When Does a Company Need an ERP?

By: on August 17, 2018

For many small and midsize businesses (SMBs), it’s not a matter of if they’ll need enterprise resource planning (ERP) software, but when.

ERP systems offer businesses a centralized hub to manage data from a variety of company departments and functions. Some small businesses can skirt by using separate applications, since they’re typically working with a smaller data volume than more established midlevel and enterprise corporations.

But as the company continues to grow, managing all that information across platforms becomes costly, time-consuming and prone to mismanagement.

Thankfully, the barriers to ERP entry are lower than ever, and by 2020, SMBs will dominate the amount of money spent on ERP systems. The move is being accelerated by lower upfront costs and more specialized, industry-specific platforms.

The question remains, though: When does a company need an ERP?

The answer is, as always: It depends. There’s no hard-and-fast rule about when it’s time to take the plunge, and adopting an ERP can be an expensive and labor-intensive endeavor. But a lot of the small business owners we talk to share common pain points that an ERP system can resolve.

Given the increased productivity and efficiency an ERP offers and the growing popularity of integrated cloud-based ERP solutions, the resources, budget and infrastructure traditionally required by an ERP implementation will soon be a thing of the past.

If your SMB identifies with the following telltale signs, it’s time to consider ERP software. Even if the implementation your business chooses comes with high upfront costs, you’ll save money in the long run by streamlining processes and maximizing workflow efficiency.

You’ve Outgrown Your Existing Software

Out of the hundreds of buyers we’ve talked to in the last year, our advisors recommended an ERP to 21 percent of them on the basis of corporate growth.

Pain Points Driving ERP Adoption
pain points driving erp adoption

Much in the same way we outgrew our favorite Led Zeppelin tee as teenagers (a sad day indeed), adolescent businesses experience similar growing pains with software. You can try to stretch it out and wear it until you lose all circulation in your torso, but you’re really just delaying the inevitable.

Data is the blood of your business, and you have to keep it flowing.

If you’re processing data in entry-level software applications built to hold only so much volume, you need a more robust system to do all that heavy lifting.

 HOW AN ERP HELPS:  ERP software is designed to store large amounts of data across the spectrum of business operations. These operations include accounting, manufacturing, CRM or HR, to name a few.

The flexibility of ERP systems provide SMB owners with room for continued growth and, just as important, some welcome peace of mind.

Your Existing Process Is Inefficient

If you’re losing track of all those spreadsheets, constantly switching between software or struggling to get your apps to communicate with each other, don’t worry—you’re not alone. These are common challenges for a growing business, and are one of the main reasons to upgrade to an ERP system.

 HOW AN ERP HELPS:  ERP’s flagship offering is its ability to integrate functions seamlessly, combining disparate operations in a single, central workspace.

This eliminates most, if not all, of the duplicate processes you’re doing across a number of different applications. It also reduces the risk of data entry errors, since information only has to be entered once into a single system.

You’re Spending Too Much on Software Integration

Without an ERP, odds are good that your business relies on various software integrations to streamline data and access it cross-departmentally. But integrating multiple applications isn’t cheap.

Between license fees, staffing, training, operations and the labor required to get them to work well together (if they even work together at all), the price of owning and integrating multiple pieces of software can add up real fast.

Software Advice Callers’ Preference for
Integrated vs. Best-of-Breed ERP Suite

integrated erp vs best of breed

The majority of small businesses that have called Software Advice and were recommended an ERP prefer an all-in-one system. Far less popular is best-of-breed software, which comes fully formed and without the level of customization businesses crave.

 HOW AN ERP HELPS:  Whether you find an integrated or a best-of-breed ERP system to be a better fit for your business, all ERP systems streamline data collection and dissemination, reduce training costs, user error and the expense of maintaining multiple systems.

To learn more about the differences between integrated and best-of-breed ERP systems, take a look at our report “What Is Postmodern ERP?“.

You’re Struggling to Meet Customer Demands

Your customers are the lifeblood of your business, and the last thing a growing business needs is a failure to deliver on the promise of your product.

Whether you’re having difficulty managing and tracking inventory, retrieving customer-specific financial information or producing comprehensive reports for clients, ERP software allows you to organize and access data in a central location.

Say, for instance, you’re a manufacturer who is increasing production and adding a new plant. But you’re still using manual methods and disparate applications to track inventory and process purchase orders, and things are getting messy.

In this case, an ERP system can help you scale appropriately and account for any increase in demand.

 HOW AN ERP HELPS:  ERP software can help streamline and simplify the manufacturing process in the following ways:

  • Data from accounting, CRM, order management and shipping, among other departments, is collected by the ERP system.
  • The ERP system consolidates this data into a single, easy-to-navigate dashboard, providing greater efficiency, accuracy and insight into your internal processes.

These efficiencies are essential to ensuring that your customers remain happy and loyal advocates of your business. For illustration purposes, this is what a comprehensive manufacturing dashboard looks like:

JobBOSS dashboard (Source)

Where to Go From Here

These are among the most common factors driving ERP selection today, but the reasons for upgrading—and knowing when to do it—go far beyond what we can cover in one article.

Whether you’re in the exploratory phase or ready to make a selection, you first need to determine whether your business meets the criteria for an ERP.

Here’s what to do:

  • Meet with your employees and major stakeholders to find out what operational challenges they’re experiencing by having to use multiple systems.
  • Perform an audit on your current processes and systems to see how an ERP could specifically improve your workflow.

Once you’ve done that, be sure to leverage the following Software Advice resources for all things ERP:

  • Browse our ERP software page. This tool allows you to sort and filter top-rated products by market, business size or budget. To learn more about a given piece of software, simply click on the name.
  • Evaluate the FrontRunners® for ERP. Based on real user reviews, the Software Advice FrontRunners® study highlights the top ERP products in the market.
  • Call 855-998-8505. We have a knowledgable team of ERP software advisors available to answer any questions you might have, whether related to ERP or other types of software. If desired, we’ll even do a needs assessment and recommend some products based on the information you provide. The best part? Our consultations are free of charge.

Note: The information contained in this article has been obtained from sources believed to be reliable.The applications selected are examples to show a feature in context, and are not intended as endorsements or recommendations.

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