6 Benefits of ERP for Small Businesses

ERP (Enterprise Resource Planning) is the business process management software that helps an organization (small and medium business) to use a system of integrated applications for managing business and automating several back office functions associated with human resources, services, and technology.  ERP is mainly used by large organizations considering its costs of installation and maintenance. However, it is increasingly used by small business enterprises in the contemporary era in order to streamline data that is available in several departments, make information available, take better decisions and enhance productivity.  Few of the core benefits of an ERP system can be highlighted as follows –

1. Integrate the flow of information

ERP helps small business to integrate the flow of information between the different business processes in the organization while integrating business transactions with the financial system of the company in real time. It helps to post necessary business transactions to the company’s general ledger as well as other financial systems. This allows the management to view the financial implications when it is needed.  It helps to cover the core processes that start from sales order entry, product pricing, shipping/delivery, inventory and warehouse, production, procurement, invoicing, financials and several others.

2. Enhances productivity

Key data and information of all departments are made available on a single platform at the right time and place. Hence, the need to contact employees of different departments and/or go through excels sheets to collect disintegrated date does not arise.  ERP system maintains a master date for vendors, customers, products/materials, routines and manufacturing work processes, bill of material (BOM), and other data which is critical.  This helps to maintain consistency in the work processes, saves time, and enhance productivity.

3. Maintain control & and reduce operating costs

Increase in the volume of business transactions and rigorous use of spreadsheets may lead to lack of control over the data and to the operating state of collapse. Keying data on the spreadsheets can also lead to errors, leakage of confidential information and unnecessary chaos. Small business often uses cheaper tools such as spreadsheets or simple accounting software such as QuickBooks or Peachtree, which is suitable when the company is very small with a limited volume of transactions. However, with complex business processes and increasing transactions the need for an ERP system becomes a must. With the increase in human resources/employees and growth in revenue, lack of appropriate integrated business software may have a negative impact on small business. The bottom line may be impact in the form of lost orders, inventory shortages, and poor planning, missed invoicing, missed shipments, and thereby lack of control. By streamlining data into a dedicated software application, small business owners can save money on individual software and management systems that were being paid for in each department.

4. Higher flexibility

One of the greatest advantages of ERP software in small business is agility and flexibility for adapting to market needs or the conditions that are imposed by buyers.  Dedicated ERP software provides flexibility in terms of making necessary adjustments in data management to maintain business flexibility. For example, stock adjustments, changes in sales figures, cancelation of orders etc. can be flexibly maintain in an ERP software rather than deleting data and keying information in a spreadsheet.

5. Increase sales and long term planning

In case of control via spreadsheets, the budget is released, however, it is not checked if they had the confirmation of receipt. This may lead to forgetfulness, and thereby loss of sale. Dedicated ERP software has an automated authentication mechanism to prevent this from happening. It also sends daily report of proposals so that necessary measures can be taken.  It is a long term investment, provided the system provider/vendor remains a partner for prolonged period.  ERP system helps to maintain consistency in business policies and processes throughout the organization which improves customer services and profitability.

6. Improved decision-making

Taking core business decisions requires the availability of necessary information and accurate data at the right time. In small business when such data and information are easily available and constantly updated in the ERP system, the management is able to take timely decisions that are necessary for business growth and sustenance. With the help of available data, the managers can compare sales figures and revenue of different months, forecast future sales, financial needs and take effective decisions that suit the business requirements.

Conclusion

Although the costs of installing an ERP software is much higher than maintaining data over spreadsheets, the benefits of such a software system makes it a necessary tool for small business. It helps to manage data more effectively, maintain confidentiality, carry out adjustments in a flexible manner, enhance labor productivity, increase sales and take effective decisions at the right time. Dedicated custom ERP software also helps in reducing technological obsolescence in an organization and helps in long-term business planning.