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7 Beginner questions about ERP answered

7 Beginner Questions About ERP Answered

If you’re not really sure what ERP means or why it matters, this post is for you.

There’s a lot of jargon, acronyms and initialisms in the business world: it’s easy to lose track. Maybe you’ve heard the term ERP used in relation to managing a business and wondered, ‘what exactly is an ERP?’.

For people new to the concept, we answer seven of the most common questions about ERP to save you time searching the web:

 

1. What does ERP stand for?

ERP stands for Enterprise Resource Planning.

Enterprise Resource Planning refers to a process of organising and managing all the resources and activities that help a business function, through an integrated system. You’ll almost always hear the term ERP in the same breath as ‘system’, ‘software’ or ‘solution’, because Enterprise Resource Planning is achieved through the application of software and associated technologies.  

 

2. What is the purpose of ERP systems?

ERP systems exist to bring daily workflows, tasks and data from various business functions together into a coherent whole. The software helps to link and standardise processes and makes information available across all parts of a business, to inform related activities and allow for high-level consolidation, analysis and reporting.

In business, there’s a lot of emphasis on setting a strategy so that you can make plans with a clear end point in mind. This idea recognises that although you may have different people working on different tasks in different parts of an organisation, collectively you’re working towards a common goal.

But how do you coordinate the practical, day-to-day flow of tasks, materials, information and procedures involved, especially when your business has grown in size and scope—or operates across multiple business entities, several stages of a supply chain, numerous branches and warehouses, or multiple countries?

Traditionally, different departments or business functions create and use their own systems, and store their own information separately—whether that’s on paper, in spreadsheets, or bespoke software. But this ignores the fact that each part of a business is dependent on the others in order for an entire enterprise to operate well.

That’s especially true when complex structures or processes are involved. As your business gets bigger or more complicated, it gets harder to gain a complete picture of how each aspect of the operation contributes to overall performance, and to communicate effectively across teams.  

That’s the reason that ERP solutions were created. In the very early days, ERP systems were mostly used by large manufacturers looking to coordinate and plan the required resources for each stage of production. Now they are used by businesses in all kinds of industries that want a more unified approach to managing their core business functions.

[FEATURE ARTICLE – A Brief history of the ERP]

 

3. What does an ERP system do & how does it work?

An ERP solution is sophisticated software that, when successfully implemented, should make it easier to manage workflows, collect and share information, and make insight-driven decisions.

You have a choice of how to deploy and implement your ERP system, whether that’s on-premise, in the cloud, or via a hosted, private cloud. Modern ERP systems make it simple to adopt a cloud-first, SaaS subscription model where your business pays by-the-month and benefits from real-time data, true mobility, data security without the hassle of maintaining a server, and automated updates to ensure your software is always current.

ERP systems are not the kind of software where you can sign-up and start using it straight away. They need to be configured for your specific business requirements and reporting needs. While you may choose software from a particular vendor, many businesses work with a re-seller or implementation partner (like Leverage Technologies, a highly-awarded and experienced partner working with vendors including MYOB, Sage, and SAP) to guide them through the implementation and make custom modifications.  

Typically ERP systems use one database to store and share information across the whole business. Most systems are modular, with a variety of different modules that cater to different business functions or activities, such as accounting and finance, inventory management, customer management, production, business intelligence, and HR. Modules are designed to work seamlessly together. Add-ons and complementary applications can be integrated where necessary.

Employees can be given access to some or all modules or specific functionality, with different permission based on their role and responsibilities.

In addition, newer ERP systems apply technologies including AI and machine learning to automate processes and eliminate some repetitive, manual tasks, as well as analyse data to help you forecast and plan with greater precision.

The interconnected nature of an ERP means that information about a customer is available across the business as a person moves through their buyer journey: from adding them into the system as a lead, the progress of their order, through to managing returns and warranties, and reporting on aggregated sales and profits at the regional or national level. Similarly, every stage in the life cycle of creating and delivering a product can be seen, tracked and analysed to improve your purchasing, quality assurance, cost management or supply chain efficiency.

 

4. What’s the difference between an ERP and a CRM or Accounting software?

A Customer Relationship Management (CRM) system focuses solely on that specific aspect of your business—managing your sales funnel, customer journey and marketing efforts. An accounting program helps you balance the books, manage payroll and invoices and some reporting.

Both systems are useful in their own right, but are designed to manage isolated aspects of your business. On the other hand, an ERP system can include both of these areas of functionality (and much more) and ensure that information can be easily shared between them.

Once a customer is created within an ERP system, all of your interactions, orders, balances and dealings with that individual or organisation is linked across every part of your system. For instance, when someone in the sales team adds a customer’s details and includes attributes like their location, that information will flow through and allow your CFO to generate accurate reports by sales region that help the business analyse profitability.

Accounting and finance functionality is usually a fundamental inclusion in an ERP solution, because data from across the business is required for your business to create accurate, consolidated financial reports, and to gain clarity about overall costs, margins, and the performance of different teams, processes and product lines.

 

5. What are the benefits of an ERP?

High-level visibility and the ability to manage processes across your whole enterprise are the key benefits of an ERP system.

Greater visibility of what is happening allows you to identify bottlenecks, cost blowouts, and inefficiencies—plus it gives you a better vantage point to see opportunities to grow, enter new markets or develop new products and services.

An ERP system can help you answer questions like: Who are my best customers? Where am I losing money on dead stock? What product lines are most profitable?

Integrated systems and data means there’s less room for error, smoother workflows, and less effort required to aggregate information so reporting becomes faster—with instant access to a lot of key data via intuitive dashboards.

 

6. Do I need an ERP?

The top three misconceptions about ERP systems is that they’re only for large businesses, or only for manufacturers and that they are too expensive. We break down these myths in detail in a previous post.

The fact is, your need for an ERP will be driven by the problems your business is currently experiencing in terms of information silos or inaccurate record-keeping, poor productivity due to manual processes, lack of coordination across your supply chain, and lack of consolidated financial reporting.

For many businesses on a growth trajectory, the cost of not implementing an ERP is the real concern because their current disparate systems are holding them back. Are you displaying any of the seven ERP readiness signs?

These problems can impact small to medium businesses just as badly as large businesses. The return on investment when your business is firing on all cylinders can more than justify the expense of a modern ERP system (particularly given that you can pay monthly using operational budget).

Implementing an ERP solution does require time, a significant investment, and project management muscle within your organisation. Learn more about what you should consider and the kinds of questions we ask new clients to determine their readiness.

If you think you do need an ERP solution, take your time and choose wisely.

[LEARN MORE – Your 2019 ERP software selection guide]  

 

7. How much does an ERP cost?

The cost will vary depending on the software you choose, the functionality you want, how you deploy the software, your configuration needs, number of users, and other factors unique to your business.

We’ve created an indicative reference price chart that you can use to scope the size of your ERP project and allocate a tentative budget based on the size of your organization (employees and turnover).

 

A few bonus answers about ERP!

Another query many people have is who uses ERP? What kinds of companies and what kinds of software? Here’s a few case studies of real businesses that use ERP systems that you might find helpful:

Still have more questions about why an ERP system is important, its main characteristics or functional areas? Our expert team would be happy to help: call 1300 045 046 or email [email protected].

ERP Misconceptions and myths businesses want to believe

Top 3 ERP Misconceptions & Myths Businesses Want To Believe

In this article, we are going to review some of the common ERP misconceptions that often come up during our consulting sessions. If you are going through an ERP selection/evaluation process for your business, we hope that this article will help you shed some light on what ERP is, what it’s not and what your options are.

After having implemented Enterprise Resource Planning software for more than a decade, we have come across a number of situations where the perception about these solutions is far from the reality.

  1. Enterprise Resource Planning is only for large businesses
  2. ERP is only for manufacturing companies
  3. ERP is too expensive

Here is our view on why Enterprise Resource Planning software is misinterpreted in these instances, backed by real-world scenarios and articles that we have written in the past.

 

#1 ERP is only for large organisations

The top misconception about Enterprise Resource Planning is that only large organisations have the necessity for ERP solutions.

Our answer is that you don’t have to be big, but you need to have a growth mindset and the ambition to scale your organisation. In fact, ERP software gives you the ability to streamline your operations and increase productivity, no matter what the size of your business!

From Finance to Inventory, Manufacturing, Reporting and more. ERP gives you a “single source of truth” that is used across all the areas of your business to consolidate disparate systems and eliminate manual processes.

Although large organisations have a major appetite for ERP software solutions, small and midsize businesses can also go to market for a new ERP to step up their capabilities.

From our experience, businesses that are turning over $2M+ and are still using a basic accounting package, typically start seeing the “ERP readiness signals” that lead to the implementation of a new system.

 

#2 ERP is only for manufacturing companies

Manufacturing businesses have without a doubt a large degree of interest in adopting Enterprise Resource Planning solutions. It is no secret that industries such as food & beverage but also discrete manufacturing see ERP has key to success.

However, a common misconception is that unless your business has a manufacturing component to it, ERP has no reason to be adopted.

From our experience, this is certainly far from the truth as our 250+ ERP customers span across virtually every industry! From Wholesale Distribution to Professional Services, Construction, Healthcare and many more, we have seen ERP software work beautifully in a range of different situations.

To further disrupt this common ERP misconception, check the following case studies:

 

#3 ERP is too expensive

Budgeting for an ERP software is not an easy task and requires involvement from multiple parties. The good news is that there are multiple price points to choose from according to your business size, budget availability and desired outcomes.

“ERP is expensive” – Our response to this common ERP misconception is:

  1. There are multiple tiers of ERP software solutions to accommodate the needs of businesses of multiple sizes. If you are a growing small business, look for “entry-level”, Tier 3 ERP software solutions to start with.
  2. ERP shouldn’t be looked at merely as an expensive exercise! In fact, ERP systems are often implemented when your actual internal systems are limiting your business. By removing the limitations of your current system, you open up to a new way of moving your business forward to better operations, enhanced capabilities and growth. For more information, read our recent article about “the cost of not implementing an ERP solution”.
  3. Modern technologies have transformed the way you use and pay for an ERP software. Long gone are the days of costly, ERP implementations. The advent of Cloud Computing technologies means that your ERP software is now delivered to your organisation “as a service” and the CapEx model is being disrupted by an OpEx alternative. The result? Learn all about Cloud-based ERP and what it means for your business in this article.

 

Conclusion

If you look at the common ERP misconceptions, it is clear how most companies might be missing out on a true opportunity for growth.

If you still think that ERP is only for large organisations or enterprises, likely in the manufacturing industry, that have access to massive implementation budgets, think again!

Today’s ERP is Cloud-based, adaptable and scalable, which means that any organisation with a growth mindset can step up to a whole new way of running their business.

 

Choosing ERP for Small and Medium Business

How To Choose The Best ERP Solution: A Guide For Small To Medium Sized Business

There is no quick, easy answer to the question “which is the best ERP software solution for my business?”

There are multiple different Enterprise Resource Planning (ERP) and Business Management Solutions (BMS) to choose from in the Australian SME market.

Rather than focusing on which is the best solution, in this article we will focus on the best process to ensure that your business implements the right ERP solution.

 

When it comes to ERP, every business is different

The first thing to understand is that when it comes to ERP software solutions, every business is slightly different. Even if your functional requirements are similar to another business, there are other influencing factors when it comes to choosing an ERP solution:

Each of these factors and a number of other elements can influence which ERP solution is best for your business.

 

How functional requirements influence your ERP choice

Choosing an ERP solution that is well suited to your functional requirements is what the decision is all about. Aim for a solution that has the standard, out of the box functionalities that you are looking for.

List your core functional requirements and short-list ERP solutions that have a close functional fit to those requirements. Start at a high level then drill down to more detail as your investigation into ERP continues.

As an example, you might list your major requirements as follows:

  • Multi-company, multi-country with consolidation;
  • Inventory control across multiple warehouses;
    • Bar-code scanning / paperless warehouse;
  • Simple manufacturing;
    • Works order;
    • Bill of materials;
    • Basic MRP / planning;
  • Service and repairs;
    • Management of the repairs and returns process;

Start with a high-level list of requirements (usually a one-page document). Align this to the vendors that believe that they are well suited to your functional requirements and budget.  The ERP vendor will need to align the budget with expectations.

 

Keep it simple

Don’t over-complicate things. If your business does not require complex manufacturing or complicated supply chain management then, don’t buy it or try and implement it. Take baby steps, grow into your ERP solution and keep it simple – automated, but not over-complicated.

 

Cloud vs on-premise

Choose Cloud vs on-premise based on your company’s specific situation and requirements.

It is true that in 2018, about 90% of enquiries that the team at Leverage Technologies received are for Cloud-based ERP solutions. But, this does not mean that Cloud is the only way to go. Assess your company’s requirements and infrastructure before making a decision:

  • Internet reliability and speed;
  • Five-year cost structure review;
  • Remote access;
  • Growth plans;
  • Standard ERP vs bespoke (how “standard” are your requirements?).

 

Technology is becoming increasingly important

In an ever-changing world where technology is moving at a more rapid pace than ever before do not ignore the benefits that you might be missing out on.

Think about some of the advantages of a technically advanced, modern ERP application:

  • Cloud – More computing power available than ever before for a simple monthly fee. Pay as you go and add more computing power as you need it;
  • Mobility – We can’t be competitive in today’s world unless you offer true mobility apps, web client access and the ability to get the information that we want, when and where we want it;
  • E-commerce – Easy, integrated and available 24 x 7;
  • EDI – Integration for order taking and a whole lot more. Integrated into the Australian major retailers and extended (in some form) through your supply chain. Make it easy to manage orders and the delivery process;
  • AP Automation – Automate your AP process and approvals using OCR technology;
  • Internet of Things (IoT) – The connectivity of multiple devices across the internet to share data. Think of the multiple internet connected devices that we use daily and now, consider all of that data being shared. How can this data help us to make better-informed decisions with regards to customers, marketing, suppliers and team members to help us run a better business?
  • Artificial Intelligence (AI) – It’s coming to ERP. With massive data volumes being collected from multiple different sources, Artificial Intelligence will help us sort through data to pick trends and help make better decisions from machine learning.

 

Partnership matters

Choose your ERP software and Cloud solution carefully but choose your ERP implementation partner even more carefully! Your ERP implementation partner will take responsibility for transforming an off the shelf ERP solution into a tightly integrated solution for your business. Choose a partner that has previous experience in your industry and is a good cultural fit for your business.

Specifically look at your ERP providers:

  • Previous experience in similar industries with similar size organisations;
  • Support options;
  • Implementation methodology and process;
  • Team size, experience and how long team members have been with the organisation;

 

Take a medium to long-term view

This is surprisingly difficult to manage. If you take a view which is too “short-term” you risk having to re-implement a new ERP solution again in 3-5 years to cater for your growing business and the associated requirements.

Take a view which is too “long-term” and you risk over-complicating your implementation and choice of ERP as you try an implement functionality that you don’t yet need.

Balance these requirements for the best chance at success.

 

Conclusion

“Which is the best ERP software solution for my business?” Follow the steps in this article to narrow down your research and make sure that you focus on the right success factors.

There are a number of outstanding ERP providers and resellers in the Australian market and there is an ever-growing amount of competition for Cloud-based ERP. The winner is you, the customer!

As technology continues to advance at a more rapid rate than ever before and as the world of ERP solutions demands more value for money you will be able to choose from several competing solutions to choose the best ERP offering for your SME business.