Why is ERP Important to Small and Midsize Businesses?

November 18, 2021

ERP implementation has become a key component of business success for companies of every size, whether in growing metropolitan areas or rural communities. Small businesses with few employees are now using ERP systems to track everything from staff hours to inventory.

What is ERP?

ERP stands for enterprise resource planning, which is a system that integrates business practices, processes, and data sources within an organization. The function of ERP in small and midsize businesses is to automate critical business functions such as financials, sales, and operations tracking. It also improves customer service by improving the flow of information within organizations.

What Are The Benefits of ERP in Small and Midsize businesses?

1. Track and manage information.

ERP systems capture data from different sources, including departments within the organization and customers and suppliers. ERP enables management to make informed decisions based on real-time reports, maximizing customer satisfaction and employee productivity.

Business owners can use ERP to track customer history, consumer demand, and time to lead to a sale. ERP systems can also help companies set goals, benchmark performance against competitors, and identify areas for improvement.

2. Financial reporting.

ERP system reports allow businesses to track everything from sales figures and accounts receivable to payroll and inventory. ERP also maintains relationships between purchases, sales, and payments as part of a company’s overall financial reporting.

With ERP, owners can determine the actual cost of purchasing items at different prices. ERP systems also enable them to track production costs and improve manufacturing processes.

3. Provide real-time customer service.

Tightly integrated ERP systems allow businesses to answer customer questions immediately, keep them satisfied by getting products out quickly and efficiently, and reduce the costs and risks associated with errors.

ERP enables organizations to identify and meet customer demand significantly higher than expected and cooperate with suppliers to avoid stock-outs.

4. Improve operational efficiency.

ERP systems automate core business functions such as purchasing, finance management, and accounting. It streamlines business processes, such as order fulfillment and invoicing, through barcodes, radio frequency identification (RFID) technology, and mobile computing. ERP can also help reduce a company’s risk of human error by improving document tracking.

The systems provide businesses with the flexibility to adapt and change as they grow, offering more options when it comes to scaling up or down. ERP systems are also connected to the cloud, allowing access to data whether an organization is in its home office or halfway around the world.

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5. offer insight and reduce risk.

ERP systems provide a clear picture of the entire business enterprise, allowing users to quickly identify issues, such as inventory shortages or vendor performance, and take steps to address them. ERP will enable organizations to plan better by using forecasting tools that anticipate customer demand and supply availability.

It also allows businesses to simultaneously manage multiple locations, reducing the risk of error and allowing for comprehensive reporting across the enterprise. These systems also make monitoring compliance with labor laws and regulations, such as overtime or child labor.

6. Integrate with other applications.

ERP enables a company to integrate its ERP system with other applications, such as customer relationship management software and warehouse management systems. ERP systems provide access to supply chain data from vendors and distribution centers.

It also provides an integrated view of the general ledger, accounts payable, and payroll activities. Its systems integrate with web-based applications, including e-commerce platforms and point of sale (POS) systems. ERP enables organizations to share data across the entire enterprise, making ERP an integral component of business process reengineering.

7. ERP systems are secure.

Manufacturers that use ERP software often protect ERP systems by placing them behind firewalls to prevent unauthorized access. ERP can use encryption techniques, such as data at rest and data in motion, which allow the system to communicate securely with users’ devices.

It also enables businesses to use role-based access, which restricts user access to specified ERP modules. It employs authentication techniques that require users to supply their credentials before gaining access to the ERP system. ERP can use one-time passwords and other unique identifiers and tokens for the second layer of security.

Summing Up

Using ERP in small and midsize businesses is becoming more and more common. ERP offers numerous benefits, including access to real-time customer service. It streamlines business processes, improves operational efficiency, and reduces risk through fully integrated ERP systems secure from unauthorized access.

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