Q: Let’s get down to the nitty-gritty. Could you please describe what ERP is, and what it does for a growing business?
A: At a high level, ERP is an acronym for enterprise resource planning. But, this doesn’t fully explain what it does.
To understand what it does, I think it’s best to start by looking at the business, and the business processes that are essential to running a business. This includes accounting, human resources, customer relationship management, order management, inventory management, procurement, supply chain, and production. There are more, but these are the big ones. ERP software integrates all these functions into one complete system.
ERP software takes it a step further by automating the business processes of a company. Therefore, it can help you to make them more efficient. If you think about it, there are typically a lot of repetitive tasks and hand-overs between departments. ERP can help you to automate these processes and streamline them – so employees can ultimately focus on higher value tasks.
In your opinion, what are some of the biggest challenges growing companies face?
First, as companies grow, they inevitably will face more complexity. They might suddenly have multiple locations or even multiple legal entities with the need for intercompany processes. They might have new sales channels, new markets, and overall the supply chain gets more complex.
Secondly, with their expanding operations, many companies have more and more applications that don’t necessarily speak to each other. They might get a CRM system here, an accounting system there, another warehouse system, and so on. They might expand internationally, buy a company, inherit from that another system. Their IT landscape then becomes even more disparate.
And third, the workforce keeps growing. As companies grow, more people get added to their workforce. That makes the sharing of vital information within individual companies more and more difficult. In the past, that worked – when an organization was centered in one location, where people knew each other, or chatted at the ‘Coffee Corner.’
But, as the workforce grows, this kind of informal information sharing becomes more difficult. This inevitably reduces visibility and transparency. It gets harder to answer vital business questions – like, what are my profitable products, am I making money with this product, am I losing money with this product, which are my profitable customers, and so on.
And, one more challenge! If companies keep adding new sites within a country, or if a business expands into new countries, the harder it becomes to have a uniform or standardized process. If this happens, these expanding companies risk losing control, and even worse, they risk non-compliance with financial and HR regulations.
In your experience, what do small and midsize businesses see as the biggest benefit of implementing ERP?
The biggest benefit, in my opinion, is the increase in visibility and transparency on the business’ operations. And this visibility is the basis for any intelligent decision-making.
Secondly, a good ERP solution automates business processes and makes companies more efficient. With SAP Business One, for example, we deliver out-of-the-box, 36 best practices. Based on SAP’s long experience in the ERP market, we realize that in certain companies and in certain industries, there are best practices you have to follow. We baked these best practices procedures into SAP Business One. They help to automate repetitive tasks, and therefore enable the end users to focus on value-adding activities such as making smart decisions – instead of doing the same task over and over again.
Finally, the third big benefit would be IT costs and security. Cloud ERP offerings are an affordable and secure solution. SAP runs them for you, and we are certified. That means we offer a secure alternative in comparison to a slew of standalone and disconnected solutions.
What are the top indicators for small and midsize businesses that they’re ready for ERP?
Businesses should probably consider an ERP solution if their answer is “yes” to the following:
- Is it getting harder to get visibility into your company?
- Is finance finding it harder to reconcile and consolidate data?
- Are there alignment issues between sales and inventory management?
The main indicator is companies become aware that they don’t have easy access to information like they used to. From a certain company-size on, it’s getting harder to share all relevant information with everybody that needs to know it. And this number certainly deviates from company to company, as well as by industry. I would say, if an organization reaches 25 employees or more, they most likely have started considering an ERP solution. Especially if these companies are not in one location anymore.
Size is definitely a topic, because if you keep adding people to your workforce, information-sharing starts getting more difficult.
Another indicator is that it takes longer, and it becomes more difficult to stay compliant with the finance regulations. Finance is the team that sits at the end of the chain. Selling, distribution, invoicing – all that happens before. And they then have to get the data together from the different accounting and sales systems. If employees waste hours per week to manually enter redundant data and spend time to consolidate and reconcile the data manually, then ERP solutions will definitely make a significant and positive impact.
One other key indicator, depending on industry, is if you have issues delivering your product as promised, thereby affecting your customer satisfaction. If companies promise their customers something, and later cannot deliver on the promise, that’s an issue. Tight alignment between order management, or sales and inventory management, is crucial for customer satisfaction.
Learn more about enterprise resource planning solutions from SAP for small and midsize businesses.