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What is an ERP System?

It's like having an administrative assistant who can be everywhere in your business at once, improving operational efficiency and supporting your goals for growth.

What is an ERP System?

If you are a small business owner you know what it's like to juggle a thousand moving parts. Hiring, filing, analyzing, reporting, tracking, and ordering are enough to make your head spin, and there just aren't enough hours in the day for all the work that needs to be done. 

An ERP system is designed to help you manage the mayhem.

In this article:


ERP (Enterprise Resource Planning)

An ERP (enterprise resource planning) system is like having an administrative assistant who can be everywhere in your business at once. 

Fundamentally a business data management tool, an ERP integrates your back-end business processes - financials, inventory management, project planning, and more - into one system with a common database. An ERP also updates the operational information across those processes in real-time, giving you a single source of truth.

A good ERP removes the need for duplicate entry across different systems, reduces opportunities for human error, and overall gives you the ability to see what is going on across your business and to make informed decisions about the present and future of your organization.


Who needs ERP?

An ERP can be (and is) used in almost every single industry. While ERP systems have their origin in manufacturing, as time went on businesses across the board recognized they were being spread too thin trying to manage their disparate systems. Now you'll see ERP software put to work in distribution, equipment sales & services, construction, food & beverage, retail, healthcare, the automotive aftermarket, and so much more. 

These businesses, despite their different industries, share one core similarity: they've outgrown their systems and need something more comprehensive.

In today's business world, as supply chains and workflows become harder to predict and manage, ERP software is rapidly becoming a must-have for managing your business as it grows.

2 ERP consultants working on a solution


How do you know if you're ready for an ERP?

Smaller companies will be able to make disparate systems work more easily than larger organizations. If your company is fairly small, it might be best to stay with entry-level business software. It can give you the tools you need without overwhelming you with the tools you don't.

But once a company starts growing their client base rapidly or hiring more people, and the knowledge can no longer be stored in one person's head, it is time to at least start thinking about how an ERP could help you.

Things to look out for:

  • You've had to build or purchase different systems to meet increased demand, but you spend a lot of time pulling information from one system and entering it into the next. 
  • Your staff is bogged down with dual entry and manual processes in multiple systems.
  • You don't trust the reports you pull and question the data accuracy.
  • You struggle to answer important questions about your business, and frequently have to develop workarounds to get the specific reports you need. 
  • You struggle to keep internal security controls in place while still giving employees the access they need to certain business information and processes.


How is an ERP system different from Quickbooks or other entry-level business software?

Quickbooks and other entry-level business software systems are built to handle specific components of your business; they are not intended as a comprehensive tool. They are best suited to companies just getting started, or companies with simple and straightforward processes. 

For example, Quickbooks is an accounting system focusing on financial management; payroll, tracking expenses, and handling taxes. It was not built to manage your inventory, or project scheduling, etc., and generally requires integrations with other platforms for those purposes. If those processes are simple and easy to keep track of, that isn't an issue. However, as you grow it can quickly become burdensome to manage your systems well with a Quickbooks type of setup.

Ultimately, entry-level business software is built to help you solve a specific business process challenge, whereas ERP is a comprehensive and foundational system built with the full building plan in mind.  Its capacity expands as you expand.

While an ERP is typically more expensive than simpler solutions, it can more than pay for itself by helping you use your time more effectively and enabling you to make better business decisions based on data you can trust. 

Take a client of ours, Technical Compliance Solutions LLC (TCS) as an example. TCS is in the gas compression industry and has started with Quickbooks. They had grown quickly and had reached a point where they were storing over $2,000,000 worth of parts, scheduling out jobs as much as a year in advance, and working with customers who had hundreds of engines and needed multiple repairs done at once. 

Quickbooks had helped them get there, but for them to accomplish their future growth goals, they needed something more. 

They needed an ERP, which could bring those core processes together in a central database; a tool that supported their project scheduling, kept after their cycle counts, helped them know ahead of time what they needed to order, and would act as a single source of truth. 


What are the benefits of an ERP?

Choosing and implementing an ERP may be a difficult process, but the results are well worth it. By using a strong ERP system you will see improvements in operational efficiency and in your ability to make informed business decisions, as well as in your customers' experience with your team and your employees' satisfaction with their work. 

Bad data leads to bad decisions. By providing automation and consistency across your business, an ERP becomes a source of good data that you can trust. With an ERP, you will have real-time visibility into the full expanse of your business - from inventory to project management to job costing - allowing you to better understand the strengths and weaknesses in your operations. You'll be able to drill down into the details behind what the reports are telling you, so that you can make decisions with confidence, instead of feeling like you're throwing darts semi-blindfolded at a moving target. 

You will also have much easier access to (well-organized) customer information and history, allowing your team to respond quickly to customer requests and enhance your customer service. Pricing can be quickly updated and communicated to customers; most ERPs also integrate with online payment processing, making it easier for you to get paid for the work you do. 

And, not least, with a clear source of truth and automation in place, your employees will spend less time on tedious administrative work (and less time fixing mistakes that arise from manual entry) and more time serving customers and solving interesting challenges, giving them higher job satisfaction and helping you with your retention efforts.

2 employees collaborating using erp software


How do you choose the right ERP system for your business? 

There is a wide variety of ERP systems out there, and it can be overwhelming to choose between them. As you look through your options it is important to keep in mind four questions: 

  1. Does the ERP system work for companies of your size and with your growth plans?
  2. Was it built for your industry or business model?
  3. Will their implementation process work with your organization (and is your organization prepared for this type of change)?
  4. Does the ERP provider fit your partnership goals?
Unfortunately, roughly 50% of ERP implementations fail the first time around because companies and their ERP providers were not aligned on one or more of the four questions above.

Choosing and implementing an ERP is not a simple change, though often a necessary one, and it is crucial to do the research beforehand to ensure the money you spend on an ERP will give you the best return on investment.

The right ERP supports the goals you have as an organization and helps you get there. It is crucial that it will work with you as you build for the future.


In a Nutshell

Implementing an ERP can have a dramatic impact on your ability to continue sustainable growth, your customers' experience, and your overall employee satisfaction with their work. Change of this magnitude can be daunting, but the right ERP partner will come alongside you and help you build the system out to fit your specifications and reveal a world of opportunity that was hidden behind piles unnecessary administrative load. 

If you want to get back in control of your business data and make informed decisions about your business future, while being able to get back home in time to spend quality time with your family, we'd love to partner with you to make that happen!


This article was originally published on 5/3/2018, but has been completely refreshed and updated.


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