Why Do We Use ERP? 5 Signs Your SME Needs an ERP System
For most growing businesses, it’s not a matter of if they’ll need an ERP system, but rather when. While there’s no hard and fast rule of when you should make the move, there are some tell-tale signs that you're ready. Depending on what stage of growth your company is at, one or two of these signs might ring true. Or you could tick the box next to all five – a sure sign that your business needs an ERP system.
1. You’ve outgrown your existing software
Many small to mid-size companies start out with a stand-alone accounting software, like QuickBooks, and loads of spreadsheets. Over time you might add some point solutions for specific needs, like an inventory management software or a project management tool. These applications serve their purpose for a time, but as you grow your needs become more complex. Before you know it, you could easily have 10 or 20 different applications. And eventually you’ll find that you need more robust functionality than these systems offer.
When you find yourself in this situation, ERP software is the next logical step. It offers advanced functionality to streamline processes and support the next phase of your company’s growth. You’ll also have the advantage of higher performance levels as your data load increases.
2. You lack visibility into key business data
Among the companies we work with, lack of visibility is one of the top pains they experience with their current systems. They find it tough to understand how their business is performing beyond a gut feel. Why? Because they don’t have easy access to accurate numbers. When your data is scattered across several systems, it’s time consuming to compile meaningful reports and you’re more likely to have inaccurate data.
Take a minute to consider these questions about your business performance. Can you confidently answer these questions today? How long would it take you to run the reports?
What percentage of leads convert to a sale?
What’s the average gross margin per sale?
Who are our top five customers by revenue?
What’s our schedule and cost variance by job?
What are our top selling products by territory, sales rep or customer group?
What’s the average cost to produce goods?
With an ERP system, answering these questions (and others) is much faster and easier. Because all your key business data is in a single system, you can run reports in minutes. And you’ll have more confidence in the numbers – when the data is only entered once, the error rate drops significantly.
3. Inefficient processes are lowering productivity
Consider how much time you currently spend on manual processes across the organization. This includes re-entering data into multiple systems, maintaining spreadsheets and compiling reports. With a collection of disconnected systems and tools, chances are your processes are inefficient and overly complex. As a result, employee productivity takes a hit. And the impact has a trickle effect down to your customers, making their buying process or service experience complicated and inefficient.
Here are some common areas where inefficiency is most obvious. How many are familiar to you?
We manually compile reports to evaluate business performance.
We regularly find data inaccuracies because of manual effort.
We spend too much time transferring data back and forth between systems.
We’ve lost sales due to stock-outs.
We aren’t sure how much inventory we have on the shelves.
This might be one of the first areas you see improvement with an ERP system. With everything in a single system, your team isn’t wasting time on duplicate data entry or reconciling data between systems. And the system allows you to simplify your processes, saving even more time and increasing productivity.
“SAP Business One allows our team to be more efficient by having the information we need at our fingertips. Average daily time savings across 12 users is almost one hour per day.” – Sean Lavin, Aircom Instrumentation
4. You have separate systems for each business process
It’s natural for growing companies to add systems as the need arises. But this becomes challenging when these tools aren’t integrated. You end up with a collection of disparate systems, each housing their own data, but you inevitably have the same data in multiple places. Trying to manually reconcile that data on a regular basis is time consuming and error prone (see point #3 above). Not to mention the cost. It might seem more affordable to add a small subscription fee here and there, but when you start adding up ALL the costs, the picture changes. Beyond the cost of the systems themselves, there’s the cost of maintaining each of those applications and any integrations that you’ve built. Not to mention the IT resources you need to build and support those integrations. Whether you outsource that expertise or have an in-house IT team, there’s a cost to that.
You can simplify your IT requirements significantly with an ERP system. Take all those point solutions for accounting, CRM, inventory, project management, etc. and roll them up into a single application. Now you have one system to maintain and one system to train your team on. The efficiency gains can be seen across the entire organization with a more robust ERP solution that simplifies both your processes and your IT stack.
5. You need a system that will grow with your business
As a growing business, you’re always looking to the future. Sticking with systems that you’ve outgrown and fighting through the pain will impact your ability to grow. And the bigger you get, the more you’ll feel the pain of inefficiency and lack of visibility.
Preparing your business now can deliver big benefits later. In fact, the top 20% of growing businesses have implemented an ERP system. They see the value of investing in a scalable system that will support their business now, but also 10 years into the future. An ERP system gives you the flexibility to implement new functionality as needed or adapt to changes in your processes.
“As the company continues to grow… our needs continue to change. SAP Business One and our partner, ProjectLine Solutions, have been able to provide and accommodate those changes for us.” Tom Boehm, Team Power Solutions
Are you ready for an ERP system?
We’ve discussed a few common signs that it's time to evaluate ERP solutions. But if you're still not convinced, take our ERP readiness assessment. It will help you uncover the gaps in your current systems and identify how immediate your need for an ERP system is.