As life sciences companies evolve from startup through IPO and commercialization their financial, operational, and compliance needs become significantly more complex. The ability to efficiently manage financial planning, supply chain logistics, and regulatory requirements determines how effectively an organization can scale. Without a structured ERP strategy in place early, companies risk operational bottlenecks, compliance challenges, and disruptions that can slow commercialization efforts. A proactive approach to ERP selection and implementation provides a foundation for scalability, compliance, and financial visibility. Planning ahead—rather than reacting to growing complexity—helps to enable organizations to focus on innovation and market expansion rather than operational firefighting.
What Life Sciences Companies Should Consider in an ERP System
In a recent webinar, James Neal, Principal in BDO Digital’s NetSuite Practice, outlined key considerations for selecting and implementing an ERP system. From inventory tracking and gross-to-net calculations to supply chain integrations and compliance requirements, the discussion highlighted the critical need to build a scalable financial system that supports long-term growth and regulatory requirements.
ERP is Essential for Life Sciences Companies
Most life sciences companies begin their financial operations with basic accounting software during their pre-clinical phase. However, as they prepare for additional funding rounds, IPO, and commercialization, they face challenging financial and operational requirements that require the broader functionality offered by ERP systems like NetSuite, Microsoft Dynamics 365, SAP, or Oracle.
Most life sciences companies will begin implementing an ERP system during Phase 2 clinical trials, while cell/gene therapy companies will start as early as Phase 1. Transitioning to an ERP system early, before commercialization, helps to ensure that critical processes—including multi-entity financial reporting, revenue recognition, and regulatory compliance—are structured properly from the outset. Retrofitting an ERP after launch can create implementation challenges, inefficiencies, and operational risks that could otherwise be avoided.
Key ERP Considerations for Life Sciences Organizations
When evaluating an ERP system, life sciences companies must assess whether it can support both current needs and post-commercialization complexity. The following functional areas are critical:
- Financial Reporting & Audit Readiness – Supporting Sarbanes-Oxley (SOX) compliance, multi-subsidiary financial consolidation, and IPO preparation.
- Multi-Entity & Multi-Currency Capabilities – Managing international expansion, intercompany transactions, and service agreements between subsidiaries.
- Revenue Recognition & Gross-to-Net Adjustments – Helping to ensure accurate accruals for rebates, chargebacks, and pricing structures across markets.
- Contract & Vendor Management – Handling complex supplier agreements, purchase orders, and compliance documentation.
- Automated Approvals & Compliance Controls – Reducing manual processes, enforcing segregation of duties, and documenting approval workflows.
Establishing a financial system with audit-ready controls helps to ensure that companies are prepared for investor scrutiny, regulatory audits, and long-term business scalability.
Supply Chain & Manufacturing: Managing Complexity
For life sciences companies, supply chain management comes down to two options: outsourced manufacturing or in-house manufacturing.
The Fully Outsourced Model (CMOs & 3PLs)
Many companies rely on contract manufacturing organizations (CMOs) for production and third-party logistics (3PLs) companies for distribution. In this case, ERP systems must:
- Track inventory across multiple locations – Managing raw materials, intermediates, and finished goods before shipment to 3PLs. Monitor stock levels & production costs – Ensuring visibility into the financial impact of inventory at each stage of production.
- Helps ensure compliance with FDA & GMP standards – Supporting quality control and regulatory documentation, even when manufacturing is outsourced.
- Integrate with CMO production schedules – Preventing stockouts, overproduction, or misalignment between demand and supply.
Aligning manufacturing procedures with ERP implementation is critical. Without well-defined Standard Operating Procedures (SOPs) prior to ERP go-live, companies risk process inefficiencies, manual workarounds, and wasted investment in underutilized ERP functionality.
The In-House Manufacturing Model
For companies that manufacture their own products, there are two levels of support for GMP manufacturing. An ERP system can be used primarily for status tracking, with most GMP tracking occurring outside of the ERP system. The second method is where GMP compliance occurs fully within the ERP system. This is the method that BDO’s Life Sciences for NetSuite supports. For an ERP to support GMP compliance it must offer the following functionality:
- Lot inspection, quarantine, and release processes and documentation to adhere to GMP regulatory requirements.
- Vendor and material approval workflows to help ensure purchases are from an approved supplier.
- Automated documentation & sign-offs for batch records and final product release.
In addition, it is critical to have standard operating procedures (SOPs) documented prior to go-live with an ERP system. Manufacturing procedures and system design must work in tandem. Going live without a set of SOPs or having SOPs that don’t align with an ERP solution creates complexity, unnecessary manual work arounds and wasted dollars on ERP functionality that isn’t being used.
Adhering to GMP compliance requires different processes depending on which ERP system is chosen and who implements it, making it essential to choose a platform and implementation solution provider that aligns with organizational requirements.
Revenue Recognition, Gross-to-Net, and Order Management
Revenue management in life sciences presents unique challenges, particularly due to complex pricing models, reimbursement structures, and multi-market sales strategies. Companies must help to ensure that ERP systems can support gross-to-net (GTN) calculations by:
- Accruing revenue adjustments – Managing rebates, chargebacks, and discounts at a granular level (SKU, country, dosage).
- Ensuring real-time GTN reconciliation – Matching estimated accruals to actual financial performance, whether in-house or through external service providers.
- Providing full revenue visibility – Offering clear insights into revenue fluctuations across different geographies and payer groups.
For companies selling through 3PLs, an ERP must support seamless integration with external order fulfillment and accounts receivable processes. Organizations with direct sales teams require robust sales order management and invoicing capabilities.
Aligning Demand with Supply: Forecasting & Planning
Accurate demand forecasting is essential for balancing inventory, preventing supply chain disruptions, and ensuring commercial readiness. ERP systems should facilitate:
- Sales Forecasting – Predicting future revenue based on market dynamics, customer demand, and commercial strategies.
- Demand Planning – Aligning inventory levels with projected sales volumes to optimize distribution
- Supply Planning – Coordinating procurement, production scheduling, and inventory transfers across multiple locations.
While many ERP solutions include built-in forecasting and planning tools, companies with highly complex demand modeling needs may require additional FP&A (Financial Planning & Analysis) solutions. These range from Excel-based forecasting tools to advanced AI-driven predictive analytics platforms.
Key Takeaways: Preparing for Commercialization
To prepare for commercialization and future growth, life sciences companies should:
- Select an ERP system early – 12 to 18 months before commercialization to allow for a phased approach that reduces strain on the key stakeholders.
- Help to ensure alignment with business models – Whether outsourced, in-house, or hybrid manufacturing and sales strategies, ERP functionality must fit operational needs.
- Automate compliance workflows – Reducing manual effort while ensuring auditability and regulatory alignment.
- Establish revenue recognition frameworks – Setting up gross-to-net calculations and financial forecasting models before launch.
- Leverage ERP-driven demand planning – Aligning inventory strategies with commercial objectives to support long-term scalability.
A well-structured ERP strategy helps to ensure that life sciences companies can navigate commercialization efficiently, maintain compliance, and support financial stability as they expand into new markets.
Looking Ahead: Is Your Financial System Ready for Commercialization?
As life sciences companies scale, financial complexity, supply chain coordination, and regulatory requirements will continue to evolve. Organizations that proactively select the right ERP system and implementation strategy will be better positioned to manage these challenges while focusing on growth and innovation.
By assessing current and future ERP requirements, organizations can make informed technology decisions that support long-term success.
Watch the full webinar here:
Need to Upgrade Your Financial Systems?
If your company is outgrowing its current accounting software or struggling with financial complexity, it may be time to implement a scalable ERP system with a solution provider that understands Life Sciences, like BDO. Contact BDO for the skilled guidance on selecting and deploying the right financial technology to support your growth.