Enterprise Resource Planning (ERP) is a process that enables businesses to integrate and centrally manage important business functions and processes. This typically involves the use of ERP software platforms. ERP predates the digital age by several decades and was originally conceived as an inventory management system in the manufacturing sector. The term Enterprise Resource Planning did not actually gain traction until the early 90s.
Business operations can often involve the use of siloed computer systems across different locations and departments. ERP implementation effectively brings all of these systems together, allowing them to be managed via a single platform. Cloud-based ERP solutions and software enable decision makers to manage seemingly disparate business functions through a single platform either on-premises, at home or on the road.
Functions commonly managed by ERP software include:
- Inventory and order management
- Supply chain management
- Human resources
- Customer relationship management
Examples of ERP
Having established the definition of ERP, let’s take a look at some examples where it may be prudent for companies to integrate an ERP system into their operations.
As companies grow, their operations become more complicated. Maintaining the same processes and procedures can lead to huge inefficiencies and waste.
Inventory tracking systems chosen out of necessity at the beginning may not accurately account for increasingly complex costs. Likewise, rudimentary accounting software may no longer be fit for purpose when financial statements need to become more detailed and complicated. In order to remedy the shortcomings of old systems, new manual processes may need to be adopted, further compromising operational efficiency.
ERP provides businesses with an all-in-one software suite to eliminate manual processes that may impede growth.
Make tax compliance easier
Accounting errors and inconsistencies can prove serious impediments to tax compliance. As businesses of all shapes and sizes aim to make their operations more compliant with Making Tax Digital (MTD), ERP can be a useful aid.
It can automate bookkeeping processes and help to eliminate the errors that are red flags for HMRC. ERP can also save companies money by making them less reliant on outsourced third parties for accounting and bookkeeping support.
Poor record-keeping and inventory management can lead to a waste of resources, from perishable goods to employee time. Integrating ERP systems may be beneficial for businesses that struggle to keep down their bottom line and want to increase their margins.
Benefits of ERP
The ability to integrate and automate different business processes across multiple departments and locations can be a huge boon in eliminating wasted time and effort. It can improve accuracy and productivity while reducing operational redundancy. It can facilitate greater cohesion between different departments that share interconnected processes, allowing them to synchronise their efforts in real time.
ERP also helps to provide decision makers with more up-to-date and detailed reporting via a single-source system. They no longer need to waste time and effort interrogating different systems and compiling their findings in order to make informed decisions.
With faster and easier access for completing reports, companies can plan more comprehensively, budget and forecast more effectively, and take the legwork out of tax compliance. They can also facilitate faster and more effective communications between teams and with external shareholders.
Frequently asked questions about ERP
What is an ERP system?
An ERP system is a combination of software integrations combined with an overhaul of operational processes. It involves the use of single-system software platforms to bring digital processes together that were previously managed separately.
How does ERP improve business processes?
ERP, especially when cloud-based, benefits business processes by eliminating waste, providing better data visibility and communications, and reducing the errors that can occur when using manual processes.