Maintaining accurate business records is vital. Many startups know they need to keep correct records of their income and expenses to manage tax time. However, while accounting alone can let you know whether you’re making money, it leaves a lot to be desired.

For example, do members of your marketing team need to coordinate with someone in sales to access customer shopping behavior? Can a member of your HR staff access payroll information?

Various factors determine whether your business requires an integrated solution beyond credits and debits or if it can wait. Discover more about whether your startup needs an ERP.

What is an ERP and how does it differ from other software solutions?

Most businesses select their preferred accounting software when they first open their doors. Such programs are intended to record your income and expenses accurately. It lists your business assets and debts and is a must-have for filing your quarterly and annual returns.

ERP, or enterprise resource planning software, includes all accounting functions but goes much further. It also serves as a CRM – customer relationship management – tool. In addition, it can track inventory, provide marketing reports, and facilitate the flow of information between departments.

The biggest difference between an ERP and other software solutions is their comprehensive nature. Team members no longer need multiple logins to access various parts of your business computer system. Everything is at their fingertips and many such suites use cloud-based technology, enabling your staff to sign in from anywhere across the globe.

ERP comes in three tiers. Knowing the differences helps you select the solution that’s right for your unique business:

  • Tier 3: This form is the most economical and requires little more than junior bookkeeping skills to operate. Intuit’s QuickBooks is one example of tier 3 enterprise software. It only costs between $250 and $5,000, but that low sticker price has a caveat. This type of ERP software is more prone to audit and fraud risks.
  • Tier 2: Roughly 20-40 percent of all companies use such a system to manage their daily operations. Unlike tier 3 programs, these systems integrate supply chain management and manufacturing. An example is Microsoft 365 Business Central. Such systems require the use of an experienced bookkeeper or accountant. Businesses opting for such a solution typically have between $25 million and $500 million in annual revenue.
  • Tier 1: The most complex ERP system available. It’s used primarily by businesses with at least $500 million in gross sales. It can take 18 months or longer to implement and takes over $1 million to establish. It includes financials, tax planning, business intelligence, maintenance, CRM, job costs, manufacturing, and advanced warehousing. Examples include JD Edwards, Orion, and Texada.

Your enterprise size primarily drives the ERP solution you choose. If you’re a tiny sole proprietor, you can likely skip this step until your revenue and team grow sufficiently to demand an integrated solution that allows multiple people to log in from anywhere.

However, many businesses that start with employees, such as franchises, would do well to investigate their tier 3 options, if nothing else.

Benefits of starting with an ERP

Why would you want to implement an ERP solution for your business? Consider the following four benefits:

1. One master record of all company data

The right ERP solution means everything you need to operate your business remains in one secure place in the cloud. Are you on vacation in the Netherlands but need to take care of an urgent client matter? You can access their information in the cloud to have a full portrait of the products and services posted and assist them from your location.

ERPs are particularly vital in today’s telecommuting world. Experts warn that the reality of climate change means more frequent pandemics. With the right program, you won’t have to worry about lockdowns – your most critical team members can continue their work from anywhere.

2. Automation of vital processes

The beauty of ERPs is centralizing your data. Let’s say you sell widgets and get a large order in a decentralized system. Sales first checks with inventory to ensure you have the product available. If not, they have to approach the production team to get them to make more. Production may need to contact your vendors to procure adequate supplies to complete the order.

However, the right ERP automates this process for you. More importantly, it provides real-time updates of potential delays, allowing you to maintain communication with your customers and increase transparency.

3. Increased supply chain visibility

Few things are more frustrating in the business world than desperately needing supplies and not knowing where they are. The right ERP helps you quickly identify and remedy supply chain issues to delight your client base more effectively.

For example, perhaps you need a certain type of black paint to produce your goods. Your ERP could identify shortages from your usual vendors, alerting you to the need to seek alternatives.

4. Improved data security

Paper files leave much to be desired in terms of security. A fire or natural disaster can eradicate such records. Furthermore, physical files increase the risk of unauthorized personnel gaining access to personally identifiable information.

The right ERP keeps your data safe in the cloud. You have a trusted partner in keeping confidential client data secure.

What types of businesses benefit most from ERP?

Multiple businesses can benefit from ERPs. If your industry falls into this list, you might start thinking about solutions:

  • Manufacturing and distribution: The right ERP helps you monitor vendors and keep track of necessary supplies.
  • Professional services: You can use the CRM tool to manage client relationships.
  • Construction and industrial services: Track the subcontractors needed and when they are paid, monitor construction liens, and handle payroll for contractors and staff.
  • Health care: Keeping patient information secure is a must when adhering to HIPAA regulations.

Factors to consider when selecting an ERP

What should you keep in mind when selecting an ERP for your enterprise? Please perform the following steps:

  • Do a thorough analysis of your current processes. What could you potentially streamline? Which shareholders would most benefit from universal access? How can you increase overall productivity with the right ERP solution?
  • Evaluate your current technology. Does your business run on Windows, Mac, or Linux? It affects which software you choose.
  • Develop a realistic implementation plan. Some ERP solutions can take months to establish. How much time will you need and who will the change affect the most?
  • Seek outside advice. What do others in your industry use? Going with the standard often assists in conformity and providing a consistent user experience.

Does Your Startup Need an ERP?

Owning a business means staying on top of multiple details. The right ERP can help you do more than accounting by managing inventory, customer relationships, and vendor relations. Does your startup need an ERP? Conduct your analysis and get started on the right productivity and organizational schema for your enterprise.

Devin Partida is the Editor-in-Chief at ReHack Magazine, where she covers topics related to data, cybersecurity, tech investments, and more.

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