What Is ERP Software & How Can It Increase Efficiency?

What is ERP software?

ERP software is technology companies use to manage their most essential business operations, including project management, accounting, inventory management and human resources (HR). ERP software is essential because it allows companies to manage multiple aspects of a business within a single platform. This capability can improve company communications and create more accurate data reporting.

“ERPs provide businesses with control over the organization, real-time insights, streamlines operations and ensures that all departments are working with the same source of truth,” said Andy Reid, head of product marketing for Sage ERP. “This unified approach helps companies improve efficiency, meet stringent regulatory requirements, make data-driven decisions and scale operations effectively.”

How does ERP software work?

ERP software uses a central dashboard to monitor various business processes. It ensures data from multiple departments can be shared and viewed easily and cuts down on siloes within your business. This helps improve your company’s workflow and reduces time-consuming manual processes. 

“ERPs automate core business processes, ensuring that financial reporting, sales, production, inventory, procurement and supply chain functions are seamlessly connected,” Reid said. “By doing so, ERP enables organizations to operate more efficiently, delivering automation into the business and with a greater degree of control and transparency.”

For example, you could use ERP software to manage your company’s inventory and finances. ERP software can track your existing inventory, account for changing costs and update your company’s financial statements. Those are three different tasks you can accomplish with one solution.

“ERP breaks down silos by creating a ‘single source of truth’ — all teams within an organization access the same data, reducing the potential for miscommunication and inefficiencies from errors,” Reid said. “This connectivity ensures that leaders have a comprehensive view of business operations, allowing them to make informed strategic decisions with full visibility across departments.”

What are the benefits of ERP software for small businesses?

Integrating ERP software into your business brings multiple benefits. “ERP levels the playing field for SMBs, enabling them to compete more effectively and adapt to market changes with agility,” Reid said. 

“Simply put, ERP systems turn fragmented information into actionable intelligence,” added John Case, CEO of Acumatica.

Here are some of the advantages of using ERP software. 

1. ERP software improves efficiency.

ERP software automates repetitive tasks and streamlines your business’s processes. ERP software can automate inventory management, financial reporting and order fulfillment, among other processes. This will save you time, lower overall costs and help your business run better.

“By automating processes and ensuring real-time data access, ERP eliminates redundant tasks, adds automation, reduces the risk of errors and speeds up workflows,” Reid said. “Take procurement, for instance — an ERP system can automate approvals, track orders, highlight the risks of failed supplier delivery and the impact on work orders, and ensure financial alignment without back-and-forth emails or manual data entry.”

As your business becomes more efficient, it will be better able to expand into new markets or create new products and services. The company will also become more flexible and able to adapt to changes in the market. 

2. ERP software helps you monitor project progress.

ERP software allows supervisors and managers to follow the progress of every project phase to ensure benchmarks and key performance indicators are met. Tracking a project step by step allows management to identify when an employee needs additional reinforcements to ensure the project is delivered on time. 

3. ERP software standardizes processes and data. 

A further benefit of ERP software is it can help standardize processes and data. As ERP software stores all data in a single, shared repository, teams across an organization can ensure they are all pulling from the same, standardized data. This can further spur efficiency and team member communication, as ERP software helps prevent data duplicates while also enforcing version control.

4. ERP software keeps team members on the same page.

Creating team sites and employee portals through ERP software can help all team members work together productively across your organization. ERP software can boost workforce collaboration regardless of where your employees are located or whether they work in different departments. 

“The magic of ERP software lies in its ability to provide a digital replica of your business, integrating data, people and processes into a single, unified platform,” Case said. “That means that instead of working in disconnected spreadsheets, emails or siloed systems, teams across departments can collaborate using shared data in real time.” 

This visibility, noted Case, “creates greater collaboration and alignment between traditionally separate functions like finance, operations, inventory, sales and customer service, so an organization can truly act as a unified whole.”

Ensuring all team members are on the same page will eliminate obstacles hindering communication or slowing progress. ERP software allows a project’s team members to reach out to others within the organization and provides additional help or insight.

5. ERP software fosters communication and problem-solving.

When a company places performance information in a virtual location easily accessible to everyone, managers can more effectively communicate the organization’s business strategy. In addition, they can set employee performance goals that support the company’s overarching objectives, which can help enhance overall decision making, Reid noted. 

When performance and project information is available in a centralized location with ERP software, you create a more open environment with greater visibility and enhanced business transparency. Employees understand the business’s larger vision and how their work fits into it clearly. Your workplace enjoys creative synergy, higher employee engagement, increased productivity and enhanced problem-solving.  

Modern cloud ERP can “also connect the back office with frontline decision-makers, ensuring everyone — from executives to warehouse managers — works from the same playbook,” Case said. “This alignment reduces errors, improves responsiveness and keeps the entire organization moving toward shared goals, even as business needs shift.”

6. ERP software helps you analyze business performance.

Today’s ERP software boasts advanced reporting options and data analytics capabilities that help business owners and managers understand the organization’s performance better along with industry trends and customer preferences. 

By accessing analytical reports and performance metrics, you and your management team can collaborate to tweak ineffective strategies and develop new ones. ERP software can also play a vital role in inventory management, linking key metrics across your organization. 

7. ERP software can help you reach compliance goals.

Ensuring compliance can be extremely complicated. This is especially the case if your business operates internationally, opening up your business to compliance regulations from a range of jurisdictions. ERP software can help you stay compliant by making your records easily searchable and auditable. Additionally, some ERP software have built-in support for specific regulations, allowing for automatic compliance tracking. 

8. ERP software can help scale business processes. 

Through better cross-team collaboration and increased efficiency, ERP software can help scale up your business and provide more sustainable growth. As ERP software standardizes and automates internal processes, businesses can handle higher workflow volumes. 

“An ERP enables an SMBs to see across the business, creating the ability for it to pivot to take advantage of new market opportunities, scale with confidence or grow internationally without complex systems development,” Reid explained.

9. ERP software helps increase visibility into your supply chain.

Supply chains can quickly become complicated to manage. As your business expands, you have to keep track of suppliers, freight shipments, transportation, delivery, storage, inventory management and more. Some ERP software features AI tools that analyze real-time data that your company can use. These tools help provide greater insights into your supply chain, as well as providing usable business intelligence metrics. 

10. ERP software can help make your data more secure.

Modern ERP software features additional data security measures. Software can come bundled with a range of options that help increase the health and security of any data you manage with the ERP, including automatic encryption and data backups. 

How do I choose and implement ERP software?

ERP software isn’t one size fits all. Instead, various iterations are tailored to specific functions or industries. For example, there are ERP software platforms focused on accounting and customer relationship management and specific ERP solutions for manufacturing and healthcare. 

Here are the steps to choosing the right ERP software for your business.

1. Identify your current business processes.

Before deciding which ERP software would be best for your business, you must analyze your current processes. Which operations could be streamlined? Where could your organization be more efficient? 

Determine what your company is doing well and identify areas for improvement. This analysis will clarify what to look for when you meet with software vendors. Also consider your overall business use cases and needs, Reid advised. For instance, SMBs should consider ERPs that offer modular scalability, allowing them “to start with essential features and add functionalities as they grow,” he said.

Additionally, businesses that use multiple other software tools should prioritize ERPs that have strong integration options. “The ERP should seamlessly connect with other business-critical tools like CRM, payroll, and e-commerce platforms,” Reid said.

2. Research various options.

Research a wide variety of software options before deciding on a solution. Ask your colleagues and employees for recommendations and research thoroughly before meeting with sales reps. When talking with vendors, insist on demos of how the software works. Online reviews are also a great resource.

3. Determine how you’ll implement the new software.

Once you’ve chosen an ERP software solution, you should develop an implementation plan. A good implementation plan accounts for how you’ll install the software and ensures it’s fully functional and can be used by everyone. You should offer training so all employees know how to use the software.

Also consider whether you want an on-premise or cloud-based deployment for an ERP. While both options come with their own positives and negatives, Reid advised that SMBs use cloud-based ERPs as they “reduce IT overhead and ensure accessibility from anywhere.”

Once you choose the ERP and deployment method, you can pick how slowly or quickly you wish to implement the ERP software. The three main options are: implementing the ERP all at once for a fast approach, conducting a phased rollout in which you implement the system in steps or a parallel implementation in which you have two parallel systems in place. 

Each implementation option features its own risks and advantages, as summarized in the following table. 

4. Track the ERP software’s benefits.

If you’re trying to meet a specific goal through ERP software, such as reducing business costs, track and measure your progress after implementing the new system. That way, you’ll know whether or not the solution is successful. 

What are examples of ERP software?

The following solutions are highly rated ERP software platforms. Consider them as you begin your search:

• Oracle NetSuite: Oracle NetSuite offers a wide array of features, including payroll, HR and customer relationship management (CRM) software. The platform is highly versatile and customizable. You can also easily integrate Oracle NetSuite with other software you use to run your business. Our Oracle NetSuite CRM review explains this platform’s integrations with the broader collection of Oracle NetSuite cloud-based services. 
• SAP: SAP offers ERP software that incorporates an organization’s key business functions. It helps companies avoid the damaging effects of complexity and generate new opportunities for growth and innovation. SAP provides real-time information across an organization, reducing redundancy and helping create a more efficient work environment for everyone.
• Microsoft Dynamics 365: Microsoft Dynamics 365 is a family of business solution software that integrates data, business applications, documents and devices to help employees maximize their time. This platform allows you to automate functions within your business, enhancing collaboration and increasing sales.
• Sage: The Sage ERP platform is easy to use and customizable to fit your business’s needs. You can use the software to get an overall picture of your business finances, manage your cash flow and access detailed reports. The order management module can manage high order volumes and simplify inventory management. Check out our Sage 50 review to learn more about the accounting aspects of the Sage ecosystem. 

These solutions are only a small sampling of the ERP software available. No matter your business goals, ERP software will ultimately help you and your company run as efficiently as possible, both from a cost perspective and a time-management perspective. If you haven’t invested in this type of technology yet, you are missing out on an opportunity to improve your workplace and help your business succeed.

Jeremy Bender contributed to the reporting and writing in this article.