POWERFUL, FLEXIBLE, AND AFFORDABLE ERP SOLUTION

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1 POWERFUL, FLEXIBLE, AND AFFORDABLE ERP SOLUTION Let Xeo Software show you how our Hybrid ERP gives you the best of all worlds

2 INDEX What is ERP and Why Does it Matter for SMBs? The Pitfalls of Relying on Spreadsheets The Answer: ERP Software Why Do We Need ERP Software? Comparison of Company Performance Using ERP Possible Cost Savings from Implementing ERP Today s ERP is Designed for Small Business Key Takeaways

3 WHAT IS ERP AND WHY DOES IT MATTER FOR SMBS? EXECUTIVE SUMMARY Every business understands the importance of operating as efficiently as possible to drive the highest possible profit margins. They also know that consistent, standardized processes are a key factor in achieving that goal. Most larger companies have realized the value of enterprise resource planning (ERP) software in automating and streamlining business processes. However, smaller and midsize businesses (SMBs) tend to rely on disconnected software systems and spreadsheets to manage their data and processes. As a result, they are hampered in their efforts to run as efficiently as possible. This paper explores these issues and explains why SMBs need to take advantage of ERP software if they intend to grow, thrive and establish a competitive advantage. THE PITFALLS OF RELYING ON SPREADSHEETS Companies that contain costs to drive higher profits generate competitive advantage in their market. One step to achieving that goal is ensuring efficient operations through standardized business processes. The other is to use the data generated as part of these business processes to make smart business decisions. Unfortunately, too many SMBs struggle to extract the right information at the right time to make business decisions because of reliance on a patchwork of standalone tools that don t share information. These include spreadsheets, accounting systems, desktop applications, and homegrown applications (many lacking code documentation). Morever, as companies grow, they hire people and often decentralize portions of their organization. The more distributed the organization becomes, the easier it is for an organization to lose sight of its goals and what is really going on in day-to- 2

4 day operations. Reliance on multiple systems and spreadsheets further complicates matters. According to a research report by Aberdeen Group 1, businesses under $50 million in revenue typically manage their business using a combination of the following: Most businesses relying on a mish-mash of systems transfer data from these systems into spreadsheets. While many small businesses are comfortable using spreadsheets to run their business, doing so can lead to numerous issues. Here s why. Because spreadsheets are usually updated manually, it s difficult to check for errors. Any errors quickly snowball and can impact numerous calculations that serve as the basis for important decisions. There s no way to track a history of changes made in a spreadsheet. Without an audit trail, it s impossible to understand who did what and why. Spreadsheets often get shared via , making it easy for sensitive data to end up in the wrong hands and be exposed. Requiring a password to access a spreadsheet is not a very secure measure since many free and inexpensive tools can be used to crack such passwords. Over time, spreadsheets become large and unwieldy. As a result, it takes longer and longer to run calculations and the chances increase for links and formulas to break down in some manner. In addition, it becomes incredibly frustrating to generate reports to reflect new data. 3

5 All of these expose the company to multiple risks. Moreover, these challenges leave SMBs (particularly manufacturers and complex service providers) struggling to grow. That s because these shortcomings end up negatively impacting the business across multiple departments, leaving SMBs with: Inaccurate forecasts that impact manufacturing schedules and inventory levels Lack of accurate status about customer accounts Incomplete or inaccurate order tracking Underutilized or overstrained capacity Cost overruns and missed deadlines that hurt customer relationships Lack of visibility into the revenue cycle THE ANSWER: ERP SOFTWARE Fortunately, SMBs can now take advantage of software designed to address these precise issues: enterprise resource planning (ERP). An enterprise resource planning (ERP) system helps organizations track information across all departments and business functions, from accounting to human resources to sales and beyond. ERP emerged in the early 1990s as companies recognized the need to share information between operation systems, such as manufacturing resource planning (MRP) and supply chain management (SCM), and other administrative and support systems. As a result, ERP software was introduced as a broader system that integrated each of these applications. While implementing an ERP solution has been historically perceived as a significant investment, this is no longer the case. Solutions targeted to small businesses have made the benefits of ERP software available to growing businesses of all sizes. 4

6 ERP software streamlines business processes while eliminating the need for spreadsheets. As a result, businesses realize numerous benefits: Lower administrative and operational costs Improved on-time delivery Faster decision-making Higher customer satisfaction Larger pipeline of new business Better knowledge into daily operations The table below identifies some of the more common ERP modules and features and their basic function. Table MODULE FUNCTION FEATURES Accounting Manage financial transactions and provide unified reporting General ledger (GL), accounts receivable (AR), accounts payable (AP) and payroll. Business Intelligence (BI) Customer Relationship Management (CRM) Human Resources (HR) Inventory Management Analyze and report business data to improve the quality of decision making Manage interactions with prospects, customers, suppliers, channels Manage and report on workforce Manage product inventory Analytics, data mining, reporting and forecasting Sales force automation, integration with marketing automation, customer service and technical support (case management) Personnel management, employee evaluation, learning and benefits administration Work in Process (WIP), Finished Goods levels Manufacturing Supply Chain Management (SCM) Manage manufacturing forecasting and operations Manage suppliers and their shipments Bill-of-Material (BOM), Manufacturing Resource Planning (MRP), Manufacturing Requirements Scheduling (MRS) Raw materials shipments from suppliers, supplier management/performance 5

7 WHY DO WE NEED ERP SOFTWARE? Without the visibility that ERP provides, SMBs may be missing opportunities for growth. As businesses grow, ERP software helps them manage greater cash flow, track increased spending and stay organized. The stability that ERP provides helps best-in-class SMBs better prepare for growth. ERP software not only helps SMBs better serve current customers and grow business with them, but it also improves visibility of strategic partnerships. At the end of the day, a properly implemented ERP system and strategy allows SMBs to compete with larger enterprises. As the table below shows, SMBs using ERP outperform those not using it. TABLE 2: COMPARISON OF COMPANY PERFORMANCE USING ERP 2. BEST IN CLASS SMBS AVERAGE SMBS LAGGARD SMBS Days to Close 2.7 DAYS 5.2 DAYS 8.5 DAYS Days Sales Outstanding 33 DAYS 44 DAYS 67 DAYS Complete and on-time delivery 96% 88% 79% Operating Margin Growth 21% 11% 0% Inventory turns 61% IMPROVEMENT 34% IMPROVEMENT 16% IMPROVEMENT Operational costs 24% 16% 8% Administrative costs Improvement on Delivery After ERP Implementation 23% 23% IMPROVEMENT 15% 15% IMPROVEMENT 10% 9% IMPROVEMENT Inventory 18% 11% 9% 6

8 In addition to improving financial performance, ERP software can help SMBs mitigate risk: Only 45% of SMBs have visibility into business processes across functions and departments to discover adverse events and mitigate impact Only 23% of SMBs are integrating disparate desktop and enterprise applications to give managers full visibility into the business With ERP software, SMBs gain that visibility. In addition, SMBs can actually reduce costs by implementing ERP. TABLE 3: POSSIBLE COST SAVINGS FROM IMPLEMENTING ERP FINANCIAL EXAMPLE: $30MM REVENUE COMPANY 7

9 $2.1mm GENERAL & ADMINISTRATIVE (G&A) EXPENSES (7% of revenue; assuming total Sales, General & Administrative expenses of 10-11%) 20% G&A SAVINGS FROM ERP (Average of 16% for average SMBs and 24% for best-inclass) $420,000 FORECAST SAVINGS FROM ERP IMPLEMENTATION ($2.1MM * 20%) 8

10 TODAY S ERP IS DESIGNED FOR SMALL BUSINESS Though ERP software now exists for SMBs that can be implemented in as little as a few months, the key is to choose software that can be customized to suit a business specific needs. That said, it can be challenging to find the right resources whether a systems integrator or reseller that can handle this type of customization. The challenge is making sure the domain expertise is available in the geography you re operating in, says Gartner analyst Dan Miklovic. Xeo Software has developed a new model to address this challenge. Specifically, it offers SMBs a hybrid approach for customized ERP software that combines industry-specific customization with flexible delivery (i.e., hosting) and financial models that offset the upfront investment. SUMMARY: TAKE ADVANTAGE OF ERP TODAY SMBs that implement ERP realize both internal (employee-facing) and external (customer-facing) benefits to SMBs that deliver measurable financial impact. And with SaaS and hybrid ERP deployment models, even startups and small businesses can use ERP software to level the playing field with their much bigger competitors. Getting started with ERP does not require large cash outlays and complicated deployments. That s because SaaS and hybrid models allow businesses to avoid large upfront capital expenses and instead fund ERP software as an operating expense line item in the budget. 9

11 KEY TAKEAWAYS SMBs running their businesses on spreadsheets and desktop applications are exposing their organizations to risk (data security, compliance/audit, employee departure) Cost savings from improving operations can often fund an entire ERP implementation SMBs that implement ERP realize not only cost savings but improvements in financial performance related to inventory, process, on-time delivery, sales pipeline, customer satisfaction, and improved insights for decision making ERP software enables businesses to scale for growth A hybrid ERP model blends the best of custom features from software development and cost savings from SaaS SOURCE REFERENCES 01. Aberdeen Group, To ERP or Not to ERP for SMBs: What Can ERP Do for Me? Aberdeen Group, ERP in SME: Setting the Stage for Growth,

12 THANK YOU!