How do you know that your business needs Enterprise Resource Planning (ERP) software? It’s not like knowing that you need a new refrigerator when milk starts going bad the day you bought it. The signs pointing to ERP-need aren’t that obvious, unless you know what to look for. Then, it can become really clear that you are in need of an ERP solution. Here are seven such signs.
Briefly, what is ERP?
ERP is a category of business management software. An ERP solution provides an integrated suite of applications that manage business processes. Together, these apps help manage operations and track business resources like cash and raw materials while enabling efficient supply chain management. ERP suites generally offer a complete accounting and financial management program. ERP suites often contain customer relationship Management (CRM) tools along with data analytics and visualization/reporting capabilities.
Learn more in What is ERP software?
7 ways to know that you need ERP
Chances are, if you’re diligent about your business, it runs pretty well even without ERP software. Indeed, a lot of profitable concerns work fine with the most minimal Information Technology (IT) inputs. However, every business could run better and be more profitable. With that in mind, consider the following signs that ERP could improve your operations as well as your bottom line:
- You rely on manual handoffs between accounting and operations – Does your staff have to use email or paper to transmit information from operations to accounting? For example, when a supplier delivers materials, does the accounting department have to input the order information into the accounts payable system by copying it off a carbonless form? An ERP system integrates accounting and operations management software, getting you out of this manual work.
- You’re using spreadsheets to analyze your corporate data—reports about sales growth, order statuses and so forth are produced on Excel. ERP has rich data analysis tools that work in real time.
- You’re adding too much staff as you grow—This is a sign that your knowledge worker productivity is lagging. Ideally, the staff headcount in accounting and operations management should increase at a lower rate than revenue growth. ERP enables greater productivity through automated workflows and process orchestration between systems.
- You don’t know what’s happening soon enough—You’re hearing about problems in the business well after they have occurred. For example, you find out that a vendor delivered a defective batch of raw materials a week earlier, but you already paid the invoice for that shipment. ERP systems can alert you about issues occurring in your business.
- You’ve got excess inventory on hand—Inventory ties up cash. If you have more raw materials, work in progress (WIP) or finished goods inventories that you want, it’s a sign that you lack the means to measure and track inventory effectively. ERP provides real time reporting on inventory and the ability to set quantity or dollar limits, with alerts for situations where the limits are exceeded.
- Your cash cycle is lengthening—It seems like it’s taking longer to collect from your accounts, while your payables are growing. You’re perpetually short of cash, which wasn’t a problem before. ERP systems give you greater real time visibility into payables, orders and receivables, enabling you to get ahead of cash shortfalls before they manifest as problems.
- Your customer satisfaction is falling—Late deliveries, errors in orders and so forth are driving your customers away. Yet, you’re not aware of it until it’s too late. An ERP system addresses this problem in two ways. First, better order management and oversight of delivery and service helps you avoid customer issues. You’ll get alerted when there’s a problem. Second, an integrated CRM system lets you engage more deeply with customers and enjoy more positive, growth-oriented relationships.
If you are experiencing any of these telltale signs of ERP need, you may want to talk to us. We have extensive experience evaluating a company’s requirements for ERP and then implementing the right ERP solution.