Why large companies can’t operate without the ERP system and how small businesses can grow with resource planning software? Until recently, ERP software has been a privilege to big enterprises only. It was costly, inflexible and deployed on premises. Today, they are moving to cloud-based systems in great numbers, and smaller companies also start using this business applications.
General benefits of ERP software are known: increased productivity, streamlined data flow, better team collaboration, reduced operating costs, better business insights, improved decision-making. ERP for small businesses (SMBs) and entrepreneurs (SMEs) means the possibility to get rid of dozens of spreadsheets, that usually gather on top of each other. The trouble with this comes when SMBs experience growth and still try to operate on the same level avoiding the urge to change. The larger a small business grows, the harder it gets to maintain all the workflows. With a proper ERP system that helps to store all the data and organize the resources, SMBs can monitor operations, and eliminate errors.What is small business ERP?
In enterprise software terminology, ERP for small businesses (or small business ERP) means a lighter business management software that is designed to meet the needs of a small business. It integrates development, manufacturing, sales and marketing. Small business ERP is typically a SaaS (software as a service) model and includes project management, financials, manufacturing, warehouse management, accounting, sales and business management.
What are the signs that your business needs the ERP system? Most of the small businesses start with the basic stuff, like accounting software and spreadsheets/synced documents. As their business grows and workflow increases, it gets more difficult to process everything at hand. Sales and purchase orders from customers, inventory, processing invoices, keeping track of buyer interactions demand much more effort and time. Especially when information is stored in separate databases. Importing/exporting data leads to errors and loss, as a rule. Then SMBs start to realize that there’s a solution out there called Enterprise resource planning software. They research and find out that ERP software enables all departments and employees of your company to be on the same page at any time.
When looking for the ideal ERP for small businesses, one should be aware of its key characteristics. What ERP system would be best for your business needs? – is obviously the question for any business owner. And it’s quite a complicated decision to make. Small business ERP must be modular and flexible, to be able to deal with the variety of growing business needs. You’ve got to be able to activate and deactivate the ERP’s modules. So a good small business ERP will manage main enterprise processes like:
- product planning and cost
- marketing and sales
- inventory management
- payments and shipping
It must also be adaptable. Choose between ERP software providers carefully, seek for vendors that keep in touch with the fast-paced tech innovations. Because ERP for small businesses should be adapting too constantly. You need a dialogue with your customers, you need their feedback. All businesses do know that, but what’s the reason? Your company and your employees have to adapt and to respond quickly to the market.
In 2016, ERP systems should be cloud-based, both ERP for SMBs and for larger enterprises. With mobility, team members can work from anywhere and from any device. Cloud technology also means no need for software installation, no licenses, no maintenance. Affordability is also of importance, as conventional ERP solutions tend to be a financial mountain impossible to climb. In this instance, a cloud-based solution of ERP for SMBs is a breath of fresh air – today’s providers offer ERP modules starting from $10-30/month.
A good SMB ERP should be multilingual too, comprising several languages. It means the possibility to create documents, invoices etc. in many languages, customize product info depending on various markets, communicate with clients and provide support in more languages. Most of the efficient ERP systems come in English, French, German, Dutch, at least.91% is the customer retention rate at companies with ERP system.Click To Tweet
What benefits does SMB ERP bring?
Most SMBs have to go through a tough selection process to buy a business application. Often they abandon the idea and keep the old operational ways. Well, until it becomes unbearable yet again. What happens with installing an ERP system? For SMBs it can help avoid many problems and nurture the way for growth. The opportunity to increase efficiency does not sit in scattered spreadsheets. Thus, we can name the first and one the most significant benefits of the ERP for small businesses – it reduces complexity and provides a single data store for vital information. For business to grow consistently, a good reporting system is required as well. And that, of course, is also at the core of the ERP.
The ongoing summary information can’t be overlooked for good management. Traditionally, management and reporting are period based, the accounting systems report on defined time periods. We don’t need to stress how good reporting is crucial to decision-making in business and how its also good for taxes requirements. The good news with ERP systems is that data between the periods is available at any moment. All items and interactions are accessible day-to-day. Dashboards and operational metrics are updated regularly, so no guessing needed – vital decision-making info is always available.
A single ERP for SMB covers it nicely. Consistent data raises the speed and quality of decision making for small businesses, well, for any businesses these days.
- managers can identify any potential trouble areas,
- financiers can get an instant up-to-date picture of work processes,
- production planners can manage stocks and keep deliveries on schedule,
- HR staff can identify recruitment opportunities,
- top executives have a clear overall picture of all operations.
Growing business equals to more work processes, more people involved. Collecting data and compiling reports becomes more and more time consuming, especially for SMEs stepping up their game. Time that is sacrificed to actual money making and troubles lurk in the future. With ERP implementation we can expand the amount of data to be processed without much effort. Of course, implementation can be arduous, but it results in fewer problems further on and a stable platform to grow from. Employees receive less requests about accounting issues and can focus solely on their tasks.ERP for SMBs means more products, more locations, more people.Click To Tweet
Deploying an ERP for small businesses implies transformation to cope with the growth. Entrepreneurs can remove duplication in administration, and streamline processes of order processing and production planning, for example. It is also worth mentioning that besides the benefits of ERP systems for SMBs, certain risks are at play. It is a major undertaking in time, effort and costs. ERP for small business cost may be unreachable for struggling businesses. Although, separate modules for specified departments can be deployed. Another factor is a learning process for employees.
Though, as mentioned before, ERP is a long-term investment. To obtain a proper balance of risks and rewards of an ERP system, SMBs need to identify priorities and have a clear vision for change, allocate resources to training and project management. Seeking advice from an ERP expert/SMB consultant is on the list of good options to select the right system.Need advice on small business ERP selection?
Small ERP for Small Businesses
On the one hand, startups and small businesses do not necessarily need business software from the very beginning of endeavors. On the other hand, with growth come new challenges. When business is expanding it makes sense to use enterprise applications like ERP, though it’s pretty tough to cope with its own complexity and added expense. So what’s the way to go?
Actually, there’s an alternative solution in the form of so called “small ERP for small businesses”, or simply small ERP system, for business automation. Take US state of Alaska for example. Local authorities there decided to develop their own application alternative to big vendor systems, and have saved substantial amount doing so. Alaska created smaller system for about $100.000, according to Government Technology magazine.
The challenges to many companies of all sizes are similar here. Elaborate ERP systems grant obvious benefits to businesses, but not all businesses need such scoop. And not every business can afford a big enterprise application. Along with all the challenges of ERP implementation process and cost, many public-sector and private-sector companies are seeking less expensive and faster-to-implement solutions. Luckily, alternatives exist.
Open source ERP systems are worth taking a closer look, as advised by software industry experts. Or basic homegrown applications that you can produce or outsource the task to development agencies. There are industry-specific ERP applications as well, i.e. for small manufacturing businesses, food industry, finance industry etc. These systems cost far less, are not that complicated, and enable workflow automation for your organization. You can apply a small ERP with the very features customized to your exact needs.
To ERP or not to ERP?
To stay ahead of the competition small business must be sharper and quicker. No business is too small for an ERP system, with it SMBs are able to work at upper-scale business level. What do small businesses need to realize? Within a company or startup employees have multiple tasks to do, with lots of ideas and pitches flowing in constantly. Automating all the document flow with ERP for small businesses is hugely beneficial to order processing, production, and finances.
Cloud computing brought a price drop for small ERP systems. Numerous ERP solutions for smaller businesses (SMBs) have appeared on the market. These are known as “tier 3” ERP vendors, and according to Panorama Consulting, they make 26 % of the total ERP market now. With the average project cost of $1 million, tier-3 ERP for SMBs systems typically gets a payback period of 3 years.ERP for small businesses get a payback period of less than 3 years, most of the time.Click To Tweet
Don’t let tier-1 ERP “big guns” intimidate you, there are plenty alternatives to SAP or Oracle. Because of the complexity, many smaller companies fear the ERP implementation and abstain. Yet the data has been evident about the benefits or ERP accounting, manufacturing and distribution systems.
There’s also the availability of software-as-a-service (SaaS) ERP systems and open source ERP, as acknowledged by industry pundits like Gartner. Contrary to large enterprises, SaaS ERP use isn’t limited and it can contribute greatly to applications for small and mid-market companies. It also avoids big implementation and operational costs. Open source option has been used extensively in recent years, and numerous new open-source ERP systems emerged on the market. The focus of such is not only on driving the total cost of ownership down but on enabling customizations for applications as well. With access to source code, those goals are obtainable with examples of open source software ERP systems like EasyERP.Looking for open source ERP for your SMB?