What is ERP and why should small businesses care?

What is ERP? Is it something that could benefit your business?

If you run a start-up or SME and have anything to do with IT procurement, the chances are you will hear about ERP sooner or later. But what is it? And is it something you should be finding out more about? Could it benefit your business?  

What is ERP?

First, the basics. Enterprise resource planning, according to one definition, is ‘the integrated management of core business processes, often in real-time and mediated by software and technology’. 

To translate, ERP systems are often the next step up from spreadsheet-based processes. They consolidate and automate manual data entry and migration, creating a single source of information from multiple different business processes and departments. An ERP system might, for example, consolidate information on customer management and the sales cycle, accounting and finance, corporate performance and governance, and HR management. Depending on the business’s sector, it might include data from an ecommerce system, or a production and manufacturing system.

The key point is, ERP systems turn multiple disparate data sources – many of which may not be compatible in themselves – into one. They bring clarity and simplicity, and form a clear, unified platform for a growing business to record – and seek – information.

As such, any small business with ambitious growth plans is wise to consider the introduction of an ERP system before its internal data management gets too complex. The earlier an ERP system is implemented; the simpler data management and internal information-sharing becomes. It provides a powerful platform for business growth.

But there are other benefits to consider too. Here are five key reasons why small businesses should care about ERP.

1.     Forecasting

Accurate forecasting is crucial for businesses of all sizes, but especially important for start-ups and SMEs who may wish to complete funding rounds or other calls for investment. Enterprise resource planning software provides both the data and the tools for users to make accurate forecasts, not just in terms of finance, but in terms of many different business departments.

2.     Collaboration

By creating a single, centralised source of information, ERP software fosters better information-sharing and collaboration between different departments, and within individual departments. Everyone is working from the same data, and updates and alterations are fed out to everyone. Additionally, because enterprise resource planning systems relate to a wide range of different business processes and departments, they actively encourage interdepartmental working. This can lead to new lines of communication and the flourishing of new ideas and cross-departmental processes.

3.     Efficiency

ERP systems dramatically reduce the number of manual processes that businesses need to undertake, whether in terms of data entry and extraction, unifying disparate information sources, or turning data into tangible business insights and actions. They bring vital automation to all of these processes – which in turn frees up personnel to focus on business strategy and innovation. This is good for the business, because it fosters vision and creative problem-solving, and it is also good for staff, because it eliminates tedious and mundane tasks. Win-win!

4.     Data security and compliance

Small businesses may not pay as much attention to the risk of cybercrime and failure to meet regulatory compliance frameworks as they should. Perhaps they don’t think these issues apply to them; perhaps they simply don’t have the internal resource to respond to them. An ERP system is a simple and cost-effective way of generating more robust data management and security practices, because many are automatically built in. Good ERP systems will silo and protect data according to industry best practices and offer additional data restrictions which can be tailored by manager-level users.

5.     Flexibility

The centralised information-source and working platform provided by an ERP system mean that the staff can work with the same efficiency and productivity whether they are in the office, on the move, or working from home. This enhances productivity throughout the organisation, and also enables the business to offer more flexible working practices. Another double win from ERP.