ERPs: definition, challenges, and solutions
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Published on December 22, 2023
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You've probably already heard lots of buzz around ERPs. But what exactly is an ERP? What do those three letters actually mean, how will it help you make decisions, and which one should you choose? Read on to find out.
ERP definition
In order to get the best definition of what an ERP is, we’ll defer to the experts.
SAP, maker of the much-loved SAP S/4HANA ERP system, defines ERPs in simple terms:
“Enterprise resource planning (ERP) is a software system that helps you run your entire business, supporting automation and processes in finance, human resources, manufacturing, supply chain, services, procurement, and more.”
Investopedia expands the definition a bit:
“Enterprise resource planning (ERP) is a platform companies use to manage and integrate the essential parts of their businesses. Many ERP software applications are critical to companies because they help them implement resource planning by integrating all the processes needed to run their companies with a single system.”
In short, enterprise resource planning systems take the company’s data and processes and merge them onto one platform.
ERP software includes several modules, including but not limited to:
Accounting and finance
Manufacturing
Human resources
Sales and marketing
Inventory
It really is the backbone of the company, especially if you use all the modules. ERPs can also integrate with existing tools, making your tool stack and processes much more efficient.
How to choose and implement an ERP
Choosing an ERP is as strategic as it is complex. It’s often the CFO and the finance team who initiate the use of such a tool. Ideally, the ERP becomes a centralized treasure trove of information that can help them make the right decisions to establish the company's action plan and ensure its growth.
The decision to implement an ERP also goes hand in hand with growth. A small company will usually start by using Excel spreadsheets before installing a large ERP. As the company grows, KPIs become increasingly difficult to track, and this is the right time to implement an ERP.
Tip: for an expert’s advice on when to switch to an ERP, watch CFO Connect’s webinar with Aircall on building and optimizing a scalable tool stack.
ERP criteria
But what criteria should you take into consideration before investing in an ERP?
The ERP must meet the company's specifications.
The ERP must be able to send and receive data.
The ERP must be flexible to adapt easily to operational changes.
Finally, there are more elements to consider when implementing an ERP system:
Budget: it's often a big investment at the outset (some estimates place the cost of an ERP between $20K and $111K), but once in place the ROI is indisputable. Keep in mind that most ERPs operate on a monthly subscription basis: you’ll pay for the license upfront and then monthly fees on top of that.
Scheduling: it takes between 2 and 5 months to draft the specifications, plus a long time to actually implement the tool.
Implementation: once the specifications have been drawn up and the solution chosen, you'll usually need a consultant or integrator to help migrate all your data to the ERP (or you may be able to export everything manually, but this will take a considerable amount of time).
Workforce: ERPs have a steep learning curve. Companies must ensure that extensive training and support are available to the select few employees who will use the ERP every day. Some companies even have dedicated FTEs who maintain the ERP.
Tip: implementing an ERP for a global organization? Here’s a guide to international ERP compliance and localization.
ERP solutions on the market
On the market, solutions are multiplying. That's why it's not always easy to find what you're looking for. To get you started, here's a list of ten ERP systems, although there are dozens out there to choose from:
Some ERPs are full service, with modules that can adapt to any business. Other ERPs are industry-specific. You’re bound to find a great solution that fits your needs.
The final word on ERP solutions
An ERP isn’t right for everyone. Smaller companies, companies with limited resources, or companies that don’t rely heavily on data probably won’t need to invest in this labor-intensive and expensive solution right away.
But for scaling companies who are looking for a streamlined solution and company-wide efficiency, an ERP might solve quite a few problems and enhance overall performance.
There are lots of options on the market, so take your time researching the best ERP for your specific business.
Need more information about ERPs? We’ve got lots of content for you, whether you’re just starting your ERP research journey or you’re ready to take the leap and implement an ERP today:
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