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What is ERP, why do I need it and when will I know I need it?

Your business is growing and your resident IT expert has just told you that the business needs to upgrade your existing software. He recommends investing in an ERP system which will meet future business demands. But as he’s speaking, all you can hear is “Mwahmwahmwah, wah wah mwah…”, much like Charlie Brown’s teacher! (If you have no idea what we mean, or you’re too young to get the reference, check out this video. Yet, you nod politely as he carries on, wanting to appear knowledgeable as the owner of the business. Don’t worry, you’re not alone! You’d be surprised by the number of business owners who don’t know what ERP stands for, let alone what it can do for their business, why they need it and, most importantly, when they need it. We put together this article to serve as your guide to all things ERP.

What does ERP mean?

ERP is short for Enterprise Resource Planning – a system combining a number of software modules that handle the core functions of a business into one central database. The original idea behind ERP was to bring functions such as accounting, inventory, sales and purchasing together into one fully integrated application, where data can be easily managed, and departments can share information, ensuring that everyone is working to the same standards. In recent years, ERP has expanded its core functionalities to cover industry-specific requirements such as manufacturing, construction, retail, wholesale, TV and Media and Not for Profit. Still, the idea behind the software remains the same – to help your team work faster and better, reducing risk and driving business growth.

What are the benefits of ERP?

There are numerous benefits of having an ERP solution, including:

  • Reduced inefficiencies in your business processes
  • Effective planning, resource allocation and management
  • Reduced overheads cost
  • Comprehensive 360° view of your clients’ activity
  • One unified system which bringing together information from different departments
  • Reduced duplication of work resulting in increased productivity
  • Standardised core processes
  • Full visibility of your business performance against the overall strategy

Why companies use ERP systems?

There are many reasons why organisations are upgrading to an ERP solution and each business is unique, but here some of the most common motivators behind the move:

  • Your existing ERP system is not built to accommodate major changes to your business and operations
  • Disjointed storage of information makes accessing business data slow and limited
  • Your system lacks the flexibility to support business growth
  • Accounting and other processes take longer than necessary, resulting in a less productive workforce
  • Your team’s inability to make quick and informed decisions is negatively affecting customer satisfaction and sales
  • The cost of maintenance is spiralling and your existing system is outdated
  • Your aging system is no longer supported by the vendor/author or by new operating systems
  • The supplier of your bespoke ERP system has gone away
  • You want to trade abroad, but lack multi-lingual and multi-currency capabilities
  • Information is shared across the business by word of mouth

There are many other reasons for business owners to look at replacing their existing software, but if we listed them all this article would rival ‘War & Peace’ in length!

When does a company need an ERP solution?

Nothing is ‘written in stone’ when it comes to this question. You can keep putting out fires for as long as you want, but at some point you will need to decide what’s more cost efficient: holding on to an outdated ERP system that’s causing issues or replacing it with a shiny new ERP system which will do the job a lot more effectively. Only you know when your company needs an ERP solution refresh, but if you’ve been affected by several of the above reasons, we recommend looking to replace your business management software now.

Some parting ERP software advice

When you are ready for a new ERP system, make sure that you compare all of the ERP options out there. Find out more about the benefits of Microsoft Dynamics 365 Business Central.

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