Enterprise resource planning (ERP) software supports a range of business critical functions (e.g., accounting, sales management, purchasing management, inventory, etc.). Depending on the industry an ERP solution is meant to serve, different functional areas will be covered. For example, an ERP system meant for retailers will not have exactly the same functionality as an ERP for manufacturers.
In general, however, ERP systems permit businesses of any type to realize gains in productivity and efficiency by enabling the integration of many different business transactions, as well as automating many routine tasks.
If your enterprise is working with separate legacy systems, such as spreadsheets to track production, a customer database to track customer data and orders, along with separate systems for employee payroll, sales performance, etc., there are many benefits to be gained from the integration that a modern ERP solution can deliver. One of the major benefits ERP offers is the breaking down of silos between departments, improving communication and reducing the possibility of making errors due to information being relayed inaccurately.
Let’s take a look at the three main reasons it’s likely your business needs an ERP system.
Reason #1: Some Departments Are Struggling
For a business to function, separate departments must be able to work together with maximum efficiency. For example, imagine a company receives an order for some products. The sales department logs the order, which generates a transaction for the finance department to bill the customer. An order must also be generated for the shipping department to send out the products, and that may mean that the purchasing department needs to be informed about the drop in inventory, which in turn may mean reordering stock so that the inventory can be replenished. In turn, that expense from purchasing would generate another transaction for accounting.
By storing all transactions in a central database, an ERP system achieves its goal of bringing unity and efficiency to all departments it supports. In the example above, all the inter-department transactions would have been generated automatically by the ERP. This means bringing speed, reliability, and accuracy to the way your departments communicate and interact with each other. One way to illustrate this in action could be to focus on two departments – accounting and sales – to see the difference an ERP can make.
Accounting is at the core of every business. When this department has to rely on multiple separate systems, communications may break down or be delayed. Mistakes may occur, and accounting mistakes are probably the likeliest to result in anger. If customers’ payments aren’t promptly and properly recorded, or employees’ wages are not correctly calculates, or sales persons’ commissions are not correctly logged and paid, the result will have multiple negative impacts.
In contrast, implementing an ERP solution that is well-matched to the company’s requirements ensures that accounting will run smoothly, using data that is not only accurate but instantly available. The ERP will make sure that other departments can also access all the relevant data, which will relieve accounting of the need to take time out to communicate requested information to other departments.
With an ERP solution, everything works together organically; there’s no more worrying about whether the latest expenditure was logged properly. Using an ERP system, it’s already tracked, logged, and the information can be retrieved at any time for analysis.
Sales is another department that struggles without a consistent flow of up to minute data. No matter the industry, any delays or inaccuracies in sales data will hamper a business’ ability to capitalize on the precious data it already has. From missing out on opportunities because emerging trends are not properly tracked, to losing customer because of poorly targeted sales pitches (i.e., trying to sell the same product to a customer who has just recently purchased that product because the database hadn’t been updated), an ERP can avoid many of the common stumbling blocks sales departments encounter. An ERP system promises to bring coherency to the flow of sales information, giving business the edge it needs.
Reason #2: Outdated Systems/Software
Spreadsheets are a staple of small businesses. They are used for everything from maintaining customer email lists to tracking inventory. Once a small business has grown beyond a certain point, however, spreadsheets can become cumbersome and best and, at worst, can lead to serious bottlenecks and errors. This often happens when either multiple versions of the same spreadsheet exist (allowing employees to inadvertently update the wrong version) or when many employees must be able to access and update a single central spreadsheet.
Unless yours is a very small business, using spreadsheets to handle the brunt of information processing in your business is going to cause slowdowns. Not only does this waste time, but there’s not necessarily a guarantee that the data is going to be accurate. Without interconnected systems performing crosschecks, input and output errors can be common.
An ERP solution, however, maintains all data in a centralized database while also automating many types of transactions across departments. So, as an example, there is no need for someone in finance to generate an invoice and record those figures in a spreadsheet once sales confirms an order – that occurs automatically, just like many other related transactions.
Older Enterprise Systems Cost Time and Money
If you’re using an older system that handles some of this workload for your business, particularly one that was programmed in-house, it may be time for an upgrade. Older systems can be expensive to maintain, difficult to train on, and don’t have the same features or support that a new ERP will. In addition, many legacy systems that were developed in-house face problems when there is a need to customize certain operations or upgrade functionality. All too often, the employees who programmed the system and know it best have since retired or moved on in their careers. Getting a programmer to work with such a system can get complicated and expensive very quickly. In addition, these kinds of outdated systems can place a heavy burden on your business to cooperate with the existing system instead of a newer system that would cooperate with your business.
Worse still, as new employees come onboard to accommodate growth or replace employees who are leaving, they bring their own set of expectations. Thanks to mobile devices and apps, much of today’s workforce is used to intuitive, easy-to-learn user interfaces, where various functions happen with a simple swipe or keystroke. An older system that requires various commands to accomplish routine tasks, such as running a report, can prove unduly frustrating to employees. In turn, more time and money must be devoted to training rather than getting new hires productive quickly.
Reason #3: Business is Booming and That Brings New Challenges
It’s an enviable position to be in, running a business that has enjoyed either steady growth or has recently leaped ahead. With all the additional resources that growth usually brings, it may be time to assess if an ERP solution can work for you. If you’ve added departments, have increased overhead, or are managing more systems, ERP systems are designed to maximize the efficiency of all your operations.
If a merger or acquisition is behind the growth, it’s very likely that each business already had different systems in place. It’s unlikely that the systems will be immediately compatible. Rather than trying to consolidate both solutions into one, implementing a new system in the form of an ERP could provide the flexibility your new acquisition needs and allow your business to continue to grow.
Business growth can also mean operating in a larger, more sophisticated market. Emerging technologies are making a tremendous impact in business software, especially in ERP. If your current competitors are profiting from adopting certain technologies, such as customer service portals informed by artificial intelligence (AI), or streamlined supply chain and inventory management through the use of internet of things (IoT) sensors, or some other advanced technology, you may have little choice but to follow suit in order to remain on a competitive footing and continue to grow. In such cases, a modern ERP that incorporates the technologies you need becomes a necessity.
ERP Systems Bring Order and Clarity to Your Business
If you don’t already have one in place, or are currently using an older ERP system, implementing a brand new ERP solution can have huge benefits. Whether it’s to aid struggling departments that slowing down productivity, replacing outdated tools or technologies that have been slowing down your processes, or supporting an increase in the size and scope of your organization, an up-to-date ERP solution could be right for you. A new ERP system, properly selected to align well with your business requirements and goals, can help connect all your resources, and give you the information, efficiency, and insights needed to continue improving your business.
For help in selecting an ERP system, ask a software selection expert. Technology Evaluation Centers is an impartial software selection firm, who specialize in ERP systems. Their experts pinpoint the unique requirements of each business to help find the best-fit solution.