Highlights:
- As a business grows and matures, core business processes move from chaotic and kludgy solutions to stable, robust systems that are built for scale, transparency, and best practices.
- Small business accounting software has limitations. That’s why Fortune 500 companies uniformly use ERP for financials, as do growth-oriented startups and small businesses.
- Small business accounting solutions such as Quickbooks do a decent job for a mom-and-pop operation at a single location, but they aren’t built for handling multiple locations and multiple currencies.
- There are ERP solutions for smaller businesses that want the financial management infrastructure in place now but don’t want the extra complexity until it is needed.
ERP is Financial Management for Today and the Future
The most obvious sign of business growth is more sales, additional products and services, better brand awareness, and added employees. But there’s more to growth than just that.
A more subtle aspect of business growth is business maturity, which includes areas such as financial management, standardized operating procedures, and automation. As a business grows and matures, core business processes move from chaotic and kludgy solutions to stable, robust systems that are built for scale, transparency, and best practices.
One of the most important areas of business maturity is financial management.
Life Beyond QuickBooks
Most businesses start with spreadsheets for financial management and quickly move to small-business accounting solutions such as QuickBooks or Xero. The use of QuickBooks typically represents a dramatic jump in financial management for a small business, because it brings standardization, easy reporting, basic automation, and many of the best practices necessary for business financial management.
But as a business grows, there’s the next level. That next step, akin to the jump from adolescence to adulthood, is the move to an enterprise resource planning solution (ERP) for financials and all business data.
5 Signs You've Outgrown Quickbooks?
ERP is comprehensive backend software that serves as the central nervous system for a business and is used by all large businesses and many small and medium-sized firms. It records and centralizes all business data in real-time, and both standardizes and serves as the starting point for business operations. This includes financial management.
Why ERP for Financial Management
Small business accounting software has limitations. That’s why Fortune 500 companies uniformly use ERP for financials, as do growth-oriented startups and small businesses.
One of the first reasons that businesses move to ERP for financial management is forecasting and financial planning. Because small business accounting solutions are standalone software solutions, they inherently have limited forecasting ability because they primarily work with past performance and a small range of business data. ERP, on the other hand, houses and organizes all business data in real time so the system has a complete picture of a business and can correlate real-time sales performance with inventory, current materials and shipping costs, and other variables that affect financial performance.
ERP not only gives a greater and more up-to-date picture of the financial side of a business, it also comes with robust reporting and analytical functionality and can easily be extended to give third-party financial analytics packages access to the needed data. This shift moves financial management from looking at the past to predicting the future of a business.
Automation is another reason that businesses move to ERP. Common financial tasks such as invoicing, expense reporting, amortization, and sales reports can be automated end-to-end and greatly reduce the amount of time it takes to manage the financial side of a business. Quickbooks has some of this, but the scope and sophistication of financial management automation inherent in ERP far exceed what CFOs get with a small business accounting solution.
Fine-grained costing is a further reason that businesses move to ERP for financial management as they grow. The ability to track costs and accurately break them down by product or line of business is enhanced with ERP because every aspect of operations is already being tracked within the system. This enables businesses to make better financial decisions, and of course, it also aids in forecasting as noted above.
Then there are areas of business growth that really only can be handled by ERP. This includes when a business starts to have multiple locations or expands internationally. Small business accounting solutions such as Quickbooks do a decent job for a mom-and-pop operation at a single location, but they aren’t built for handling multiple locations and multiple currencies. As the software that runs most multinationals, ERP on the other hand is built for multiple locations and multiple currencies out of the box. ERP handles the financials for the likes of Coca-Cola and BP, so the software knows how to deal with global operations.
An ERP that Looks Like a Small Business Solution
Of course, the full scope of financial functions needed for Coca-Cola probably is overkill for a growing small business. That’s why there are ERP solutions for smaller businesses that want the financial management infrastructure in place now but don’t want the extra complexity until it is needed.
Small business ERP solutions such as SAP Business ByDesign were built with this business growth journey in mind.
Business ByDesign is a cloud-based ERP built specifically for small and fast-growing businesses with annual revenue in the range of $1 million to $750 million. It powers small businesses such as CeloNova BioSciences, a Texas-based medical devices firm that manufactures cardiology and endovascular products and has annual revenue of roughly $3 million, and aggressively growing companies such as Rothy's, a maker of 3D-knit, sustainable shoes that is growing quickly and have more than $140 million in annual revenue.
Small business ERP solutions like Business ByDesign can be rolled out in a matter of months, and give growing businesses the financial and backend infrastructure they need to keep growing. They also can be easily expanded into the larger ERP solutions that run Fortune 500 companies. But at the same time, they act like small business solutions and reduce the complexity until a business needs it.
For more on ERP and how it can facilitate better financial management, download our free guide, Understanding Cloud ERP for Non-IT Executives, or contact one of our experienced consultants at (801) 642-0123 or by emailing info@nbs-us.com.
