ERP Starter's Guide
You've been running your small business on QuickBooks, or a product like it, to automate your accounting function and produce basic financial reports. So, what's wrong? Things just don't seem to be working well. It takes too long to get a “picture” of how your business is performing, and you're drowning in paper.
Congratulations: You have outgrown your basic accounting software. The good news is that your business is growing. However, so are your transaction volumes, process complexity, and your information reporting needs. Your business can no longer be reduced to a set of ledgers or independent accounting transactions. Your business is comprised of increasingly complicated, end-to-end business processes such as Procure-to-Pay, Order-to-Cash, Forecast-to-Stock, and Record-to-Report. You need enterprise resource planning (ERP) software that supports these end-to-end processes and provides timely, actionable information regarding business performance.
“Wait a minute,” you might say. “I'm not a big business. I don't have a large IT staff or a robust IT infrastructure, and I certainly don't have the money to sink into an expensive software package, or the small army of consultants needed to implement it.”
Relax. Your business has grown to a point of complexity during a time when cloud computing can provide a robust, cost-effective solution for small and medium-size enterprise (SMEs) like yours. But don't take my word for it; ask your business.
Are you experiencing sales growth but also stock-outs because you don't have the right inventory available to meet customer demand? Or, are you meeting demand but with excess inventory because you're keeping excess safety stock in order to avoid stock-outs? Are your order fill or item fill rates falling and with them your customer satisfaction? Are customers complaining that their invoices don't match the goods they ordered or received?
Any or all of these conditions can be a symptom of internal systems' inability to manage increases in business volume or complexity, or both. They may also be indicative of disconnected transaction systems, which require multiple transaction entry for the same business event (a sales order, a shipment, a return, etc.), thereby increasing the risk of errors and leading to “islands of information.”
Business management software treats business events as end-to-end processes. In an ERP system, when a completed order is shipped, inventory balances are immediately updated and an invoice can be produced. In fact, in many ERP systems the invoice can be electronically sent to the customer, thereby improving collection time and reducing paper. The same is true of the procurement cycle. Purchase orders can be automatically generated based on replacement stock rules and be electronically sent to a vendor. In these ways (and others), an ERP system can reduce transaction cycle time as well as the manpower and paper transactions necessary to execute them.
Perhaps just as important as the integration of related transaction processing is the information collected and available for analysis. Data is instantly updated when transactions occur, meaning that decisions made regarding inventories, cash balances, or purchase commitments are based on the most current information and as a result are more accurate. “Islands of information” are eliminated, and everyone is making decisions based on the same data.
Cloud-based ERP solutions are ideal for small but growing businesses. They can provide robust functionality to support transaction processing, as well as sophisticated reporting capabilities to monitor business operations. Additionally, cloud-based ERP can provide external focus to improve customer service and generate new sales leads through applications such as customer relationship management (CRM). Because cloud-based ERP solutions can be deployed in a variety of platforms and configurations, they reduce initial costs and provide reasonable cost of usage. Yet this flexibility in platform configuration also provides a clear path for future evolution of systems support.
As the business grows and becomes capable of supporting an increased IT infrastructure, cloud-based systems can be brought in-house to be internally hosted. Alternatively, they can be configured in a hybrid arrangement, with some systems in a public cloud and others in a private, internal cloud. This flexible growth path means that initial ERP investments continue to provide a positive return.
But which cloud-based ERP system should you choose? The first choice needs to be between “open source” and “proprietary” software solutions. While open source software has advantages in terms of cost and availability, it is also very new and has potential support and security issues. At this point, open source is not a viable alternative on which to run your business.
Among proprietary cloud solutions, look first at a vendor's track record. How long have they been in business? What has their year-over-year growth rate been? Remember that you are selecting a vendor for a long-term relationship. Your vendor will provide new and enhanced functionality that your business will need as it grows. Select a vendor with a good track record, a solid financial position, and the potential to grow with you.
Next, look at functionality. Select a vendor whose product has the core modules you need to run your business. Do you need manufacturing support? Do you need lot traceability? Next look for features such as multi-currency support, multi-warehouse support, and varied pricing capabilities. These are features your business may not need today, but you probably will someday as your business grows in terms of size and new markets.
Finally, look for a vendor that has a global reach, with overseas offices and partners who are prepared to help you succeed wherever your business goes.
By Jon Roskill