Enterprise resource planning (ERP) software can help any small to medium enterprise (SME) flourish and grow.
Six key benefits of using integrated ERP in a small business are:
- Sharing information between different business processes such as inventory management and finance.
- Enhancing productivity through using a single database accessible to all relevant departments.
- Improving control and reducing operating costs by reducing data entry errors.
- Greater flexibility, allowing the company to rapidly adapt to changing conditions such as supply chain disruptions brought on by new Covid-19 restrictions.
- Boosting sales through tighter inventory control.
- Enhancing data security when using cloud-based products such as Microsoft Dynamics 365 (D365).
Figure: 1ERP Software for Small Business 6 Key Benefits
Upsides and Downsides to an ERP
Updating a small business to a modular cloud-based ERP program like D365 has its drawbacks. They include:
- Resistance from executives, managers and workers. They don’t understand why they can’t keep using the same old spreadsheets the same old way. ERPs are much more efficient.
- Cost of licensing and installation, which is generally done with the help of the right ERP consultants. Costs are recovered through increases in efficiency. The ability to respond quickly to customer requests generates more sales.
- Possible on-site computer upgrades as the primary servers migrate to the cloud. High speed internet connections permit real-time viewing of data regardless of location.
- A potential reduction in productivity while the new system gets online and the staff adapts to the new ERP. Eventually, users get to the point that small errors like typos or duplicate data entries disappear entirely, further boosting productivity.
These drawbacks are easily offset by an ERP’s inherent advantages, especially when using a modular system like D365. Additional functionality can be added as the business requires. Each module can also be expanded, adding more users and increasing capabilities such as storage.
Among the factors to consider when choosing an ERP system are the willingness of different departments to share data, and more importantly, contribute to eliminating any disintegrated processes. Finance will know what sales has in the works. Sales will know what raw materials Inventory has on-hand. Production will know when the next big order is coming up. Departments need to move beyond the “what’s mine is mine and no one else’s” mentality. A unified ERP such as D365 allows companies to do just that.
For example, sharing access to data means managers and executives have the ability to spot and correct errors quickly. They can also keep tabs on what every connected department is doing. An example is having inventory, production, finance and sales working together ensuring a project is delivered on time and on budget.
Another advantage of using an ERP in a small business is scalability in terms of:
- Expanding existing facilities
- Adding potential new suppliers
- Increasing the size of projects
- Increasing product lines
Inventory Control or Finance?
Two of the most visible and valuable D365 ERP modules are Supply Chain Management and Finance. Both are appropriate for small and medium businesses updating their systems. Which one to install first depends on the company’s current and future needs.
D365 Finance lets companies of any size, “Assess the health of your business, improve financial controls, and make timely decisions to drive agility and growth using comprehensive, real-time financial reporting, embedded analytics, and AI-driven insights,” Microsoft states.
For example, the artificial intelligence built into the software lets SMBs do a better job of managing business applications. Key elements include:
- Accurately determine project cash flow
- Predict customer payments
- Rapidly provide budget proposals
- Simplify financial management
- Automate vendor invoice processing
- Manage credit risks and collections
- Provide a unified information source
When the company’s major issue is a lack of accurate inventory management, such as small business manufacturing, then D365’s Supply Chain Management module makes sense as one of the first modules.
One of Supply Chain Management’s critical functions is its ability to improve product deliveries. Functionality like creating barcode labels enhance a business’ ability to track supplies. Labels coupled with hand-held scanners or cellphones indicate where raw materials are in terms of their physical location. They also indicate where they are in the production cycle. Tracking continues from the time items arrive at the warehouse to when they are delivered as finished products.
Tracking incoming and outgoing ships is also a key reason to invest in the Supply Chain Management module. In a world beset by an ongoing pandemic, it’s important to know that raw materials will continue flowing. Last minute delays can make or break a company’s production schedule.
When the Supply Chain Management module ERP is used in small business manufacturing, companies are able to more accurately schedule certain production tasks. This leads to overall equipment effectiveness (OEE) being maximized.
When combined with internal Internet of Things (IoT) sensors, production machines can provide a continuous stream of wear data. Instead of shutting down a production line while waiting for a replacement part to arrive, the part can be ordered in advance so it is on-hand when needed. Production delays are reduced while active working time increases.
The Supply Chain Management module also helps provide advanced knowledge of potential quality control issues before they occur. Instead of wasting raw materials and worker time making deficient products, information from the Supply Chain Management module helps managers know when to stop production and resolve the issue. This boosts efficiency by maximizing raw material use.
Supply Chain Management and Finance are two of the D365 modules. Other Microsoft products cover Sales, Marketing, and the overarching Business Central (ideal for a company that is small)
Another issue plaguing businesses worldwide is industrial espionage, also known as data theft. Private and some state-sponsored actors gain access to a company’s data and then threaten to destroy or corrupt it unless a ransom is paid. Even then, proprietary formulas and patent information may be sold to an unscrupulous competitor.
Some small businesses lack the resources to prevent every potential data theft attempt. Using a cloud based ERP like D365 for small business means you have Microsoft’s massive team protecting your data in distributed server farms. Data is safely stored away from company property that can be damaged or destroyed by a fire, flood, hurricane or earthquake.
Information as a Product
Today’s businesses buy, sell and use one main product, regardless of industry: information.
ERPs store information in a central repository, available to anyone with the right access. Older programs tend to silo data: Sales has its data. Finance has its numbers. Inventory has its own database. None of them share what they know effectively or efficiently.
ERP systems configured for a small business let it use its information much more efficiently. Data produced in the factory is immediately viewable by Inventory, allowing that department to order just enough materials to meet expected demands. When potential supply chain disruptions are forecast, Inventory and Finance working together, can quickly determine the best way to minimize impacts on production.
This allows small business’ funds to be used more wisely, allowing the company to make wiser investments as they continue to grow.
Modern ERPs like Microsoft Dynamics 365 can help small businesses grow by efficiently using data it produces on a daily basis, and helping remove artificial barriers and data silos, allowing information to flow freely to all departments of a company. Help with selecting the right ERP is best achieved with a team that understands your industry, and supports the best products along with the experience to implement them.
Book a consultation with our ERP expert to learn more about ERP for small business.