When most people think about enterprise resource planning software (ERP), they focus on that first word: “enterprise.” What might come as a shock is that ERP is also widely used by small businesses and those that are planning to scale before they’ve bulked up.
ERP is backend software that manages, integrates and organizes all data and business processes across an organization, including production, finance, procurement, human resources, distribution, supply chain and other areas according to business needs and requirements. It developed out of material resource planning software built for manufacturers, and ERP software powered by SAP alone is involved in more than 77 percent of all global transactions.
Almost all Fortune 500 companies and large businesses use ERP software to power their operations, including names such as Coca-Cola, British Petroleum and 3M. But what many small businesses don’t realize is that it also powers smaller firms, and ERP is accessible as a cloud service that can be used for small operations and expanded as a company grows.
More than 80 percent of the customer base for the largest ERP maker, SAP, actually are small to medium-sized businesses. More than 65,000 businesses use SAP’s small business platform, SAP Business One, companies that have between 10 and 200 employees and between $1 million and $50 million in annual revenue. That’s not including the firms that use the company’s mid-market solution for fast-growing smaller businesses, SAP Business ByDesign.
How Small Businesses are Using ERP
The likes of Apple and audio electronics maker Skullcandy, with large supplier lists and complex supply chains, obviously need and use ERP for efficient operations. But so do smaller businesses such as golf coaching company, David Leadbetter Golf, and medical devices firm, CeloNova BioSciences.
Florida-based David Leadbetter Golf, a golf coaching and product company with annual revenue of roughly $6.2 million, relies on an ERP system to get real-time insight into what its instructors and 31 employees are doing for better overall utilization. The company also uses ERP for more precise inventory control.
CeloNova BioSciences, a Texas-based medical devices firm that manufactures cardiology and endovascular products and has annual revenue of roughly $3 million, on the other hand, uses ERP to manage its supply chain, meet stringent FDA regulatory requirements, and simplify both operations and financial management.
Small businesses often have the same needs as large enterprises when it comes to ERP software. The complexity of the business isn’t less, just the scale. And with the emergence of cloud-based ERP systems, smaller firms now are using ERP almost as much as large enterprises.
Why ERP for Small Business
ERP brings both tangible and intangible benefits for smaller businesses.
Cost Savings and Greater Automation. Process automation within ERP systems reduces time, effort and resources spent on daily, repetitive tasks, freeing up employees to focus on more meaningful work.
Better Supply Chain Management. Cloud-based ERP significantly improves supply chain management by linking supplier systems, automating key functions, and boosting responsiveness. This can lead to better demand forecasting, precise inventory management, and efficient procurement.
Reduces inventory and stock obsolescence. With complete, real-time visibility over all aspects of operations, including those with suppliers and customers, inventory levels can be refined and managed with greater precision.
Standardized and Simplified Business Processes. Because systems and data are linked between departments, cloud ERP systems simplify business processes and bring greater synergy across an organization through standardization. Businesses also benefit from best practices that are built into the system, focusing on differentiating elements instead of reinventing standard processes that are uniform across an industry.
Better Regulatory and Security Compliance. Cloud ERP helps with regulatory and security compliance processes by combining secure and validated data with built-in reporting and tracking capabilities. It also assists with producing information and spotting exceptions around federal, state and local regulatory requirements.
Improved Financial management. By using an ERP system, small businesses can simplify financials through more complete financial tracking end-to-end, automated payroll, and the discovery of new market opportunities.
Where Businesses Should Start Their Journey
The first step toward ERP adoption for the small business is getting a basic understanding of ERP. Because ERP systems power a company’s backend end-to-end, and serve both small businesses and much larger organizations, they are complex. We’ve put together a vender-neutral guide for getting up to speed, Understanding Cloud ERP.
Then next step is performing a thorough assessment both of the existing business and the goals for a new ERP system before ERP selection. This is a crucial step that, when missed, often leads to challenges during implementation. You can download our ERP Evaluation Worksheet to help work through this process.
Finally, we recommend that businesses of all sizes get help from an ERP implementation partner. Because ERP involves all parts of a company and upgrades almost every business process, it is a significant undertaking that greatly benefits from experienced hands. Just as you hire a lawyer for legal matters, you should hire an ERP consultant for making sure ERP selection and implementation run smoothly.
If you would like more information about how ERP can benefit your small business, contact one of our consultants at (888) 670-5369.