Keeping your business profitable takes continuous management of all the resources that make it up.
Letting this slip leads to inefficiency, which increases your costs and reduces revenue.
There are many ways for you to stay on top, but as your business grows, this can get more complex.
Before you know it, you’re juggling product stock, cash flow, and people challenges all at the same time, with no way of improving these areas and ensuring they work together.
Enter enterprise resource planning (ERP) software.
In this article, we’ll explore what this type of software is and how it can benefit your business no matter how big it grows.
What is ERP?
Enterprise resource planning (ERP) software lets you integrate and manage all your core business processes in real time.
That includes everything from finance and HR to supply chain and customer relationship management.
In other words, ERP acts as a central, unified hub that connects your data and lets you improve processes across many areas of operations.
Where some businesses have specialist solutions in each department (e.g. one for paying employees, one for managing stock levels, and another for storing customer details), ERP users have the advantage of keeping everything connected.
This brings many benefits, particularly to complex, medium-sized businesses that struggle to extract the full value of multiple separated solutions.
8 benefits of ERP
1. Boost efficiency and productivity
By enhancing multiple areas of your operations, ERP systems provide the opportunity to remove a large volume of manual processes with a single solution.
For example, your finance team could automate generating invoices, while your sales team automates the processing of customer orders.
Since every corner of the system is working from the same data, any process that can’t be completely automated is at least streamlined.
You can reduce mistakes, duplication of effort, and the use of outdated information.
People from every team can do more with fewer resources, in less time, and with fewer mistakes.
2. Enhance data accuracy and integrity
Having a single source of real-time data for your entire operations is perhaps the greatest strength of ERP.
This gives every department the best possible foundation for decision-making, since the information and insights they’re acting upon are always accurate and being used by other teams too.
This is essential for strategic planning and allocating resources, which often relies on teams ensuring their goals and actions are aligned with one another.
3. Improve collaboration
Speaking of alignment, the integrated nature of ERP makes it great for eliminating silos between your departments.
People can collaborate more easily, both within their teams and across functions.
The sharing of data and other resources, as well as dedicated features specifically designed for collaboration (such as those within project management modules), does the following:
Breaks down communication barriers
Facilitates smoother project execution
Keeps everyone on the same page.
4. Save costs
Being able to efficiently allocate resources and get fast access to financial insights will help you consistently find ways to save costs.
For example, your procurement team could use an ERP system to manage and compare vendors, leading them to spot more competitive prices and negotiate better deals.
This can be the case for almost every area of the business, helping you directly use ERP to boost your bottom line.
5. Delight customers
A unified view of all your customer data allows you to find ways to delight those you service.
Customer relationship management (CRM) capabilities give you more control and visibility over every customer touchpoint, from tracking interactions and learning their preferences, to receiving their feedback.
This gives you everything you need to tailor your services, offer more personalized and timely experiences, and build stronger relationships.
6. Simplify regulatory compliance
Many ERP systems have compliance features embedded into their modules.
This minimizes the effort required from your teams to ensure you’re doing everything correctly, whether that’s how you’re managing sensitive data, running your finances, or anything in between.
These features will be tailored to the region you’re working in and are often automatically kept up to date by the software vendor, which means you’ll be able to stay compliant even as rules change.
By removing so much friction from compliance, you’re not only protecting your business against potential fines and legal action, you’re also able to instill more trust in stakeholders.
7. Scalable and adaptable
Today’s world is unpredictable.
ERP systems are designed to accommodate this by allowing you to scale different areas of the software as you need to.
If your business suddenly grows, or you need to quickly shift strategies, you can adjust the parts you need to suit.
For example, you might be pushing to expand your product line and need to integrate new sales channels.
ERP can evolve as your business does, and help you adapt to unexpected external shifts without compromising efficiency.
8. Data security and confidentiality
Most ERP solutions include robust built-in security measures that are perfect for protecting data confidentiality.
From encryption and access controls to regular security audits, they ensure any sensitive information you’re handling is protected, which creates confidence in stakeholders, and enhances your reputation in the market.
ERP in action
Organizations in every sector can benefit from giving their business processes a central hub.
By linking everything together, ERP can streamline your entire operations, from the point where your customers buy products, through to manufacturing, and delivery.
Empire Candle is a great example of this. After a rapid growth period, the company brought in Sage X3 to help manage inventory and manufacturing.
This sudden expansion made determining supply to meet demand much more challenging, so an end-to-end solution to manage both efficiently was chosen.
Robert Turtledove, president and CEO of Empire Candle, says: “The right systems don’t just make IT better or technology better. They make the company better.
“That’s what you want. This is the central nervous system of the company.”
Having such control of operations has saved Empire Candle 30% of unproductive labor, with productivity increases helping the company save around $400,000 per year.
ERP implementation challenges
Leading ERP solutions are designed to be fast and easy to implement, even for complex businesses. However, there are some common challenges that can arise if you don’t take a considered approach.
Here are the hurdles you might encounter and some strategies to overcome them.
Challenge 1: Resistance to change
It can be difficult to get employees onboard with new processes and technologies, especially if you’re a long-established business and your people have being doing things the same way for a long time.
You need them to buy into the new system, otherwise it won’t be used to its full potential.
Solution 1: Conduct training
A lot of the resistance will be down to a lack of confidence or knowledge of how to use a new system.
If you conduct comprehensive training and highlight the benefits, most will see the value and start to embrace it.
Also, offer ongoing support and ensure everyone has the resources they need to keep up to date with the software and its capabilities.
Challenge 2: Data migration
To make the transition as smooth as possible, you’ll need to migrate the data from your existing solutions into the new ERP system.
This can be an intricate and lengthy process, and, if done incorrectly, can cause problems later due to data discrepancies.
Solution 2: Meticulous planning and testing
Think about how you’re going to migrate data well in advance of bringing the ERP system in.
Create a detailed plan of how you’ll extract data from each existing solution, working closely with current vendors to do this accurately.
You can also ask the ERP vendor which additional tools can be used to transfer data.
And once you have the system in place, do some data validation and testing before it goes live.
Challenge 3: Customization
Being able to customize ERP is great for helping you achieve specific business goals.
However, sometimes this introduces some system instability that you may have to compromise on.
Solution 3: Set priorities
Identify which customizations are essential, and which you could live without.
Work with the ERP vendor to understand what sacrifices each might require, and let them guide your decisions on tailoring the solution.
Challenge 4: Integration with existing systems
Even with a new ERP system, you may still be keeping some software that you’ll want it to integrate with.
This can present compatibility issues, but if you neglect integration, you’re more likely to maintain the silos that ERP is so good at eliminating.
Solution 4: Compatibility assessments
Work closely with ERP vendors to assess compatibility before committing to bringing in their solutions.
When researching your options, ask whether systems have APIs that allow integration, and work with third-party IT experts if you need to.
Challenge 5: Budget overruns
As with any large implementation project, there is always the potential for the budget to creep beyond your initial estimations.
This can be down to how the implementation is managed–both by your own team and the ERP vendor–as well as the technical complexity of the solution itself.
Solution 5: Cost analysis and planning
Before bringing an ERP system on board, conduct a thorough cost analysis and err on the conservative side.
Ensure you have contingency plans in your budget to create some room for unexpected mishaps that require more money to solve.
Take a phased approach to implementation, starting with critical functionalities that provide the most value.
To control costs internally, make sure you have a detailed implementation plan that outlines tasks, timelines, and responsible stakeholders.
Final thoughts
When implemented correctly, ERP systems can help you better manage your business operations.
Having a single, fully integrated system for all your departments will help you work more efficiently, give you faster access to insights, and reveal ways to enhance profitability.
Bringing in an ERP system also gives you the opportunity to get rid of all those under-used apps that aren’t adding much value and that may even be creating friction between your teams.
With this in mind, think of ERP as a strategic investment that could not only boost operational efficiency but also improve your internal culture by removing barriers and making life easier for your people.
