What exactly does an ERP system offer?
There is much talk about businesses implementing an ERP system to meet the growing needs of their organizations, and manage the complexities that come along with growth. But what exactly are functionalities of ERP and why do businesses need it?
Enterprise Resource Planning, abbreviated as ERP, refers to programs and systems offered to businesses that aid in their day to day transactional processes, business decision making, analytics, reporting, and customer relationship management among other things. In the past it was exclusively in the domain of giant companies that could afford the exorbitant price tags that came with the ERP implementation. Companies such as Nestle, Nike, Hershey’s, and Sony would routinely spend over a 100 million dollars to integrate and streamline their business processes and various branches all over the world. What did an ERP system offer that made it worth so much? We will discuss the major features and functionalities of ERP to shed light on it.
Financial Management and Accounting
The first most basic module in an ERP is that of accounting and financial management. An ERP software allows the employees of an organization to enter day-to-day transactional data and purchases. It provides a framework for the accounting data and transactions of an organization to be entered and updated on a daily basis, giving a real time, accurate financial reports. The company’s assets, liabilities, revenue, profits are all consolidated under one roof. The framework provided by the ERP software helps to standardize the accounting information and streamlines the process. It increases the efficiency of the accounting and finance department of the company and increases transparency of the organization as it allows management and employees to view the components that make up a financial figure. The greater accuracy and transparency helps both the internal and external stakeholders of the company to make business decisions.
Purchasing and Ordering
The ERP program enables companies to automate their purchasing process and optimizes the purchases. The ERP software helps in selecting vendors, planning purchases and managing orders. It integrates the data with other business functions like accounting and warehousing within the system and enables employees to have a detailed overview of their stocks and purchases. It enables the organization to make the best purchase decisions and thus save on costs. The vendor management feature of the module allows the organization to maintain steady supplier relationships. ERP helps to centralize the information and have real time reporting about the happenings of the business. It ultimately helps to make better informed buying decisions.
Warehousing and Production
Businesses can manage their inventory across various warehouses and locations with the help of an ERP software. Manufacturing companies can maintain optimal inventory levels and aids in material requirement planning and production order management. Export-import businesses can maintain optimal stock levels and improve on-time delivery – without experiencing shortages or being forced to maintain surpluses. The ERP program enables accurate inventory tracking and costing, giving managers a keener business insight. The greater efficiency due to the automation lowers inventory costs. The on-time delivery and fewer stock shortages increase customer satisfaction and help the company grow.
Customer Relationship Management
One of the most important features of ERP, this allows businesses to win new customers and increase customer loyalty. The customer relationship management tools help to optimize and integrate the company’s sales, marketing and support processes. The ERP program helps businesses to plan and monitor their marketing campaigns, and later helps to analyze the results. By analyzing the customer’s information, it helps companies identify the most promising prospects and convert these prospects into loyal customers. Efficient management of service contracts and warranties improves customer service times and increases satisfaction levels. The company can increase its sales revenue and look towards greater profits arising from more customer conversions.
Integrating Subsidiaries and Partners
Large companies often have multiple subsidiaries and partners, and intercompany transactions tend to increase business complexities. An ERP system automates, streamlines and integrates intercompany transactions and helps to prevent confusion and reduce errors in reporting. The automation increases organizational efficiency by saving time and effort that would otherwise be spent in manually processing and reconciling company data. The ERP system helps companies comply with governmental rules and regulations regarding inter-organizational transactions. The increased transparency in the reporting of intercompany transaction help to give an accurate picture of the overall performance of the business.
Analytics and Reports
The overall ERP system increases organizational transparency and gives a real-time accurate picture of the company’s financial performance and growth. The streamlined and standardized data enables employees to have a clear understanding of the company’s internal situation. The up-to-date data enables fast and accurate report generation for the company’s shareholders and management. The ERP software often helps in the analysis of business data and enables employees to make well informed decisions.
The standardization and integration of company information increases overall organizational efficiency. The greater transparency that results from the ERP system provides incentive to shareholders to continue their investments. The improved customer service helps to increase loyalty and gain new clients in the process. Overall, the implementation of an ERP system helps the company to grow and maximize its potential.
Contributor : Vidushi