Businesses over the last three decades have benefited from the deployment and use of enterprise resource planning software. Enterprise resource planning software (ERP) has revolutionised the way that processes with a business entity are handled. The idea of having an end-to-end work flow made it possible back-office, front office and highway office (online) to be connected in real-time.
The aim of this post is to highlight the benefits of enterprise resource planning as many more companies now use this highly scalable all inclusive business solution software. Let’s get started by reminding ourselves of what an ERP system is.
WHAT IS ENTERPRISE RESOURCE PLANNING (ERP)?
ERP system is integrated business solution software that is built around business processes rather than on departmental functional levels as we used to have in standalone legacy business solution software. ERP system was introduced to solve the problems inherent in most standalone which usually cause problems like slowing down processes. There are quite a number of companies that deliver enterprise resource planning solution but the dominating companies are SAP, Oracle and Microsoft.
10 BENEFITS OF USING ERP
- Improved flexibility and staff motivation: one of the most acclaimed benefits of using ERP business solution software is the flexibility of doing things. Things that was not possible to do with legacy systems can easily be done using well configured integrated business process software. The increased flexibility that comes with use of ERP has over the years proven to enhance employees’ job satisfaction that eventually translates into motivation.
- Improved cash management system: the integrated nature of processes ensures that cash management process of a company is improved. ERP has the functionality of monitoring individual transactions from end-to-end, examples are order-to-cash and purchase-to-pay. This feature of ERP makes it easier for management accounting controls that are designed to improve internal controls to function according to plan.
- Cost saving through reduction in inventory: inventory management as a working capital management tool is a core module in ERP systems like SAP. With this system, companies no longer need to keep piles of inventory which would ensure that a business does not incur stock out cost as ERP supports the concept of Just-in-Time (JIT) philosophy. A JIT philosophy is a management philology that is hinged on the idea of keeping stock to the lowest level thereby reducing the overall cost of managing inventory. Microsoft dynamics and SAP for example has the capability of being fully integrated into the production line of your suppliers who in turn gets alert when your stock of material drops below certain specified level.
- Improved customer satisfaction: nowadays, customers continually demand more from businesses. They want to achieve more with minimal cost and effort. ERP system provides a platform that is scalable enough to meet and surpass the ever changing demands of customers in this information age. Best practices in customer services now include delivering a hassle free service to customers. In the UK utilities and energy industries where consumers are continually seeking easier ways of getting things done, ERP has now made it possible for customers to for example book meter exchange appointment from the comfort of their home without having to phone their energy supplier.
- Guarantees on time delivery of goods and services: because systems are integrated at the business process level, systems now talk to each other in real time basis and this guarantees automatic execution of processes. A process can be initiated and completed whenever it is required without irrespective of the time.
- Reduction in procurement cost: a lot of paper work and redundant processes are greatly reduced to the barest minimum thereby saving money in the form of material cost and human capital cost.
- Reduction in the financial cycle: full set of annual report of a large organization can be produced just under a day. This is because the systems that would otherwise be in silos are fully integrated thereby making the production of financial statement as easy as clicking few buttons. Also, the time it takes from initiation to finalization of a financial cycle (payable for example) is hugely reduced as a result of leveraging on the integration power of ERP business solution software.
- Reduced number of hardware and software requirement: the overall cost of IT will be reduced when ERP system is implemented. The number of standalone licencing fees will greatly reduce if a company only has to pay for one licence that that will cater for all of its business needs.
- Improves productivity: the fact that operations are more flexible and scalable means that efficiency is achieved. Businesses face ever evolving challenges that require highly efficient flow of activities in order to keep pace with the business dance tune.
- Reduces or eliminates redundancy: one of the characteristics of the legacy system is the creation of duplicate processes that ultimately leads to redundancy. The use of ERP ensures that no single process is duplicated and this will save the business valuable resources.
At this point, you would have appreciated the importance of using financial software ERP to manage your business challenges. Many forward thinking businesses have long implemented ERP and are reaping the benefits of taking the decision to make the investment which is usually huge compared to the cost involved in buying an off the shelf good accounting software for example.