Why Should Small and Mid Sized Business Use ERP?

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1 Why Should Small and Mid Sized Business Use ERP? There is no doubt that every small and medium business will acquire an asset for marketing or the production floor that will help the business to grow and make more money. Only a few will invest in business software that will help in overall process efficiency. A good number of owners of small and medium enterprises prefer managing their inventories, accounts and invoice with spreadsheets and other off the shelf business software. They think that ERP software is only good for large companies that have complex tasks to carry out. The truth is that ERP is invaluable for the small and Medium Sized Enterprise (SMEs). Contrary to the thinking of many owners of small and midsized businesses, ERP is not all that expensive. This ebook reviews the importance of ERP for the SMEs. What is ERP? ERP which is an acronym for Enterprise Resource Planning refers to a wide range of software applications designed for the day-to-day running of a business and effective decision-making. It is an integrated business management software made for storage and management of data in all phases of business operations such as product planning, production, marketing, and distribution of products, management of inventory, shipping, payment and customer relationship management. ERP automates these business operations thereby increasing efficiency, reducing production cycles, inventory and increasing accuracy of demands for materials management. The use of this software makes business operations easy and helps a business to grow. One of the popular providers of fact-based research, Aberdeen Group has issued a report titled ERP in SME: Fueling Growth and Profits. According to the report, ERP plays a crucial role in the development of small and mid-sized business. The report demonstrates that SMEs using ERP software applications are able to profit from their growth strategies. Indeed, experience has shown that there is a remarkable performance gap between SMEs using the software and those that are not using it. Your decision to use ERP to execute your business operation is indeed a major milestone that will bring significant benefits to your business. Here are some of the reasons why you should consider using ERP software.

2 Easy execution of business operations Most SME run a lean operation with minimal staff. All their business operations are managed by the few employees they have. They may not able to achieve a lot despite putting in a lot of effort. ERP provides the staff with increased automation so instead of doing things for a system they are able to make decisions with the information they see from the system thereby transforming the capability of the SME. Quick reaction to critical business issues ERP will help give a quick or immediate response to critical business issues. This is because the software provides dashboards to review the status of various parts of the business and where decisions are required thereby making the business more resilient, agile and competitive. Responding quickly to critical business issues will enable the SME to be proactive and remain competitive in the market. As a business owner, the implementation of ERP will also help you be more nimble to redirect resources quickly and easily when there is new opportunity. Define and measure business processes One of the reasons why you should consider using ERP system for the running of your business is that it will help you to easily define your business processes and measure against it. Most businesses are able to define the business processes but not measure their compliance to that process. A reasonable number of SME are not able to articulate or define clearly what their business process is. Using ERP you will be able to define your business process and measure your compliance to that process. Better productivity and Reduce Error ERP brings automation in your business operation. Automating your business processes using ERP system will simplify and reduce the number of daily operational steps that need to be executed. Few minutes per operational step are enough for you to complete a business operation which will ordinarily take you hours to complete if you were to do them manually. Thus, using ERP not just saves your time but also gives you the opportunity to focus on relatively more productive areas of business.

3 In addition, automating your business process using ERP system will help reducing errors in your business operation and taking care of certain mundane tasks such as data entry or balancing of data. Simplified Integration with no information barriers Imagine looking at one dashboard and getting an overview of your entire business processes! Business operations involve disparate processes which you must integrate for quick decision-making. Integration of business operations can be very challenging when it is done manually. ERP system integrates all business processes effortlessly which in turn, will save time and facilitate decision making. Adoption of ERP will help you to avoid error, duplication, discontinuity and ensures coherence that can promise improved business performance. It gives full efficiency and visibility across the supply chain. Improve the quality of your report and performance analysis If you are a business that is aware of the importance of Reports and Performance Analysis, you will appreciate having an ERP. Small and mid-sized businesses also issue financial and shareholders/owners reports. It is imperative to have an ERP, in order to know if the business is on track my measuring and keeping track of your smart numbers such as Order to Ship time, DSO etc. Using ERP will make it possible for you to issue more accurate and quality reports to make strategic and operational decisions. Since ERP facilitates the automation of business processes, your reports will use good data that tie into each other so your reports will not contain any erroneous figures. Having a perfect operational and financial report will make it possible for you to analyze the performance of your business. Ensures consistency ERP contains important information for vendors, customers and products (also known as materials or items), assets, routing, manufacturing work processes, bill of materials and others. The software will make it easy for you to maintain these pieces of information which

4 will in turn help you to be consistent in your business operations. It will also help your employees to use the same set of data in working effectively. Quicker decision making ERP system will help SME s owners take informed decisions. This is because all data required by the management to take decision on any business process is readily available and visible across the organization. With ERP there is transparency and clarity of statistical data. Statistical data is devoid of any form of obscurity. Given this, management can make an informed decision or evaluate any aspect of the business. Protection of sensitive data ERP system is capable of managing security of information for the right users. This will give strong protection to your business sensitive data especially your financial information. Another advantage of deploying an ERP system includes data being visible to those who are permitted by the administrator. Not every employee in the company is required to have access to all kinds of information. Delicate information that is to be shared only amongst the higher authorities can also be set in an ERP as per business requirements. Besides, the consolidation of various security systems will eliminate the need to synchronize changes among various systems. Increase opportunity for collaboration ERP provides increased collaboration opportunities for your business. There are different forms of data in the contemporary business world. Data can be available in files, documents, audio, forms, s, audio and video. With ERP system, your employees will no longer spend time mastering the curve of communicating in different arrangements across the distributed systems. Instead, they will spend more time on the collaboration of the content and quality of data. Easy Accounting task The accounting department of your business will particularly benefit from ERP system. In your business all the documents that affect financials like sales orders, purchase orders, receipts etc. will already be entered in your financials. Thus the accounting team can take

5 more time to review variances and help increase the bottom line and perform audit functions rather than perform data entry and validation of such data. Enhancement of sales and customer experience Another reason why your business should consider using ERP software is that it improves sales and customers experience by making customer communication centralized and visible for more effective value addition. Managing sales, inventory and customers separately will create serious challenges for your business. It will be difficult for you to discover when your business is running out of a particular product. You may not be able to give an immediate reply to your customer s inquiry. Back Orders and Scarcity of inventory resulting from poor inventory management can suffocate your business leading to poor customer experience. Signs that your business requires ERP Having examined ERP and why you should use it in your business, it is pertinent to discuss signs that indicate that your business requires ERP. Are you using different software applications for different business operations? Do you have inadequate business tools which do not have any impact on reducing your operational costs? Do you find it difficult to obtain information about your business or any aspect of your business? Does it take too long for your accounting department to prepare account and financial report of your business? Is your customer experience suffering? The answer to the above questions indicate whether or not your business requires ERP. If the answer to any of the above questions is yes, it simply means that your business can benefit from an ERP. Conclusion

6 It is evident that ERP software fosters effective management. Time has gone when ERP system is only meant for large corporations. Small and mid-sized business should leverage then too. Given the improvement in information technology and software development, there are various ERP systems in the market. You will surely find an affordable one with a team that can implement it well for your business.