What is an ERP system?
An ERP or Enterprise Resource planning system helps organisations to manage business functions and streamline operations with a centralised database and a user-friendly interface. Depending on system configuration an ERP can incorporate all operational areas of an organisation. The aim is that the system links different areas of the business creating synergies and increasing collaboration. A typical ERP will include the following modules:
Accounting and Finance – This comprises the general ledger and sub-ledgers which make up the core accounting system. This module will host the key company’s key financial information keeping track of what is owed to and by the business.
Customer Relationship Management – The CRM module allows sales and other people responsible for generating business leads to keep track of and share potential new clients and leads.
Supply Chain Management – offers allows managers to manage procurement and supply of the goods, services, and other resources. From handling manufacturing and warehouse resources to managing transportation and execution processes.
Inventory Management – this module allows the business to effectively plan the materials and resources needed to properly control it’s inventory levels.
Human Resources – the HR module is a centralised database for managing all employee-related data. From payroll to attendance, joiners to leavers and performance management, the HR module will give the HR team full visibility across all personnel-related data.
Business Intelligence – The business intelligence function is a reporting module built into ERP systems. It can pull information from different sources and present it in user-friendly dashboards and reports.
Should my business invest in an ERP?
ERP systems are not cheap, especially Tier 1 and Tier 2 ERP systems. Costs can be mouth-watering for some businesses who have been operating using a basic ledger and spreadsheets to maintain details of client and HR details. We typically find that the type of business the looks to invest in an ERP has some of the following characteristics:
- Experiencing growth – When businesses grow to a certain point they outgrow their legacy accounting ledgers and begin to see benefits from broader enterprise wide systems. Some businesses start to have this discussion after growing and others in anticipation of growth.
- International Footprint – Companies operating across numerous jurisdictions using multiple currencies and exchange rates begin to find consolidation and fx revaluations increasingly complex. ERP systems are designed to deal with complex consolidation and fx revaluations so they will make your monthly reporting process easier. They can also help your business comply with local reporting requirements.
- Looking for more reliable information sooner – ERP systems will store all data in relation to the company in one place making it more easily accessible for senior management through their advanced reporting capabilities.
- Looking to make complex and manual processes easier – ERP systems facilitate more robust and reliable business processes. This will result in less spreadsheets being used across the business, quicker and more efficient processes, requiring less people and cost savings.
How much will an ERP cost?
The 2 main costs you will incur in acquiring an ERP are the one off implementation costs and the ongoing cost of the ERP. ERP pricing can be complex and models are not uniform across the many vendors. One thing that makes ERP costing simpler is that most solutions are now on cloud which means you will not need to pay for storage, upgrades and maintenance separately. Vendor prices vary based on number of users, the number of ERP modules your business wants to use and general complexity requiring customisation of your requirements. Integrations to other software and databases will likely cost more and will need to be maintained.
The first step to understanding how much an ERP will cost your business is to work out your ERP requirements and you will then be in a position to talk to vendors and get a more specific idea of how costs. We help organisations to establish their ERP requirements so get in touch for a free conversation.
When thinking about costs it is useful to understand the Tier Structure people in the industry use to categorise ERP systems.
- Tier 1 ERP Systems include the likes of Oracle Cloud, Microsoft Dynamics and SAP S/4HANA. These are the most expensive and generally employed in large complex organisations.
- Tier 2 ERPs include the likes of NetSuite, Sage Intact, Workday, Acumatica. These systems are often used by SME’s and are scalable so are also used by large global businesses.
- Tier 3 ERPs is in fact the largest category with lots of small and less famous vendors. A lot of Tier 3 ERPs are built to address the requirements of specific industries such as manufacturing or hospitality. They can also be cheaper and often provide good value for companies looking to invest in their first ERP.
There are lots of factors to consider before selecting the right EPR for your business. We conduct a requirements gathering and analysis exercise with business owners to determine which ERP if any is the best fit for their business.
As part of the requirements gathering exercise we will look at your business process, reporting requirements, software integrations and budget to advise on the most suitable ERPs for your business. Please get in touch for a free initial conversation about your business and your needs.