As a small business owner, you face challenges every day. You are trying to make the right decisions since every penny counts. ERP implementation sounds like something huge and costly. Read on to learn if you need an ERP system and if it is hard to live with.
ERP software for small business – do you need one?
Enterprise resource planning (ERP) is the system that allows managing all the resources of your organization. The first systems date back to the 1970s. Those systems were helping to maintain product inventory and schedule production. The modern versions handle the ever-growing list of tasks:
- Financial management. Analyzing all your transactions, assets and liabilities.
- HR management. Keeping track and managing your employees’ career progression, payroll, vacations and promotions.
- Customer relations management (CRM) system can be integrated as well. Contains all the information about your clients and prospects.
- Marketing automation. Create, adjust and operate your click-funnels.
- Procurement management. All vendor contacts, purchase orders generation and approval, payment transactions in one place.
- Supply chain management. One-stop-shop to see materials stocks, finished goods movements, pending requests, orders history, etc.
Looks like a good fit for Procter & Gamble but not for your 15-person-strong small business? Don’t jump to conclusions too fast. There’s a whole market of ERP for small business. You will be able to select only the modules you need. Moreover, you will be surprised by how affordable some of these systems are.
Let’s make a quick fact check. If you encounter at least one of these issues, small business ERP may be the solution.
Access to critical data
You remember seeing a report but cannot find it. You want to check the agreement details with the vendor but have no time to read the contract. You want to see the cost dynamics of per unit KPI, but your analyst is busy with a different task.
Negative cash flow
You are keeping an accurate track of all your orders and expenses. One day you face the situation when you don’t have the spare cash to run the payroll. That might happen because you did not consider the post-payment conditions with one of your clients. You rush for the urgent loan dreading this type of surprises
Difficult to generate business documents
It takes you more than three clicks to generate an invoice, see the last months sales report or estimate the payroll-driven taxes for the next year? Imagine the additional revenue you could have if you and your team stopped wasting time on activities that do not bring value.
High dependency on individuals
What if your sales analyst quits tomorrow? Do you know how your reporting system works? Will you be able to train a newcomer? If that’s a triple no, you are over-dependent on individuals instead of relying on systems and processes.
When working on sales forecast, do you estimate or guesstimate? Do you have a system in place to analyze the previous period’s sales and apply some external trends?
Breath out and read on, we’ll stop talking problems and start talking solutions.
What are the benefits of ERP for small business?
Small business ERP system will change your team’s attitude to data and routine operations. Manual data-related activities will not go away, but will take significantly less time and will yield better results. Let me highlight the top-level benefits of ERP for small business
- Efficiency. You will have full control over your operations. You will know the status of any project or transaction at any given point. You will know exactly how you are using each type of resources. This will allow you to start making better decisions and eventually get higher profit.
- Responsiveness to customers. A convenient way to work with customer requests, when you know their history and possible pain-points.
- Analytics and reporting. Both high-level management and detailed operational reports are a couple of clicks away.
- Quality control. All QA functions in one system are allowing to manage quality at the production line, iterations of app development and review feedback received by the customer service team.
- Order management. You will never forget to pay on time, generate necessary documents or place the recurring order for office stationery.
- Sales management. Your sales team will have the history of transactions, name of the pet and wedding anniversary date for every client stored in one system. All they need to do is to pitch for another sale.
The benefits list of ERP for small business does not end here. As soon as you start using the software, you will see more advantages related to your industry. Significant benefits usually come at a significant cost. Read on to learn the approaches developers use to make small business ERP affordable.
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Cost efficiency of ERP system for small business
Already convinced that you would benefit from small business ERP? Not ready to pay a fortune? Here are your options.
Open-source ERP for small business
This type of ERP has the smallest cost and the most extensive list of integration possibilities. Take a look at the list of benefits:
- Freedom to make any adjustments. You will not depend on the vendor to push updates or security patches. You will never need to wait for the vendor’s support team to help you with any possible crashes.
- There’s no license fee, and oftentimes there’s no installation fee either.
- Many open-source ERP communities will be willing to help if you need any support. Those developers may end up in your organization’s talent pool
- You can customize anything, there are almost no limits. The users of the system will be grateful, and the business owner will enjoy all the benefits of process efficiency.
The backside of it is it requires coding just like any other open-source system. If you have an in-house team of developers, they most probably will be able to handle the integration and maintenance. The other way is to ask for the help of professionals outside of your organization.
The other way to call it is free proprietary ERP. You get the regular ERP system with functionality limited to the very basics or by the number of transactions. This usage will be either free of charge or for a fraction of the regular cost.
The key benefit of this approach is the ability to test the system. Testing is an essential part of the ERP implementation process. It allows you to see if your organization accepts the system. You will learn from your staff all the pros and cons, which you would never think of yourself otherwise. In the worst-case scenario, you will not upgrade to the full version, thus, losing time for the integration process. Guess we all agree, that losing time is better than losing the same amount of time and money on top.
You get all the required functions from day one and pay the full price. Still, there are ways to minimize the cost.
- Take only what you need. Most of the small business ERP vendors will allow you to take only those modules that you need. For example, you may start with HRM and Finance management and target to implement CRM the following year.
- SaaS or cloud-based version. No hardware maintenance or license purchase fees. You pay only monthly or annual fee, like in any other SaaS.
Unfortunately, there’s no one-fits-all solution, and you will need to examine many factors when estimating the cost. Let’s take a look at some of the trendy options available on the ERP market. You don’t want to pay for something that is not modern, right?
Anything new cooking in small business ERP?
ERP market is booming with new vendors emerging and “old giants” not willing to lose share. Here are some of latest developments that you might want to integrate into your small business ERP
SaaS approach. We touched base on it in the previous section talking about cost saving. The tech part of the method is that it allows full-fledged real-time synchronization. This is a huge step forward. The prior approach of batch synchronization was not adding any user experience. In simple words, all the users of the system had to agree that, let’s say every Wednesday at 2-3 p.m. nobody makes inputs to the system, because it runs synchronization. If at least one user of the system missed the rule and did inputs, the whole dataset might be considered inaccurate.
Mobile app. Yes, now you can generate reports or approve purchase requests while waiting for your plane boarding call.
The marketing automation part of the ERP is advancing rapidly. It now allows social media integration. Just think about it, the same system is scheduling the production run on your factory and posting your tweets.
The use of artificial intelligence. Modern AI-based ERP systems can automate some of the routing financial operations. As a result, you may expect better and faster reporting and simpler data integration.
Now let’s get practical. You already know what to expect from ERP software for small business. Let’s take a look at the factors that you should consider when choosing the right system for your organization.
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How to choose an ERP software for small business
The list of factors for selecting the ERP system is broad but should definitely include the following.
When assessing the cost of ERP software for small business, always consider the total cost of ownership:
- One-time payments (license purchase, vendor’s support team at your venue)
- Integration costs. Consider legacy systems adjustment costs if you are thinking of point-to-point integration. The more advanced integration approach is through an enterprise service bus (ESB) which will be a one-time investment.
- Hardware maintenance. This type of cost is applicable if you go with the on-premise system.
- Monthly service costs.
- Cost of possible modification and future integrations.
Don’t let the selling points of vendors mislead you. Always use the list of cost implications mentioned above to check for hidden costs.
Implementing the ERP system from day one of your organization is a rare case. Most probably, by the time you get to ERP implementation, you will already have some legacy systems or at least data sets. In the article about ERP implementation, we discussed the integration methods. It’s essential that you examine the possible integration issues before you start the implementation project. Otherwise, you may end up with the cost exceeding the budget and project delays.
It’s better to have as many ERP modules from a single vendor as possible. The more vendors you buy from, the more headache you have at the integration stage. Your demands for additional functions and modules will grow with the growth of your business. Try to predict these demands and assess if your shortlisted vendor is capable of delivering what you will need in one or two years’ time.
It’s about keeping the healthy balance between the two states:
- An off-the-shelf solution, when you take what’s available and adjust your business processes to the system architecture and flows.
- Full customization, when the system looks and works exactly how you need it to, but it takes some time to develop.
Most of our Clients enjoy the benefits of custom ERP software. With the proper team in place, the development takes a reasonable amount of time. Moreover, since the system will be tailored to your organization, you will quickly catch up the lost timings on more efficient processes and faster onboarding of your staff. You may want to learn the other benefits of custom business applications we develop.
It’s essential that your new small business ERP performs the expected tasks. It is equally important that your staff finds it easy to use. Otherwise, all the benefits of data usage and productivity may be offset with the frustration of your team.
By now you see that choosing the ERP for small business is a task requiring much time and relevant expertise. If you have enough energy, you may try this journey on your own. A productive route would be to ask for the help of our ERP consultants, who have years of experience with small business ERP projects.
We will learn your business needs first. Then we will narrow the landscape of small business ERPs to a couple of shortlisted options. We will be managing the whole project and will consider our job done when all your dedicated personnel is trained and satisfied with the new ERP system.
Let’s start the conversation. Order your initial free of charge consultation today.