ERP Solution for Small-Medium Business
One of the problems many small-medium businesses encounter is whether to make an IT investment decision in order to equip themselves with the necessary tools for business expansion, as well as improving efficiency and productivity.
It’s very common to see many SMB and start-ups operate their businesses by relying heavily on manual processes and spreadsheets for reporting and decision making. For businesses that are still in the early stage, those methods could prove to be effective, but when it’s time for growth and expansion - inadequate business systems and tools can actually deter growth and profitability.
When it comes to the Enterprise Resources Planning (ERP) System, many SMBs still have a misconception that an integrated ERP solution is beyond their reach and too costly for their companies to invest in.
In this article, let’s consider the reasons why SMBs should invest in adopting an ERP system and find out that implementing in an ERP system is not as costly as they think.
ERP for Small-Medium Business
Reasons Why Small-Medium Business Needs ERP
The first and most obvious sign is when your employees spend the majority of their time performing many of their tasks manually, which means the whole processes are also in manual. All of your business data scattered around in silos, with different versions, and likely to introduce risks and discrepancies.
Your business is expanding and growing quickly, with new market segments and geographies. But you have no idea which market is growing the most or contribute to the revenue growth.
Your products and/or services catalogues are growing larger, as a result, inventory levels are rising. Yet, your companies still can’t meet customer demand and manage your stock efficiently. Understocking and overstocking are happening more frequently. Furthermore, your companies need cash to finance production, so you need to maintain sufficient balance to ensure production can run smoothly.
Thus, the problem is how are you to predict the inventory level and production to closely meet market demand while still meeting financial goals?
Finally, your companies do not have an IT department, most of the time it’s either one IT helpdesk guy who supports your day-to-day IT activities and sometimes it’s entirely self-service. Digital transformation and technology are essential for businesses but you’d rather saving on the extra overheads instead of investing in technology.
Disadvantages of not implementing an ERP solution:
Clearly, if your organization currently encounters any of the above, the problem of not implementing an ERP system is obvious. For instance, do you recall that it’s actually very often that you and your co-workers have to spend hours manually searching for a key piece of documents or data file and information which should be available at your fingertips?
Imagine having a catalog of more than 5000 product items being managed on a spreadsheet by different departments?
Without a single source of data truth, your company is very likely running the risk of data discrepancy, duplication, inaccuracy and, etc. which leads to making decisions based on incorrect data, or at best delaying decisions. Relying on a system of solely using spreadsheets and emails is highly inefficient and time-consuming. More importantly, spreadsheet does not provide a reliable system of record for future audit trails.
Difficulty in Managing Costs and Profitability
If your company sells physical and tangible products of a large catalog at store, inventory management, and lead time forecasts are crucial and many times it’s a challenge to achieve - leading to less profitability. On the other hand, if your business provides services or is project-based, then in order to quickly capture business opportunities, your team needs to be able to estimate costs and provide quotes quickly - ensuring that it is competitive.
Integration and Interoperability Requirements
Out-dated and legacy systems of business applications running on desktop may seem viable for SMBs, especially if they’ve been operating with such methods for a long time. However, in the new era of digital transformation and customer-centric economy. Not achieving interoperability across channels could introduce a disadvantage to businesses, where competition and customer demand are becoming increasingly more demanding.
Managing Business Complexity
As a growing business establishment, it's very likely that your company is operating under various offices and entities and thus, you'll have to navigate through a matrix of numerous operations. Outdated systems are not capable of providing the features or integration like an ERP system.
Missing Out on Competitive AdvantageThe new economy makes it both easier and more difficult for companies to compete at the same time. Advanced technologies enable companies to operate in a more efficient way through streamlined processes. Yet, not being able to fully utilize technology can make it tougher for companies to maintain a competitive advantage.
To stay ahead of the competition requires a robust IT infrastructure and business systems with reliable data, audit trails, and optimized processes that are available across business organizations.
Legacy systems and manual processes or non-integrated applications are no longer suitable to equip businesses with the advantages where the added value an integrated ERP solution can bring to the table.
ERP Implementation should be treated as a long-term investment
ERP often gets a reputation for being expensive and only suitable for large multinationals enterprises. Furthermore, many observers seem to pay more attention to the failed ERP implementation projects instead of focusing on the long-term benefits with many rewards that companies can reap in the years to come.
The initial investment for an ERP solution can be quite a big sum, which may cause some reluctance for your business. Yet, an ERP investment decision should be treated as a long-term investment and justified by the estimated return on that investment with future discounted cash flow.
As your companies are starting to undertake the growing phases, delay in ERP implementation could further lead to your business operating inefficiently and deterring growth. Thus, The timing of the project should also be carefully considered by taking into account opportunity costs and loss due to missing out on chances of business expansion.
4 Rewards ERP Delivers to Your Small Business
Cost savings are, most of the time, the most important goal of an ERP solution implementation, especially for companies in the manufacturing industry, where inventory and production costs can be optimized and become highly visible.
Yet, any company can achieve cost savings in the area of indirect and administrative with ERP solutions. Common tasks such as processing customer invoices, matching vendor invoices and making payments on a day-to-day basis, as well as reconciliation, reporting and compliance, and month-end close can be optimized and some can be automated, freeing up employees time to focus on other core competencies activities.
Control And Efficiency
ERP solution offers an efficiency level that is otherwise hardly to achieve. Without ERP, SMBs will usually rely on manual processes and legacy systems together with stand-alone accounting software where everything is operated separately in silos. On a level which disparate business applications are not fully integrated, it can be very difficult to achieve control and efficiency as all departments would be working separately, one report might have to be passed around different staffs of different business units for amendment and corrections before finalizing. Certainly, such inefficiencies are hard to measure but definitely cannot be ignored. Making decisions on inaccurate information is a recipe for disaster.
As mentioned above, methods such as spreadsheets, manual processes, and paper documents are usually inefficient as well as leaving companies exposed to the risks of data duplications, incomplete information - overall can not offer full visibility into a business. On the hand, ERP system operates on one single source of data truth that is available in real-time, offering companies visibility into their businesses and minimizing the risks of errors and omissions.
Collaboration and Connectivity
Teamwork is important for any business and project, ERP solutions indeed provide an advantage when it comes to connectivity. With a single source of data truth, ERP solutions enable interoperability between departments and employees themselves - making collaboration more effective than ever.
Summary and Recommendations
The cost of implementing a fully integrated ERP solution is more affordable than ever, while ERP functionalities also become highly adapted for SMBs. An ERP solution that is properly assessed and implemented for your companies can provide all the necessary tools and enable cost-savings on your daily business operations.
An ERP solution will equip Small-Medium Businesses with a Competitive Advantage as well as allowing businesses to make real-time data-driven business decisions - capturing business opportunities for growth and profitability.
To find out more about ERP solutions for SMB, get in touch with our specialists today.
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