ERP systems: Everything you need to know
Managing a small business becomes increasingly complex as the company grows.
From internal processes to customer engagements, there’s a lot to keep track of. Of course, your company’s continued growth depends on your ability to streamline these various processes and keep moving forward.
As a team leader, having complete oversight and control over your business processes is essential to growth. Which is why an Enterprise Resource Planning (ERP) system forms the foundation of any integrated business management solution.
Here, we’ll dive deep into everything there is to know about ERP system — and help you find the tool that’s right for your growing business.
What is enterprise resource planning (ERP)?
Enterprise resource planning is the implementation and use of software to manage and simplify business processes. These processes may include accounting, inventory management, revenue forecasting, and others.
The goal in implementing an ERP system is to work more efficiently, automate routine tasks, and increase transparency across an organisation.
What is an ERP system?
An ERP system is the business management tool that facilitates and integrates vital business processes and operations in growing organisations as a means of maintaining oversight and control as complexity increases.
As we’ll discuss, most ERP tools focus on:
field service management.
The term “ERP system” covers a broad spectrum of tools, each with an even broader set of features and functions.
some ERP tools are designed for product-based companies, while others are tailored to service-based organisations
some offer tiered solutions for businesses of different sizes and needs
some tailor their entire software and service to the needs of individual clients
some allow clients to select only the ERP features that are most necessary for their current purposes.
In all cases, ERP systems are used to gain complete visibility and control of the operations that are most crucial to your business’ success.
What are the main features of ERP systems?
While all ERP tools are unique in various ways, most will cover the following operational areas.
Modern ERP software focuses heavily on helping teams streamline their accounting processes and keep their financials in good standing.
With an ERP tool, both internal and customer-facing financial transactions will automatically be recorded in your company ledger. From accounts payable and accounts receivable reports to income, expense, and cashflow statements, your ERP solution will ensure it all gets recorded and made accessible to your team with minimal friction.
Many ERP solutions (such as MYOB's) provide financial reports showcasing specific data based on your unique business criteria. This, in turn, allows you to make informed improvements to your financial situation and overall strategy moving forward.
Enterprise resource planning software also enables teams to keep track of their inventory and inventory-related processes at all times.
You’ll have clear oversight and real-time visibility about your various inventory levels. You can also set up automated alerts to notify your team when stock levels are low, and when reorders are necessary.
You can also use ERP software to generate inventory forecasts, allowing for more strategic ordering. These reports can help teams place their inventory more strategically within warehouses.
As we’ll discuss, optimising your inventory management processes will go a long way toward improving relationships with your suppliers and customers.
Speaking of your customers, many ERP tools also offer some form of customer relationship management (CRM) functionality.
This allows teams to create profiles for individual customers and to track any and all engagements these individuals have with the company. In turn, all customer-facing teams — from marketing and sales, to service and support — can provide a seamless experience to every client they work with.
Many ERP tools also allow teams to automate certain customer outreach and engagement initiatives.
Marketing and sales performance reports can be accessed easily through your ERP system. With this data in hand, you’ll know how to improve future customer-facing marketing and sales campaigns.
Field service management
Another key area of focus for most ERP tools is field service management.
The right ERP will make it easy to:
schedule service appointments for clients
keep track of projects from start to finish
manage client contracts, equipment warranties, and other policies.
A field service management module needs to be mobile-friendly, as it will need to be accessed by on-site workers who may not have access to a computer while performing their jobs.
Business intelligence is another core module of modern ERP systems.
With business intelligence functionality, you’ll have a 360-degree view of your operations — allowing you to “zoom in” to any area of your business with the click of a button. This holistic view will help you analyse workflows and performance trends across departments.
Moreover, this insight will enable you to make informed business decisions in real-time. As most industries are constantly evolving, it’s important to be agile, informed, and responsive.
How does an ERP system work?
An ERP system operates as a company’s single source of truth, bringing all of its processes under the same digital roof.
An ERP integrates all aspects of a business in two key ways:
First, all incoming data and information (from all modules) is collected and stored in a centralised location, then pushed into each module as needed. This ensures that all departments are able to access the most accurate and up-to-date data your team has on hand.
Secondly, ERP systems integrate (and sometimes automate) certain cross-departmental processes. For example, when a customer places a new order, it can trigger the following automated activities:
invoice delivery via email or direct to the recipients accounting software with e-invoicing
ledger recording for accounting purposes
inventory stock updates and reorders.
Automated notifications may also be delivered to the appropriate team(s) to ensure operations go according to plan. Any manual input from team members will be reflected throughout the ERP to ensure all stakeholders stay on the same page while accomplishing a given task.
What to consider in an ERP system
As integral as your ERP system will be to business operations, you want to be confident the systems you’re investing in will deliver results for your unique operations.
With that in mind, let’s go over the main considerations when choosing an ERP solution.
Cloud-based vs. on-premise
Perhaps the most important point to consider is whether a cloud-based or on-premise ERP solution is right for your team.
Most businesses today have made or are making the shift to the cloud. Still, certain businesses may do well to at least consider investing in a traditional, on-premise ERP solution.
These are the main differences between the 2 platforms:
On-premise systems are installed on specific devices, while cloud ERPs are accessible via any internet-ready device.
Server and data maintenance
With on-premise ERP systems, your team will be responsible for server and data maintenance and security. With cloud-based services, the provider maintains these backend processes.
On-premise ERP solutions require an upfront payment for per-user software licensing, while cloud-based solutions require an ongoing subscription payment.
Because ERP systems will touch on the most vital aspects of your business, you’ll need to ensure they’ll meet your needs as the company grows.
Consider whether an ERP system offers multiple tiers of service, with each providing more advanced features and functions.
Also, consider whether an ERP solution allows for customisations. Typically, this is one area where on-premise solutions have a distinct advantage over cloud-based ERPs. Still, many SaaS providers offer some level of customisation at higher tiers of service.
The ERP solution you choose should integrate with the existing tools in your business, or replace them entirely. If not, your ERP processes will remain siloed — defeating the purpose of this investment altogether.
Most modern ERP tools integrate directly with certain software, while also allowing for numerous other integrations via Zapier.
Support and training
Before you choose an ERP solution, you need to know that your team will be able to use it to its highest capacity.
To start, think about how tech-savvy and agile your employees are in general. Typically, less tech-savvy teams will want to stay away from on-premise solutions that require more hands-on customisation and maintenance. And, even among cloud ERPs, some are more complex than others.
On top of general user-friendliness, you’ll also want to know how much support you’ll get from an ERP provider. Here, you’re looking to ensure the chosen provider understands your business’s needs and circumstances — and knows how to help you get the most out of their software.
Tying all this together, it’s important to know that your team will be able to start using a new ERP solution as quickly as possible. In some cases, providers offer in-depth training sessions for new and advanced users alike.
Pricing is, of course, a major factor in every business decision and investment you make — and your choice of ERP is no exception.
You’ll be looking for an affordable ERP solution that meets your needs and allows your business to thrive. Comparing competitor prices, along with each vendor’s pricing tiers and feature lists, is an important first step.
As discussed earlier, payment structure will vary depending on the solution you choose. While on-premise solutions require a large upfront payment for licensing fees, cloud services are offered on a subscription basis at a much more affordable monthly price.
There are also the additional costs of operating and upgrading ERP software. Those using an on-premise solution may need to purchase additional equipment and hardware, while cloud ERP users may need to pay for additional features or integrations over time.
On-premise users will need to pay for additional licenses when updating software or adding new users to their ERP.
Finally, there are a number of hidden costs to consider when adopting a new ERP system. This can include downtime due to software installation, data migration and maintenance, team training, and other processes.
ERP system benefits
Implementing an ERP system is a major investment, but doing so will bring tangible benefits to your business when handled correctly. The following is a list of the most immediate benefits you can expect.
More insight and control of business operations
If you’ve lacked a centralised overview of all your business processes up to this point, the main benefit of modern ERP software will be immediately obvious: transparency and control.
Insight and control stems from in-depth reporting and analytics provided by today’s best ERP solutions. AI- and machine learning-powered tools collect and analyse data as it flows through your organisation, providing clear insight into the strengths, weaknesses, and overall efficiency of different business operations.
Improved customer service
Delivering high-quality customer service is non-negotiable. And your ERP will play an integral role in helping you do so.
Here, it again comes down to accessibility of data. For customer service and support purposes, this includes:
customer profile and persona data
customer engagement history
service ticket content (and contextual information).
Managing incoming service requests also becomes easier, as managers will have a more comprehensive overview of their team at all times. They can allocate human capital resources appropriately to ensure all customers get the service they need as efficiently as possible.
Improved inventory and supplier relationship management
With the right ERP solution, you’ll gain more control over your inventory — both in terms of data and logistics.
Again, data visibility and control is front-and-centre here:
The more accessible your inventory data, the easier it will be to make the right decisions regarding reorders, purchase amounts, and order timing.
You’ll also be better able to manage warehouse and inventory space to improve both intake and fulfilment. Similarly, having full oversight of warehouse staff ensures you always have the human capital on hand to complete these tasks effectively.
Improved cashflow visibility and management
Staying cashflow positive is one of the keys to continuous business growth. And a solid ERP system is integral to keeping your cashflow moving in the right direction — for many reasons.
In short, your ERP will help you identify:
how much money is coming into and out of your business at any moment
where the money is coming from, and how it’s being spent
what your cash-in-hand situation is at any given moment.
With this data, you’ll have a clearer idea of your true buying power, which could help you avoid unwise purchases and investments.
Centralised finance and accounting processes
Modern ERP systems allow teams to take a more holistic and strategic approach to their financial and accounting processes.
Again, the financial benefits include the ability to make better purchasing decisions, eliminate unnecessary costs, and find optimal financing options for your business.
An ERP will also optimise accounting processes — often to the point of automation. In fact, nearly 90% of teams agree that powerful accounting functionality is the most critical part of modern ERP software.
Compliant operations and secure data
Data security and operational compliance are ongoing concerns for businesses in most industries.
Since an ERP system will operate as your single source of truth, it’s essential that the software is secure. Cloud-based ERP providers, such as MYOB, have dedicated security teams to ensure sensitive data remains safe — and that all business operations remain compliant with industry regulations.
Signs your business needs an ERP system
Not sure if your business needs an ERP system? Here are several signs that it may be time for your company to make the investment.
You’re using multiple platforms to manage your business
If your systems have been brought together in a piecemeal fashion, your business is likely facing a number of problems — even if you don’t recognise them. For example, you’re probably dealing with a number of operational silos that hinder team efficiency. We’ll come back to this in a moment.
Consider the time, energy, and other resources it takes to train your team members on multiple platforms. From your employee’s perspective, actually using each of these platforms productively can be much more difficult than it needs to be.
With a single ERP solution, the user experience for your team will be uniform across the board. This means less time spent learning out how to use the system — and more time getting work done.
You need to make decisions based on data
As we’ve discussed, ERP software will automate a number of data-related processes, from collection and organisation to analysis and reporting. You’ll always have the data you need to make the best possible decision for your business — no matter what issue is at hand.
You have too many silos
Organisational silos are a common problem. Even giants like Netflix aren’t immune to the problem.
There are 2 factors to consider here:
Firstly, the lack of a centralised hub of operations means your various business processes will never be fully integrated. The siloes your teams encounter on a regular basis will remain, and cross-team collaboration will become nearly impossible.
Secondly, without a centralised platform, the data you collect will always be at risk in some way or another. Finding the most current and accurate data will be a needle-in-the-haystack venture — and keeping data secure as it moves from platform to platform will always be an added challenge.
Your accounting processes are cumbersome
For small businesses, accounting is a high-stakes process.
Unfortunately, even the smallest accounting error can cause major problems for your company.
The other side of this, of course, is that consistently “doing accounting right” can be challenging — especially if your processes are disjointed and cumbersome.
With an ERP solution in place, you’ll be able to automate what’s possible within your accounting processes, and optimise the rest. And, because your entire system is integrated through a single hub, you’ll always know that the information recorded in your ledgers and other accounting documentation is accurate.
Your IT team is overloaded
Remember how we said it might be difficult for your team to learn to use multiple tools and platforms? That could cause problems for your IT staff.
IT teams will have to learn the ins-and-outs of every tool in your tech stack — and deliver consistent support on these various platforms. Typically, a cloud-based ERP subscription will cover server maintenance, tech support, and other IT-related processes and expenses. [TM4]
Key steps in the ERP implementation process
Integrating a new ERP system isn’t a quick-and-easy task. But, it doesn’t need to be intimidating.
Let’s take a look at what it entails.
1. Prioritise system requirements
The first step of the process is to decide what you’re looking for in an ERP.
You’ll want to define:
your top operational priorities
your main business concerns
your goals for future business growth.
Involving your entire team at this stage will ensure you identify any bottlenecks or problems within day-to-day workflows. Similarly, your on-the-ground employees will be able to tell you more specifically what to look for in an ERP solution. Then, you can start narrowing down your choices for the ERP solution that best fits your team’s current and future needs.
2. Plan how the system will be used
Once you’ve chosen a solution, you’ll then begin planning how the ERP software will be used throughout the organisation.
This will involve:
amending current workflows to take advantage of ERP features and functionality
understanding where your teams may have trouble implementing or using the new tool
identifying ways the ERP tool can be customised to your team’s needs.
The goal at this point is to prepare so that deployment and implementation go exactly as planned.
3. Configure the software
The development stage is multi-faceted and can potentially be staggered based on your team’s priorities.
First, you’ll need to install and configure the software as needed. In some cases, this may mean installing additional hardware or setting up new connections. With a cloud-based solution, though, no extra installations will be needed.
You’ll then need to migrate existing data to your new ERP system. This is an intensive process that involves reformatting and organising the data using the new system’s interface.
Finally, you should start developing training sessions, content, and experiences to help your team. Your ERP vendor may provide instructional materials, but you might need to make some changes or additions to the materials for your team’s specific purposes.
4. Test and troubleshoot
The testing phase will involve select members from various departments, including IT staff. Here, the goal is to ensure the tool works as configured and as planned.
Your team leads will navigate the tool as they would while accomplishing routine workflows — making sure to note any improvements to be made. As they do, your IT staff will be on hand to ensure nothing goes wrong from a technical standpoint — and to address any concerns team leads have along the way.
5. Onboard and train your employees
Training is another multi-faceted step of the ERP implementation process. Again, your ERP provider will hopefully have provided sufficient instructional material to help with training.
You’ll also need to train employees on new workflows and processes. More than just using the ERP system to its highest capacity, you’ll be looking to maximise your team’s potential through the use of the new ERP system.
6. Deploy the ERP system
At this point, you’ll finally be ready to launch your ERP system.
There are a number of ways to approach this step, which we’ll take a closer look at in the following section. For now, just know that the best approach for your team will vary depending on their needs, abilities, and capacity for change.
7. Provide ongoing support and updates
Problems can occur at any time. This is especially true when your team is just getting acclimated to the new software. And, even if nothing goes “wrong,” you’ll still want to keep an eye out for ways to improve workflows and get more use out of the tool.[TM5]
Types of ERP deployment models
There are a few different ways to go about deploying a new ERP system in your organisation. Let’s take a closer look at a few of them, along with the pros and cons of each method.
Also referred to as “Big Bang deployment,” a full deployment involves implementing an ERP system in full, all at once.
The key advantages of full deployment:
cohesive training and preparation keeps all team members on the same page
your single source of truth becomes immediately available
you immediately begin improving operational efficiency.
The downsides of full deployment:
if members of your team aren’t prepared for the jump, catching up will be difficult
despite “diving in”, it’ll likely take some time for your team to reach maximum efficiency with the new tool
with so much happening at once, there are a lot of potential technical issues at play.
The phased approach to deployment will have you slowly unrolling the new ERP system in a strategic, prioritised manner.
There are a few options within this method, based on your team’s specific needs:
sequential deployment to separate office locations
The key advantage of phased deployment:
The phased approach is more focused and manageable than a full deployment, with more intentional focus on specific aspects of the ERP.
The downside of phased deployment:
It will take much longer for your team to start using a new ERP to its highest capacity. This downtime will not only cost your business in terms of manpower, but also in potential missed opportunities while you get things up and running.
Parallel deployment occurs when you’ve implemented a new ERP system into workflows without doing away with the “old way of doing things.”
The key advantage of parallel deployment:
This can be a viable option for teams that may need a bit more time and training to make the transition. It also minimises the risks involved in making the jump to the new system before the team is ready.
The downsides of parallel deployment:
Running two parallel ERP systems — one of which is likely disjointed — isn’t exactly your best option, for a number of reasons:
it’s more costly and time-consuming
maintaining alignment and uniformity around data and workflows is difficult
compliance and data security issues will be a concern.
Keys to a successful ERP implementation
Now that we know the steps of ERP implementation, let’s take a look at some best practices to follow when doing so.
1. Define your goals
While almost all businesses will benefit from using an ERP system, it’s important that you know what your team’s goals are for using one.
Starting with broad strokes, work to zero-in on the specific goals you hope to accomplish by implementing a new ERP. Discuss specific KPI throughout your various departments and modules, as this will help assess your team’s performance — as well as the effectiveness of the ERP solution.
The clearer your vision for the future, the more strategic you’ll be able to be when implementing an ERP.
2. Get leadership buy-in
Inform your executive team of the investment that will be required to adopt a new ERP solution. While you do want to play up the value of the investment, you also want to ensure leaders understand that it will take time and other resources to get the software implemented and onboarded.
3. Designate project leaders
As intensive as the ERP implementation process will be, you’ll need to have a number of leaders to guide the rest of the team.
This team should be made up of members from various departments, who will work to guide teams through their respective modules. You’ll also want to include members of your IT team, as they’ll ensure the software runs as soundly as possible.
4. Set a timeline and budget
With clear goals for the future, and a clear idea of the investment it’ll take to get your system running, you’ll be able to set a timeline and a budget for the overall initiative.
Again, this is why we get buy-in from above: Creating alignment from the beginning will allow you to be realistic in your approach, while also pushing your team to make the full transition as efficiently as possible.
5. Choose the right vendor
Finally, look beyond the actual software you’ll be using, and consider the team behind it.
You need to know your ERP vendor is dedicated not just to providing an ERP solution, but also to helping your team succeed with the software. And, you want to know that they’ll continue to be dedicated to your success as time goes on.
Some things to look out for:
case studies, service reviews, and other social proof from satisfied users
evidence of effective customer service and support
information on ongoing software updates, showing the provider is dedicated to continually improving the ERP solution.
Is your business ready for an ERP system?
MYOB’s cloud ERP software offers a scalable and affordable solution for your enterprise resource planning needs. Our local support teams are equipped to ensure businesses operating in Australia and New Zealand have everything they need to navigate our software effectively.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.