.

First stage – standard conversion procedure

Different implementation options depend on the system’s capabilities and structures. If the same system has worked in one of the countries that have made a similar transition, it is possible that the manufacturer foresaw such a procedure at the outset or added it as functionality later.

This is the easiest option because the consultants are only required to verify the process and set it up for an accurate lev to euro conversion. If the manufacturer does not offer such a procedure, the consultants will have to tailor it to the case. Approaches to such a procedure could be:

The first approach

Stop work in the existing base, create a new base with the same settings but without transactions, and migrate opening balances representing the converted lev ending balances to Euro.

Thus, starting “from scratch”, as would happen if re-implementing an ERP software, the old base is used for reference purposes, and the new one starts to accumulate the company history of the new “era”—that of the Euro.

Read more: Viplast AD optimizes its production with Soft1 ERP cloud software [case study]

Second approach

Copy the existing database for reference purposes. Start the process of converting and re-accounting for all old transactions (from previous periods) from BGN to EUR. When the process is complete, there will be a history in the current base that will make it look as if the base currency of the ERP system has always been Euros.

The business continues to operate in the same system. The back history is visible in Euros and fully comparable to the current transactions.

Third approach

Applies only to ERP systems that allow parallel ledgers (Multibooking) and are currently being implemented, with the clear prospect of the Euro being introduced soon.

In this situation, it is possible to start operationally with two parallel ledgers (one in BGN and one in EUR), setting the main one in EUR so that the second one (the one in BGN) can be used temporarily only until the Euro is introduced.

In this scenario, the ERP system does not need to be reconfigured due to the introduction of the new currency.

At the moment, the Balkan Services consulting team is working on building the system concept for reconfiguring the implemented ERP solutions from levs to euros, which will be generic for all customers of the respective ERP solution.

The first stage, implementing a generic concept for all Balkan Services customers operating with a given ERP system, only partially solves the issues related to converting the software to work with euros.

That is why we are discussing a second stage with an individual approach. The degree of its complexity and the timeframe for implementation depends on the number of modifications and integrations made to the ERP system specifically for each company and are subject to individual evaluation.

Why does this significantly complicate the reconfiguration process?

With the implementation of an ERP software, various processes begin to be managed, a large part of the activity is served, and data is managed, controlled, and collected. This doesn’t just apply to accounting data; orders, approvals, budgets, integrations, and much more are covered.

It is possible to create entirely new processes and procedures in the ERP that run and do some part of the work at a specific point in the process. To make it all work, new data structures, tables, and fields that did not exist before in the ERP platform are required, as well as modification of standard structures (e.g., adding new fields).

All of these changes to the ERP system at each company are individual. Some of them are, in all likelihood, related to money and are in BGN. Applying the general concept in stage 1 cannot affect the different modifications because the general procedure only works with the standard structures. Therefore, an individual approach is needed for each client.

In summary, from our many years of experience, we can say that the more options and possibilities a business management system has, the more customers will benefit from it. This means more interconnections, more integrations, and more data in leva. The more complex an ERP system is, the easier reconfiguration is expected to happen.

The type of business also matters in terms of the complexity of processes in a system because it matters how many of them are money-related. In this regard, the software reconfigurations of all finance-related companies are very complex. The banking sector, for example, has been preparing its systems for our country’s accession to the euro area for two years.

The role of companies in the systems realignment process 

When reconfiguring software, company management plays a very significant organizational role, not so much a technical role.

Implications of the introduction of the Euro on business operations

Company executives should also be aware of the risks arising from software systems’ realignment. Possible situations include loss of history, migrating from opening balances, and the likelihood that reports will now be done from a different location; specific reports may be slower or have to be done in two parts.

Preparation and the actual realignment of systems are expected to take hours for some systems and days for others. In this context, the management of each company should consider, according to its activity, when the appropriate time for implementing the project will be to avoid periods such as the holiday season or busy times of the year such as Black Friday and Christmas, respectively, to ensure the continuity of the workflow.

There will also be some important points related to the annual closure – about the fact that some accounting transactions in the old currency have to be added in the old period and then transferred as balances to the new period and, therefore, to the new currency.

Read more: Quality management – how important is it and how do we do it at Balkan Services?

The problem with integrations

The more integrations made between an ERP system and other systems the company uses, the greater the risk of problems arising when readjusting to work with the base currency euro.

It is imperative to check that the respective parties’ plans for changes will not lead to system failure due to method incompatibilities. Our team believes that the more integrations in an ERP system, the more complex the system realignment project will be.

Is it necessary to upgrade ERP systems to the latest version before reconfiguration?

If the version upgrade process is not automated, it may be necessary to upgrade all clients to the same, possibly the latest version, because the base procedure – the one performed for all clients of an ERP solution – will work in a single environment. Cloud versions (SaaS – Software as a Service) are upgraded automatically and this assumption will hold for On-Premises solutions installed on-site at the customer.

For these processes to be tested and prepared, we recommend that companies provide a test environment where this can happen and that is focused solely on this project – no other process should be developed in this environment.

Consultants will need months to prepare in advance. Balkan Services’ clients for whom ERP system reconfiguration is imperative are many, and the entire process requires precise and timely planning. Our team will prioritize based on the projects’ complexity to complete each one on time.

Double circulation and changes in software systems

In the month following the date of our country’s accession to the euro area, the lev and the Euro will be both legal tender on the territory of Bulgaria. This means that the accounts will be kept in euros and prices will be quoted in both leva and euros, and both currencies will be accepted at the cash desk.

We are not talking here about a reconfiguration of the software, but about an additional capability of the ERP system to accept payments in both currencies. For this purpose, a new functional capability will be created – a cash payment method in either BGN or EUR.

Balkan Services’ consultants will prepare the ERP systems for this interim period for customers with cash payment acceptance, which will be necessary.

Typically, the retail sector uses simpler systems to manage processes and so it is expected that for them the reconfiguration will not be too much of an issue, but the nature of their business suggests that the case for dual circulation needs to be addressed.

The role of consultants

Each system needs to be thought of locally – in terms of what it does and what its technical capabilities are. It is important that this is taken into account throughout the process of converting software systems from Euro to lev – and this is where the role of consultants comes in.

At Balkan Services, we will do everything possible to ensure a smooth transition of ERP systems from Leva to Euro with minimal disruption to the business. It is important to note that this is a job with the highest level of precision and the deepest level of knowledge of the systems and the interrelationships of the integration processes.

No business today can grow and be competitive without the use of IT systems. Choosing the right software solution and implementing it is a complex, difficult but critically important decision.

At Balkan Services we have expert knowledge of business, technology, and legislation, and we speak all three languages. We will listen carefully and advise you on choosing the right business system for your needs.

Balkan Services has been supporting businesses on their digital transformation journey since 2006. We have already helped over 270 companies to digitalize their business by implementing well-established software solutions and IT infrastructure management.