Why Your Small Business Requires An ERP System

Corey Foster

March 31, 2014

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As a consultant, I have advised hundreds of small businesses as well as quite a few large enterprises as well. One of the striking differences between the two is the way data is handled. In small business offices, most of the data is tracked through applications like Microsoft Excel.

One company I worked with in Montreal has been in business since 1998 and their computer had sales and inventory data for every single month since then. While the business owner needs to be commended for the effort they had taken in order to document every sale assiduously, it did not actually serve any purpose. There was no way for the data from the different months to be seamlessly compared and analyzed. Unfortunately though, this is how sales tracking happens in most of the small businesses across North America and elsewhere.

This is just one reason why small businesses need to migrate their sales and data management from software applications like MS Excel to more sophisticated ERP solutions. Here are a few more reasons I have found are pretty important factors that make ERP vital to small businesses

Create Consolidated Financial Reports - The trouble with Excel sheets is that you can always present the data in a way that makes things look better than they actually are. In a typical business with a Sales team, a Production team and Finance team, every department tries to project their own performance better than it actually is. Consequently, it is difficult for a business owner to understand the reasons for lower overall revenues. With an ERP system, every department uses the same platform to enter their data. Consequently, there is no scope for fudging data and the business owner gets the exact picture with no sugar-coating. This helps analyze the performance of the various teams better and find solutions.

Reduce Lead Time - Every business strives to reduce the time it takes for a product to be manufactured. In a small business set up, most of the monitoring is done manually. Therefore, the onus of monitoring the inventory supply falls on the shoulders of the inventory manager whose job is to report low inventory and order for new supplies. With an ERP system like JD Edwards or NetSuite, businesses can automate the notification so that the supplier can get a purchase order for new supplies the moment the in-house inventory falls below a specified figure.

Managing Growth - One reason why small businesses rarely grow big is because of inefficient work processes that make growth an expensive affair. With ERP, it becomes possible to handle growth spikes much more easily and efficiently than a manual alternative. Also, most of the modern ERP systems are built with all the industry best practices in mind. This makes it possible to retrieve compliance related data faster thus ensuring business growth is not affected by red tape.

Gone are the times when ERP systems used to be exclusive to large businesses. With cloud based hosted solutions now available in the market, ERP systems can be availed at a cost of just a few dozen dollars a month. Small businesses that have hitherto only been using Excel sheets to track growth should migrate to ERP systems for faster and seamless business processes.