For a long time, enterprise resource planning (ERP) was mainly associated with medium-to-large companies, primarily because of the costs associated with adopting an ERP system.
Moreover, the need to integrate key business processes, such as finance, procurement, inventory management, supply chain, and sales, was traditionally associated with aggressive business growth.
However, this way of thinking is considered flawed and detrimental to any business. After all, small businesses encounter similar challenges that big companies face, such as the following:
- The pressure of competition
- Economic volatility
- Difficulty attracting and retaining new customers
- Effectively reducing expenses and maximizing profit
Other constraints small organizations face include limited access to financial resources and difficulties in finding or attracting top talent or highly qualified personnel. Besides, insisting on staying reliant on discrete systems and processes can also be detrimental to growth.
But how do you determine your need for an ERP system?
A top independent ERP advisory advises businesses to watch out for the following signs:
1. Your business is heavily dependent on spreadsheets.
It’s common for budding enterprises to use financial software, like QuickBooks and spreadsheets, to keep track of certain key business processes such as payroll, inventory, sales, expenses, etc.
With spreadsheets, you can monitor, tabulate and automate data. You could even create custom templates designed to help you manage inventory, estimate costs and update customer information for marketing purposes. However, there’s only so much you can get done with this kind of system.
Besides, relying on such systems and processes could mean duplicate data entry that’s not only vulnerable to human error but also wastes time and resources. Making key business decisions also takes longer in this scenario as you’ll probably need to collate the data you need as well as the insights and recommendations of different teams.
One other major concern with the ‘old way’ (pre-ERP) of doing things is the limited access to certain aspects of the systems you are using. You and perhaps one other key member of your small team is authorized to make changes to data and update systems.
But if you or this key member happen to be unavailable at the same time, or lack the expertise to deal with a specific aspect of your business or an unexpected problem, you could find yourself unable to make the right decisions.
As your business grows, you’ll quickly realize the limitations of these old systems and practices. By insisting on sticking to the old way of doing things, you could also be exposing your business to more risk. More importantly, you could end up hindering your ability to make critical decisions for business growth. This is why many businesses use inventory management software free that can help manage your inventory in a way spreadsheets can’t.
However, when you invest in an ERP system, you’ll find your business benefiting from streamlined operations that improve business efficiency. Making data-driven business decisions also becomes easier as you’ll have quick access to up-to-date, centralized information.
2. You want to be ISO certified.
For manufacturers, getting certified by the International Organization for Standardization (ISO) on Quality Management Systems (QMS) makes it easier to achieve their goals of reducing expenses and improving profitability while also ensuring the quality of their products.
To get ISO certified, you need to painstakingly document all your manufacturing processes – which, in itself, is a tedious, time-consuming endeavor. But with an ERP system already in place, you’ll have the infrastructure and data management you need to help you meet QMS procedures efficiently.
Once you get ISO certified, you’ll find a wealth of opportunities opening up to you. More importantly, you can continue operating your business knowing you have standardized processes that satisfy stringent quality standards.
3. Your business is growing.
Growth is a fundamental goal in business. As you scale up your operations, you’ll realize that your original three-person team can no longer cope with the volume of business.
You will need to hire more employees and get an integrated system that covers the functions of different departments. This means having a centralized database that can be updated and accessed in real time, and eliminates the need to make duplicate entries to facilitate processes and generate certain documents (e.g., sales orders, packing slips, invoices).
An ERP system can help you accomplish all this and more.
How businesses benefit from an ERP system
With an ERP system, all the core processes of running a company are integrated in a single software application. Aside from this primary advantage, ERP systems offer the following benefits:
- The visibility and accessibility of core data in an ERP system not only makes it easier to analyze information for specific purposes but also enables the discovery of process improvements. These, in turn, could lead to efficiency gains, which then translate into money and time savings.
- The transparency, accuracy and clarity of data in an ERP system provides users the information they need to make important business decisions. Examples of these include purchasing more raw materials ahead of time based on current inventory level data or more efficient month-end closing.
- An ERP system eliminates ‘technology clutter’ – which means you don’t need to depend on using disparate systems and software to support business processes. With an ERP system, you can get rid of software applications that perform duplicate functions, and invest your resources in other initiatives or projects. You’ll also get centralized IT support for your system rather than depending on various helpdesks.
- Having an ERP system makes it easier for businesses to scale by offering add-on modules that can be activated whenever the need arises. This eliminates the need for employees to adjust to an entirely new interface and reduces the time needed for training, change management and adoption.
Using ERP to support business growth
As a new or growing business, you might be initially reluctant to entertain the idea of getting an ERP system. However, you can always enlist the help of business consultants in UAE (or wherever you are located) to get the data you need to make the right decision.
With their input, you can weigh the pros and cons of adopting an ERP system for a business of your size. They can provide recommendations on how the right ERP system for your business can help improve business efficiency, increase profit and achieve your goals.
You could also refer to the information shared here to self-assess and see if getting an ERP system aligns with what you envision for your business.
About the Author
Ratheesh C. Ravindranathan is the Managing Partner at Affility, a comprehensive advisory services firm assisting clients in the UAE and worldwide with IT, risk and management consulting solutions. Being a specialist FinTech professional with over 20 years of experience, an MBA in Information Systems Management, Oracle Certified Professional (OCP) and a Certified Information Systems Auditor (CISA), Ratheesh is an expert at guiding you through your business’s digital transformation journey, Independent ERP Advisory, and Transaction Advisory for various M&As in this region.