Why is ERP important for SMEs?

Why is ERP important for SMEs featured

Business these days is becoming more and more competitive and business houses have to keep their eyes open for new and innovative technologies and techniques to save costs and improve performance to stay in the competition. The business world is abuzz these days with the latest high-end software solution termed Enterprise Resource Planning (ERP) that aims at integrating operations, processes and information flow in an enterprise, such that all the resources of an organization namely men, material, money and machine are registered and managed through a centralized database.

For those who came in late, ERP is a very useful software which brings all the core activities and resources of business under a unified system so that the management has a real-time view of various business resources like cash, raw materials, production capacity, etc. and the status of business commitments like orders, purchase orders, and payroll.

As such, the company can study its processes, earnings, and performance closely by merging its operational information with its financial information. This, in turn, helps the business to get accurate and integrated information, take speedy and effective decisions and improve performance as well as cut costs.

This integrated real-time system with a common database covers almost all the areas of business like financial, accountinghuman resources, supply chain management, cost management, quality control, products, processes, supply lines, stocks, sales and marketing and any other aspect one can think of. With all the information under a single computer system, the company can reap quantifiable business benefits. An ERP is valuable not only for big businesses but also for small and medium scale enterprises.

Administration of the different receipts interdependence is very complex, such as invoices regarding a purchase of materials, salaries or general expenditures. All these things change with ERP implementation. Information flows constantly and allows you to follow a client’s processes at any moment, no matter which part of the process they are going through. Purchases and expenditures in a centralized database allow you to have close control over these activities.

Why is ERP important for SMEs

An ERP system which is powerfully integrated enables interactions of marketing, sales, quality control and many other areas. It eliminates the retyping errors as it would be in a single database. It integrates all departments and functions across a company in a single computer system that is able to serve all those different department’s particular needs.

It works to better integrate each division within the organization, helping it to function as one unified entity. Processes and transactions between different divisions are made smoother and faster and are less prone to human error. But this is not enough on its own – an organization’s agility and productivity also largely depends on how well it integrates with its whole ecosystem – its partners, suppliers, and customers. The more integrated the business is both internally and externally, the better it’s overall performance.

According to the report published by Aberdeen Group, the leading provider of fact-based research, an effective ERP system leads to these five benefits to SMEs:

  • 22% reduction in operating costs
  • 20% reduction in administrative costs
  • 17% inventory reductions (M&D only)
  • 19% improvement in complete and on-time delivery
  • 17% improvement in schedule compliance (M&D only)

Small and medium business houses have an added burden of competing with large scale businesses which are more cost efficient. In such a scenario, a well-managed ERP implementation can lead to long-term cost reduction and improved productivity, which will not only help SMEs survive and thrive but also promote future growth and expansion.

There are many different flavors of ERP that serve businesses’ varying procedure types and can bring an immediate success. An ERP solution has numerous benefits depending on the type of business that it serves; these are business solutions and industry solutions.

Once you have decided to implement an ERP one need to have a clear strategy for its implementation. Here is an infographic that can help you in ensuring successful implementation of the ERP Software.

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vaishali@softwaresuggest.com'

Vaishali Joshi

Vaishali Joshi holds a Master degree in Business Administration. She is an ardent operations and Content management executive at SoftwareSuggest . She loves to travel with her family and friends in her free time. Follow on LinkedIn