enterprise resource planning

What Is ERP? Does My Business Need ERP?

Handling a growing business takes a lot of work, no doubt. 

When nothing’s in order and everything seems like an explosive mess, it doesn’t necessarily mean you’re failing. It could mean the business is thriving and just needs some support systems to contain its growth. 

Businesses at their core are built on data, so the first thing you might want to look at is how your organization manages information. If it takes forever jumping from one program to another just to get sales data for the month, then employing an ERP could be what you exactly need. 

Read on to find out how you can streamline your operations and maximize workflow efficiency with ERP.

What is ERP?

Enterprise Resource Planning (ERP) is a type of software that organizations use to collect inputs or data across multiple business functions such as production, finance, distribution, etc., and integrate them into a single structure. It is a centralized system that links independent and codependent departments, allowing key individuals to see a complete and consolidated picture of what is happening in each business component and how they interweave with each other. This means you can have easy access to company-wide data and track key details such as contacts, financial data, profit margins, capacity for production, raw materials at its disposal, payroll information, and purchase orders.

ERP Tools and Functions

It is important to note that ERPs can take several forms, and some are particularly structured for industry-specific organizations. This technology has progressed over time from traditional software models based on physical client servers to cloud-based software with remote, web-based access.

Typically, ERP systems combine and automate critical financial and operational functions from sources such as general ledger, accounts payable, accounts receivable, payroll, and financial reporting. Some also aid in inventory, order, and supply chain management, as well as procurement, production, distribution, and fulfillment.

Here are some features of ERPs:

  • Automation
  • Data integration, analysis, and reporting
  • Tracking
  • Accounting
  • Financial Management
  • Customer Relationship Management
  • Sales and Marketing Management
  • Human Resources/Capital Management
  • Supply Chain Management
  • Manufacturing

Benefits of ERP

It is already clear that ERP collects information, stores them for reference, and consolidates them. But how exactly can this be a critical business tool?

ERP provides transparency and an efficient flow of information. Since all pertinent data are stored in a single system, it would be easier to monitor Key Performance Indicators by analyzing data and drawing actionable insights from them. Departments with related functions can also synchronize work to get faster and better results. This would enable the business to efficiently and effectively plan, budget, forecast, and communicate the state of its operations, financial situation, and ability to generate revenue to internal and external stakeholders, so they can come up with informed and data-driven decisions. 

In addition, ERP can automate certain menial tasks like data entry and repeatable tasks like payroll, order processing, invoicing, reporting, and more. This reduces redundancy, increases accuracy, and eventually boosts productivity as employees focus more on value-adding tasks.

Efficient communication leads to higher customer and employee satisfaction, faster transactions, and higher accuracy rates – all of which can ultimately lower operating expenses and increase revenue.

Does My Business Need ERP?

There are no established criteria when a business needs ERP because it is typically employed for company-specific reasons which generally touch on operation streamlining, cost reduction, or business expansion. 

So, it is important to understand your vision and company direction first and foremost, and whether the benefits of employing ERP align with your goals at a given time and your set timelines. 

ERP is a technological solution and therefore figuring out if it is the right solution for you means you need to have a good understanding of the issues the company faces and see if ERP can help resolve them. If your business experiences the following problems, then it must be time for you to employ ERP:

  1. You have too much software for different processes

Having too much software for different processes is one of the indicators that you need to employ ERP. It is normal for each department to have its system tailored for its specific function. However, if separately running front and back-end systems become a time-consuming manual process, then the technologies have defeated their purpose. With ERP, each department can still keep its systems, but all systems are integrated and can be accessed through a single application. 

  1. Inaccessibility of key business metrics

Another indicator is the inaccessibility of key business information such as sales to date, orders per day, product class distribution, etc. due to the company’s reliance on spreadsheets or systems that have to be constantly and manually updated. Using ERP would allow employees to immediately access data they need to effectively do their tasks and proactively improve their performance such as in the case of sales representatives. 

  1. You are struggling to meet customer demands

If managing and tracking inventory, retrieving customer-specific financial information, or producing comprehensive reports for clients has become taxing and time-sucking tasks, it is time to employ ERP. With ERP, data from relevant departments like accounting, CRM, and order management, among others, are collected and consolidated into a single, easy-to-navigate dashboard.

Key Takeaway and Considerations

Technologies are compelled to evolve parallel with the business growth, otherwise, the company suffers. With this, it becomes clear that for companies continually developing and becoming more complex, whether you need ERP or not is out of the question. It is a matter of when you need it and how you can successfully employ and execute it. 

Think of it this way, using ERP is like looking at a master plan from above, which means you can see the individual components and how they interact with each other. Being able to do this is a powerful tool to identify business opportunities, but it can also reveal organizational weaknesses and problem areas.

So, to successfully employ ERP and meet its designed objectives, the organization must be ready to let go of antiquated practices and old technologies and embrace a new and differentiated approach.

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