TCO Worked Examples and Selection Checklists
ERP requirements checklist for Indian MSMEs: what to ask before buying
A practical ERP requirements and demo checklist for Indian MSMEs covering processes, GST, Companies Act, payroll, data, integrations, pricing and support.
Before you ask any vendor for a price, write down what the system must do. A short, specific requirements list, split into must-haves and nice-to-haves and tested in demos on your own data, is what makes quotes comparable and prevents the most expensive surprises after go-live. For Indian MSMEs, the list must include the compliance work the software has to carry: GST e-invoicing and e-way bills, GSTR-1 and GSTR-3B data, the Companies Act audit trail for companies, and payroll deductions if payroll will run in the ERP. This guide gives a ready-to-adapt checklist; the interactive version is the ERP selection and contract checklist.
It is part of the 3–5-year ERP TCO guide section.
Step 1: describe your business in numbers
| Item | Today | In three years |
|---|---|---|
| Legal entities (companies, LLPs, firms) | ||
| GSTINs (states) | ||
| Plants, warehouses, branches, shops | ||
| Users by role (full-time, occasional, approvers) | ||
| Sales invoices per month (B2B and B2C) | ||
| E-way bills per month | ||
| Items (SKUs), with batch/serial/expiry? | ||
| Employees on payroll | ||
| Aggregate annual turnover band |
Vendors price on these numbers. Sharing the same sheet with each vendor is the first step to comparing ERP quotes.
Step 2: process requirements
Mark each as M (must-have) or N (nice-to-have).
Sales and distribution
- Quotation to order to delivery to invoice, with partial deliveries.
- Price lists, discounts and schemes by customer group.
- Credit limits and blocking of orders for overdue customers.
- Delivery challans for job work, approval and branch transfers.
Purchase and inventory
- Purchase requisitions and approvals, purchase orders, goods receipt with quality check.
- Stock by location and bin; batch, expiry and serial numbers where needed.
- Reorder levels, stock ageing and physical stock count adjustments with approvals.
- Stock transfers between GSTINs with e-way bills.
Manufacturing (if relevant)
- Bills of material and routing, work orders, material issue and returns.
- Job work sent out and received back, with records for ITC-04.
- Costing of production, scrap and by-products.
Accounts and finance
- Bank reconciliation with bank statement import.
- Receivables and payables ageing, payment reminders.
- TDS on purchases and services, with the data for TDS returns.
- Budgets and MIS reports by branch, product or project.
Step 3: Indian compliance requirements
| Requirement | Why | Test in the demo |
|---|---|---|
| E-invoice (IRN and QR) via an IRP | Mandatory above ₹5 crore AATO; 30-day limit at ₹10 crore+ | Generate an IRN and cancel one; credit note with IRN |
| E-way bill generation and Part B updates | Goods movement above the threshold | Create from invoice and from stock transfer |
| GSTR-1 and GSTR-3B data, GSTR-2B and IMS reconciliation | Monthly or quarterly returns | Export GSTR-1; reconcile purchases |
| Reverse charge and import of services | Foreign SaaS, legal fees, GTA | Book a reverse-charge bill |
| Audit trail (edit log) that cannot be disabled | Companies (Accounts) Rules, Rule 3(1) proviso, from 1 April 2023 | Edit an invoice and view the log; try to switch it off |
| Daily back-ups of books on servers in India | Rule 3(5), Companies (Accounts) Rules | Ask where back-ups are stored |
| Payroll: EPF, ESI, PT, TDS on salary | If payroll runs in the ERP | Process a sample month; see the payroll module guide |
| Personal data controls | DPDP Act, 2023 and Rules, being brought into force in phases | Role-based access, deletion and export of a person's data |
More detail: e-invoicing and e-way bill integration, audit trail and data protection.
Step 4: technical and integration requirements
- Access from browser and mobile; offline working if sites have weak internet.
- Integrations you need: bank, payment gateway, e-commerce marketplaces, attendance devices, barcode scanners, weighbridges, existing CRM.
- Open APIs, and who pays for API usage.
- Two-factor login, role-based permissions, approval workflows.
- Data export of everything in a usable format (for example CSV or database dump) at any time.
- Hosting location and back-up frequency stated in writing.
Step 5: commercial and support requirements
- Itemised pricing: subscription or licence, implementation, migration, training, integrations, customisation, support.
- Renewal uplift cap and price of additional users and modules for at least three years.
- Minimum users or contract value, and whether users can be reduced at renewal.
- Support hours, response times, escalation and service credits.
- Implementation partner's references in your industry and size.
- Exit terms: notice period, auto-renewal, data export and retention after termination. See the SaaS contract guide.
Step 6: run scripted demos on your own data
Give each shortlisted vendor the same three to five scenarios, with your own sample masters and transactions, for example:
- A customer order with a scheme discount, partial delivery, e-invoice and e-way bill.
- A purchase with quality rejection and a debit note.
- A stock transfer between two GSTINs.
- A month-end: bank reconciliation, GSTR-1 export, purchase reconciliation.
- An invoice edited after posting, with the audit trail shown.
Score each scenario on a simple scale (0 = cannot do, 1 = with workaround, 2 = standard feature) and record who saw it. A vendor that will not demonstrate on your data is telling you something.
FAQ
How long should the requirements list be?
Long enough to cover every process that runs your business, short enough that vendors answer it properly. For an MSME, 60–120 lines is usually workable. Keep must-haves to what you genuinely cannot run without.
Should I hire a consultant to write requirements?
For larger or complex projects, an independent consultant who is not reselling any product can help. For simpler projects, a structured internal workshop using this list is often enough.
What if no system meets every must-have?
Revisit whether each must-have is truly essential, consider a process change, or price a customisation, adding its upgrade cost to the TCO.
Sources
- CBIC GST — GST rules the software must support
- E-way bill portal — e-way bill requirements
- Ministry of Corporate Affairs — Companies (Accounts) Rules, 2014
- EPFO and ESIC — payroll contribution rules
- MeitY — Digital Personal Data Protection framework
