Trying to keep a company running smoothly – let alone profitable – can sometimes feel like juggling plates while riding a unicycle, especially if you're constantly switching between programs to keep things running smoothly.
This is why many successful companies use ERP, and why if you are involved in running a business, you should consider using it.
But what is ERP? What does ERP do? Can ERP benefit your business? We've put together a beginner's guide to ERP to help you figure it out.
ERP stands for Enterprise Resource Planning, and an ERP system is a piece of software that helps businesses manage their internal processes. This includes everything from finance and accounting to procurement, supply chain, inventory, and core HR tasks such as scheduling. Essentially, ERP is a centralized application that can handle all major business functions.
ERP systems come in all shapes and sizes, with many ERP products designed for specific industries or types of business.
ERP software has a number of business applications, but essentially, ERP is used to store all of an organization's important data in one place, keeping it safe, organized, and accessible. Having an ERP means you only need one application to track all the moving parts in your organization; so that nothing is lost in some long-forgotten table. ERP provides complete insight into the when, who, why and how of the day-to-day operations of a business.
Why ERP software is used?
A clear view of your finances is essential for any successful business, so a reliable financial management module is the foundation of every ERP solution.
While an ERP system will manage all your accounting requirements, it can also help manage a wider range of financial tasks, such as budgeting, recording transactions, working with expenses, controlling assets and collections, and measuring cash flow.
A good ERP solution will also help protect financial data and ensure compliance with regulatory requirements. Security is a top concern for business software makers, especially in light of recent high-profile data breaches. Many ERP providers offer cloud-based services, which means businesses can take advantage of their service provider's advanced security features, automatic backups, and managed disaster recovery procedures.
By evaluating financial data and offering a complete picture of a company's financial health, ERP can even provide opportunities to maximize profitability. An intelligent program can analyze data and identify patterns with a thoroughness and speed that manual reporting cannot handle.
For businesses that rely on materials and production, the ability to properly manage this supply chain is vitally important. A business is only as successful as the chain in which it exists, and the need for better supply chain management is the main reason why ERP was first created.
Tracking the entire supply chain through a single, consolidated system means there is no room for error; any contact is clearly recorded and less time is spent searching for answers or searching in mailboxes.
ERP can also help keep things calm by automating tasks such as placing orders when inventory levels drop below a predetermined point.
When a business is part of a chain, not only its performance can affect profits, but also the performance of your suppliers. ERPs can help track and evaluate the efforts of both upstream and downstream links, allowing key performance indicators such as costs, error rates, and time frames to be tracked and creating a more efficient network.
ERP gives users an accurate view of the entire product life cycle in real time – from quotation to production, delivery, invoicing and collection – so businesses can control not only their supply chain, but also their day-to-day production. .
If the business manufactures or produces a product, it is necessary to keep employees informed at each stage and follow the deadlines. An ERP system can help organizations track the progress of multiple projects simultaneously, so businesses know exactly where the project is at the moment and what the next steps are.
ERP can learn from past experience. An intelligent software solution can notify its users if a project might miss a deadline or go over budget, or send a reminder when a payment is overdue, helping everyone stay on track.
ERP is about making the most efficient use of your resources, and as any successful business owner will tell you, the most important resource available to any organization is its people.
With an ERP HR module, companies can get a consolidated overview of their employees and manage core HCM functions such as time management and payroll.
Like many other elements of an ERP system, a company's HCM unit benefits enormously from the centralization and availability of its data. Managing employees through ERP means that data will be consistent and up-to-date; No more searching rolodexes and phones for an employee's number if they don't arrive on time.
Repetitive HCM tasks such as scheduling, absence tracking, and vacation management are another place where ERP automation can step in to save time. HCM modules can also ensure that businesses comply with labor laws and regulations by collecting necessary information and providing a clear overview of employment data.
Business intelligence is a key aspect of ERP software. Built-in business intelligence features in ERP solutions help track progress, measure performance, and generate detailed reports.
The centralized nature of an ERP system means that all of your business data is in one place, and when it comes to business intelligence, that means more information to analyze, giving users a complete picture of every department.
Well-designed business intelligence tools provide convenient and up-to-date information through customizable dashboards, allowing businesses to gain deeper insight into what's working and what's not. Having the right data can help a company make more informed, data-driven decisions in the future.
While in-depth sales and customer service functions are typically handled by a separate system known as CRM, many ERPs also have built-in customer relationship management functions, providing additional functionality to businesses that may not deal with customers on an ongoing basis. scale requires an additional platform.
Not content with optimizing business processes, many ERPs can automate certain tasks, helping to further increase user productivity. Whether it's creating employee schedules, invoicing, or performing data entry, ERPs can take care of many administrative tasks, freeing users from repetitive tasks.
As AI and machine learning evolve, ERPs are getting smarter. Not only can they take care of tedious business management, many ERPs also learn from the data fed into them. With access to business data from across the organization, ERP systems can analyze key information, provide actionable insights, and suggest steps to help businesses run more efficiently.
For example, while chatbots play a large role in customer service and social media, they are starting to appear in ERP environments to make it easier for users to access data. This type of AI can already be seen in platforms like Google Analytics, which allow users to ask a question – perhaps how many visits did my online store get last month – and get a simple answer in seconds, instead of spending time manually searching and collating data.
The short answer? Practically everything. According to estimates, about 88% enterprises use ERP or a similar business management system today.
In its infancy – business planning software almost as old as The Beatles – ERP was almost exclusively the domain of large manufacturing enterprises that needed a platform to manage their complex web of business processes. But today, thanks in no small part to the advent of cloud software, there is an ERP system for any type of business, at any level of affordability.
While the project management capabilities of an ERP system are highly valued by businesses that manufacture and/or distribute products, ERP is essentially a resource management platform, and every business has resources to take care of; be it its finances, its employees or its business data.
The benefits of ERP software can be divided into two main parts: ERP helps you improve the efficiency of your business now and helps you make more effective business decisions in the future.
In a world where productivity depends on it being interconnected, companies have come to understand the need to have a single center for their business information; a solution that eliminates data disparity and the constant need to transfer pieces of information between departments.
The individual success of each business sector is interconnected, so it is logical that their work process should be the same. A single nervous system for your business enables employees to share and use data more productively, and ensures that every part of your organizational machine is properly synchronized.
Transparency is the first step to improvement, and ERP sheds light on all aspects of your business. By gaining a clearer picture of your business, you can see exactly where and how you can do things more efficiently. This depth of understanding is invaluable when making sure your procedural framework is ready for further development.
When you're ready to move your business forward, it's impossible to make informed, financially sound decisions if you don't have the whole picture, and you can't get the whole picture when all your business data is buried in an assortment of legacy software and spreadsheets.
If you want to grow your business, build a knowledge base, or simply find a way to improve the workflow for your organization, ERP can be the solution.
Even if you don't think you need an ERP right now, if you have plans to grow your business, it's much easier to build the necessary infrastructure now than trying to implement an ERP when your current processes are already struggling to cope. keep up with demand. ERPs are highly scalable, so you can start small and your solution will grow with you.
However, if you already have some business software, depending on its age and functionality, there may be a way to upgrade your current solution to buy time before an ERP implementation becomes inevitable. According to Kathleen McEntee of Kathleen McEntee and Associates, some companies are losing that way.
“Companies often think they need an ERP upgrade when they don't. If they have a software system, there is always a way to make better use of the current software. Sometimes this is enough, or they extend their life from 6 months to 5 years.
However, as McEntee points out, there are some key signs that an ERP software upgrade is necessary.
"First: Software is highly customizable and cannot keep up with growth without constant customization updates.
"Second: the company is undergoing or has recently completed a merger and/or acquisition process.
"The third: the company has outgrown software. Often the current software requires additional features and starts to become a house of cards, while an upgrade will bring them in line with customer requirements and increase profits.”
Implementing business software might conjure up images of IT professionals descending on your workplace and taking over your computers, but in reality, many ERP systems are cloud-based and don't require any changes to your hardware. Just open a web browser, log in, and you'll have unlimited access to your ERP solution wherever you are.
With no need for on-premise installation and the ability to choose only the features you need, implementing ERP in your business is probably not as expensive as you might imagine.
If you really don't see an opportunity to improve your business, you may not need an ERP. However, there is a good chance that your competitors are using it, and in order to compete, businesses need to use the right tools.
No one is saying that using an ERP will make running a business a breeze, but it will help you put those spinning plates into a more stable and manageable stack.