Enterprise Resource Planning (ERP) is a category of business management software—typically a suite of integrated applications—that an organization can use to collect, store, manage, and interpret data from many business activities. Most often ERP software includes tools for accounting, HR, CRM, sales, purchasing, inventory, project management, manufacturing and supply chain, and sometimes marketing.
ERP systems track business resources—cash, materials, production capacity—and the status of business commitments: orders, purchase orders, and payroll. The applications that make up the system share data across various departments (manufacturing, purchasing, sales, accounting, etc.) that provide the data. ERP facilitates information flow between all business functions and manages connections to outside stakeholders.
Enterprise system software is a multi-billion dollar industry; since 2011, IT investments have become one of the largest sources of corporate expenses in U.S.-based businesses. ERPs enhance business efficiency by facilitating error-free transactions and production.
There is also ERP software made for small businesses. While it seems contradictory to the “E” in “ERP”, some software companies have started adapting the ERP model to a smaller scale– and for a more affordable price.
ERP systems typically include the following characteristics:
- An integrated system
- Operates in (or near) real time
- A common database that supports all the applications
- A consistent look and feel across module
- Installation of the system with elaborate application/data integration by the Information Technology (IT) department, provided the implementation is not done in small steps
- Deployment options include: on-premises, cloud hosted, or SaaS
There are several different types of ERP softwares, namely Locally-Installed, Cloud-Based, Hybrid, and Open-Source. Locally-Installed is ERP software that is downloaded onto your computer. It’s ideal for businesses with in-house IT and who need stronger security. Cloud-Based is hosted on the cloud and can be accessed from any computer with an internet connection, making it ideal for businesses with more mobility. Hybrid is a combination of Locally-Installed and Cloud-Based. Lastly, Open-Source is locally-installed ERP software that is downloaded onto your computer and has a source code that can be edited and enhanced. This is ideal for businesses with developer experience in need of strong and personalized customizations.
Most ERP systems incorporate best practices. This means the software reflects the vendor’s interpretation of the most effective way to perform each business process. Systems vary in how conveniently the customer can modify these practices. In addition, best practices reduced risk by 71% compared to other software implementations.
Use of best practices eases compliance with requirements such as IFRS, Sarbanes-Oxley, or Basel II. They can also help comply with de facto industry standards, such as electronic funds transfer. This is because the procedure can be readily codified within the ERP software and replicated with confidence across multiple businesses that share that business requirement.
Perks of having an ERP software include:
- Increased Efficiency
- Better Communication
- Scalable Growth
- Key Business Insights
- Cost Savings
- Global Support
- Ensure Compliance
- Better Security
Signs you’re ready for an ERP software:
- Your accounting system is too complex
- You have too many spreadsheets
- You have difficulty sorting through business data
- Your software programs don’t communicate
- You’re spending too much money on multiple software programs
- You want to expand into an international business
- You can’t keep up with compliance
- You’re ready for an IPO
- You’re spending too much time on business processes
Switching over to an ERP software doesn’t cost much in the long-run, either. Your ERP will grow with your business, rather than being a source of complication when you try to expand. Having all your information in one secure database allows you to save time sifting through file cabinets in order to focus on more important things affecting your business. We highly recommend investing in ERPs if you identify even one of the signs that you’re ready for one. For more questions about saving time and money for your business, speak with a Sonder Payments consultant today.