Everything You Need To Know About ERP
There is a lot of confusion around ERP systems, mostly because it is a concept that encompasses many things. In this article we present a simple and practical explanation to understand everything related to ERP.
Meaning of ERP
The meaning of the acronym ERP is “ Enterprise Resource Planning Systems” (ERP, for its acronym in English, Enterprise Resource Planning ). This, it seems, is a very sophisticated and far-fetched term that does not say much in itself.
Another way of looking at it is as business management software . This already provides some clues to its meaning. It is software , that is, it refers mainly to logical processes to display, process and store information. It focuses on business management , that is, on business processes. By extension, it can be said that an ERP is a system that integrates all areas and processes of the business in a consistent way to facilitate the management of the company.
Characteristics of an ERP
The characteristics that distinguish an ERP from any other business software are that it must be modular , flexible and consistent :
An ERP is generally divided into several modules and each one refers to an area or business process. The most common modules are: human resources, inventory, accounting, production, purchasing, sales, and distribution. This division into modules allows any company, be it small, medium or large, to implement only the modules it needs.
An ERP system must be flexible, that is, it must adjust to the specific needs of the company. Each company is unique, each one has particularities in the way they do things that distinguish them from the others, even if they are from the same category. Therefore, it is not convenient for a computer system to be rigid in its operation. An ERP must not impose that its users conform to the software but must be able to adjust to the real needs of the company.
By integrating various modules in a central database, the ERP components interact with each other, consolidating operations so that each area of the company can have information from the other areas and that changes are reflected in real time. This eliminates information silos and complex connections between disparate systems, so you have a single source to answer critical business questions.
What is an ERP for?
An ERP mainly serves to facilitate the management of information throughout the company . This translates into improved management and collaboration skills between employees and company departments and thus increase their productivity. A good ERP system helps avoid rework, saves costs and time, and streamlines the decision-making process.
Benefits of an ERP
An ERP management system may seem complex and intimidating at first, but when you understand the benefits of applying it to your business, you will understand that you cannot grow without one.
- One platform for everything
An ERP system integrates all areas of your company: sales, human resources, inventory, accounting, manufacturing, and more. Provides consistency and order in one place, consistency in workflows, communication and collaboration at all levels.
- Higher productivity
Eliminate redundant and manual data burdens, reduce errors, improve information quality, and increase process automation. All of this can be accomplished with an ERP system.
- Better data for better decisions
An ERP system provides transparency and visibility across the company. The right people can have access to each process to monitor activities and know the status of the company in real time. Business Intelligence features like reports, dashboards, and visualizations help you make more informed decisions in less time.
- Greater control and traceability
By having an integrated platform, all interactions with the ERP are recorded in such a way that it allows detailed monitoring of changes and a thorough audit. No matter how many users use the system, each operation they carry out will be recorded to have traceability and facilitate control in all operations.
- Standardized processes
In general, all modules of a quality ERP system are developed according to international best practices and well-proven business processes that facilitate the good performance of activities and even compliance with regulations and standards.
Signs you need an ERP
When is a good time to purchase an ERP? Here are some surefire signs that your business needs an ERP system.
- His business growth led to disorganization
At the beginning, it is common to develop and shape the company "on the fly", that is, as needs arise.
The management of the company in an artisanal way can work well at the beginning but is not scalable and is not sustainable when the company reaches a considerable size.
It is not necessary to be a large corporation to get there, because with the first signs of disorganization, lack of collaboration, or errors that become more and more frequent, it can take to know that the company needs to reorganize.
Annotations in notebooks or calendar reminders are no longer manageable and running the business becomes increasingly complex.
Accounting, human resources management, sales, supply chain management and other processes are collapsed because there is a strong disintegration of information.
Making decisions becomes increasingly difficult because the information is dispersed or they are in disparate systems and disconnected from each other. The need for an integrated ERP management system is evident and is the missing element for your company to achieve that potential growth .
- Excel spreadsheets are no longer enough
Most companies don't just use Excel, they abuse it . It seems like a good idea to start managing accounting and financial operations with spreadsheets, but it is very common to see how it gets out of control.
Excel has its limits and it is very easy to create chaos . If you are currently using it without much inconvenience, I assure you that sooner or later it will be a headache.
Another common mistake is that you have different systems for different processes . One system for accounting, another for human resources management, another for stock control. This can certainly be better than managing the business with Excel, however, integrating information is an extremely difficult task. Therefore, the most recommended is to use a single system for everything.
- You do not have easy access to data about your business
Having accurate information on time is key to making strategic decisions . Not having it can represent loss of business opportunities and growth of the company.
When having to make an important business decision, if you do not have a comprehensive management system, you need to combine information from different sources to collect the data and have general reports.
Surely you have already verified that this is a task that consumes a lot of time and effort, which can take hours or even days.
What is needed is an agile way to access information at any time . Have reports of financial status in real time, inventory status, dashboards to see the general status of the company at a glance.
This is basically Business Intelligence and is easily accomplished with an ERP.
- The accounting and financial management of your company is inefficient
One of the clearest signs that your company needs an ERP has its origin in the accounting area . If people create invoices, sales orders, outstanding balance tracking, all on paper or in different accounting or billing systems, you need to seriously consider how much time you are wasting on tasks where an ERP can easily handle it.
Likewise, without a general source of up-to-date data, the finance department is unable to detect inefficiencies or to plan resources correctly.
- Your level of customer service has decreased
As sales and customers increase, it becomes increasingly difficult to manage inventory and have a good quality of customer service .
When the sales department does not have real and updated information from the warehouse, many inconsistencies can be generated by offering products that are not in stock, a wrong price is budgeted or products are simply stopped offering.
This not only has a negative impact internally, but ultimately causes a bad feeling for the customer and therefore an equally bad reputation for the company .
If you want to make sure you meet the expectations of your customers, you will have to rely in large part on good supply chain management (SCM), on having good stock control that even the sales department can know about.
An ERP management system helps you with these business processes, it is designed for that (and more).
How to choose an ERP system: Factors to Consider
The many ERP options available on the market lead one to wonder: "Which ERP system to choose?" Choosing a comprehensive ERP solution can be complex and delicate, so you need to have good criteria to find the ideal solution for your business. Here we analyze what factors to take into account when choosing an ERP.
Let's start with those less obvious factors that are often minimized.
- Web System in the Cloud (or local)
That it is a web system brings the great advantage that it is compatible with any device, be it a computer, tablet or smartphone, you only need a web browser (eg Firefox, Chrome).
Furthermore, if it is " responsive " or adaptable to different screen sizes, it can be used without many problems from mobile devices.
The fact that it is an ERP system in the cloud ( cloud ERP ) brings many advantages, especially that it does not imply a large investment in IT infrastructure since this infrastructure can be rented at very low cost in the cloud.
It is true that when the internet connection is lost, the system is no longer operational. However, there are many ways to overcome this limitation. One way is to install the system on the local infrastructure of the company. Another option is an intermediate solution: install in the cloud and at the same time on the local infrastructure (known as a hybrid installation ), which combines the best of both worlds.
- It must be a customizable system
The systems "canned" usually have a lower cost but that are also very limited. The fact that a system cannot be tailored to the specific needs of the business dooms it to poor performance .
A good ERP system is unique for each company , because each company is unique. The ideal is a custom ERP system . It must have at least functions to hide / show fields in forms, customize printing formats (for example, add the company logo on the invoice), configure permissions and roles, create reports with the necessary fields, etc.
To make adjustments to the specific needs of the company, you have two options. One is to apply the settings before the system is put into production, that is, before the system is installed and used by users. Another option is to put the system into production as it is and then make adjustments as the need arises. For this, the supplier company must have this service.
- ERP Free Software
That a system is Free Software ( open source , open source ) means that it gives people the freedom to see, modify and use the software without many restrictions. This also implies that it does not require license payments to any provider .
This has the great advantage that the company is not forced to work with a specific vendor, but has the option that other software development and maintenance companies can take over the system. Even if the company has a computer, it can be responsible for maintaining the system.
- Good implementation and support service
Implementing an ERP system is a complex task. It involves not only installing the system on the servers, but above all training and accompanying users in its use and adoption.
The people are key to the success (or failure) of an ERP implementation. People may have certain skills, resistances, habits and fears that are necessary to work on so that they feel comfortable using the system and can take advantage of all its advantages.
For any system and any environment, you will always need a support service and technical assistance . To troubleshoot critical problems, to teach operation, to perform advanced configurations, or simply to assure the user that they are performing their operations well. This cannot be missed.
- Flexible pricing
The large systems involving a large initial investment options are not the only nor the best. Today you can have a complete ERP system with a low initial investment and add improvements to the extent of your possibilities.
There are systems that charge for modules and / or users . You can start, for example, with the accounting, purchasing and sales modules and then add control of stock or manufacturing (depending on the area of your company).
ERP Software vs Accounting Software
Many people think that ERP is the same as accounting software. Although they have certain similarities, their differences are considerable. In this article we will clarify these fuzzy terms to make the differences palpable.
Main differences between ERP and accounting software
An accounting software has the function of managing the accounting tasks of a company. Among its functions can be named: management of accounting books, accounts, vouchers, obligations, reports, etc. It can be said that accounting is the heart of a company's knowledge and therefore accounting software is vital for the entire organization to operate healthily.
However, ERP software goes further . It includes all the functions that an accounting software has and adds several modules to manage all the other processes and operations of a company. ERP software can manage human resources, fixed assets, manufacturing processes, inventory, warehouses, projects and, obviously, accounting. It is a more complete vision that integrates all areas of the company.
In short, ERP software is accounting software and more than that .
"So what software do I need?"
Clearly, accounting software is extremely useful for a company. Manual accounting (in physical books) is a much slower and error-prone process than accounting software that is responsible for streamlining the entire process and even automating certain operations. With software the data is more precise, consistent and constantly available so that it is possible to know the financial status of the company at any time.
However, not all companies have accounting as an essential process . Many companies, especially small ones, focus their operations in other areas. For example, a distribution company focuses its operations on inventory, purchases and suppliers, sales and deliveries. In this case, an accounting program is not essential, but the fundamental thing is to agilely manage these main operations.
An ERP system allows you to manage all the central operations of the company . Even with its modular design, it is possible to first implement the central modules (such as inventory management, purchases and sales, etc.) and then, when the use of the ERP system is well established, implement the other more complementary modules (such as accounting , human resources management, etc).
In other words, accounting software may not be what you need . If it is not an accounting firm, whose central operation is accounting, an accounting system is not enough. An ERP system goes beyond accounting by integrating other areas, and even allows you to start with the modules that manage your most central operations.
"I use accounting software, can I switch to an ERP?"
In case you use accounting software, you can migrate to an ERP system. The functionalities of an accounting software are already covered by an ERP, so you do not have to worry about whether you will be able to do the same operations that you have already been doing.
There are several strategies to migrate data from accounting software to ERP.
Why SMEs need an ERP
The popular belief is that ERP systems are only for large companies, that small and medium-sized companies don't need such a solution. This belief has no foundation at all, here we will see why.
The myths surrounding ERP systems
If you have a small or medium-sized company, you have surely thought that an ERP management system goes beyond your possibilities and needs.
Here we will see that this prejudice (that ERP systems are only for large companies) is sustained by several other prejudices.
- "ERP systems are very expensive"
Traditionally ERP systems are seen as very complex systems that require a large investment to implement.
This may have been true a few decades ago where the main suppliers were large companies that did require high costs. These systems, like SAP, can cost as little as $ 35,000 .
However, this has been changing for some years. Other more accessible solutions are already established in the market , such as ERP systems in the cloud that reduce costs considerably.
There are also free options (open source, free software) that do not require license payments to any provider and give companies the possibility to adjust the system to their specific needs.
- "ERPs are difficult to use"
ERP systems are seen as difficult to use systems that require a lot of learning time.
Traditional ERP systems are so extensive that much of the functionality is not used, which makes it difficult to use.
How many times have you used systems that have so many functions that you don't know what most of them are for?
Much better would be to handle simpler systems that have all the daily functions at hand and it is easy to find the less usual ones.
A modern ERP management system is user-focused . It does not strive to include all possible functionalities for all types of business, but rather seeks to be simple and at the same time complete, being flexible to adjust the functionalities to only those that are necessary and useful.
A friendly and elegant interface, that adjusts to different screen sizes, that does not overwhelm with so many options, with a good combination of colors and good navigability.
Those are the characteristics that the user is looking for. The easier the system is to use, the more satisfied and at ease the user feels, increasing their productivity and reducing their error rate .
In short, the more modern the system, the easier to use .
- "ERPs do not suit my needs"
ERP systems are seen as "canned" systems that do not fit the needs of the business but instead force the business to conform to them.
These canned systems are not a good option.
The healthiest option is to opt for ERP management systems that are flexible, that is, that can be adjusted to the needs of the company. This includes:
- Enable or disable specific functions
- Develop new features
- Modify the forms to request the specific data that are necessary
- Create custom reports
- Design custom print formats (for invoices, estimates, etc.)
If a system does not allow these operations to be carried out, then it is not flexible and therefore does not fit what you need. Flexibility is the key.
Beyond billing and accounting systems
Many SMEs, especially in the commercial sector, use billing systems to record their sales, manage products and print invoices.
Some billing systems even have the option to manage inventory, supplier purchases, and display some reports.
However, many of these systems, advanced as they may be, are specialized and often limited systems. For example, when managing inventory, they do not take into account multiple warehouses or batch or serial number systems.
These systems can be useful for small companies with limited needs, but they cease to be so in the medium term when the requirements increase and it is necessary to include modules to handle accounting, human resources, projects, manufacturing, advanced buying and selling functions and more.
It is also common for small and medium-sized businesses to use accounting systems, but as we have already seen, these systems are not good options .
In these cases, a common mistake is to use other specialized systems to manage these areas, which makes integration increasingly difficult and inconsistencies become frequent.
In the medium and long term, you may realize that you need to go beyond a billing system, towards a more comprehensive solution, towards an ERP solution.
Reasons why SMEs need ERP
All companies, whether small, medium or large have several processes. These processes make up an organic whole that constitutes the company itself.
The efficient management of a company depends on the integration of its processes. That is why a system that assists in this comprehensive management is necessary.
So an SME needs ERP in the same way that it needs good management.
Good software should be easy to use, flexible to fit your needs, and should follow a scheme that does not involve cost overruns .
We have seen the main aspects related to ERP systems.
In conclusion we can say that implementing an ERP system in your company is a giant leap in the evolution of your company. There is definitely a before and after.
However, several factors need to be considered before choosing an ERP system. You need to know what type of system is most appropriate for your business and what specific needs you want to solve.
There are many types of management systems, but ERP systems are general and cover all areas of your company. In other words, an ERP can help manage everything. If you want to Buy ERP and Software Visit links give below.