ERP software or Enterprise Resource Planning enables organizations to improve and optimize business processes and maximize revenues. Today, ERP software has become a daily operational requirement especially for SMEs to improve productivity, reporting, cost-control, competitive advantage, and quality. But these benefits can only be achieved if the business makes the right choice of ERP inventory software. To make this choice simple, this article highlights what is ERP software, the working of ERP systems, ERP implementation, the functions of ERP, and its benefits.
What Is Enterprise Resource Planning (ERP)?
Enterprise resource planning is an integrated management system that automates and monitors essential procedures like manufacturing, inventory, production, accounting, supply chain management, sales, and in some cases, human resources.
ERP business software solutions leverage technology and real-time automation to simplify operations and administration for business owners. They support efficient business management by integrating diverse applications such as storing, collecting, and management of raw materials, production cycle monitoring, and interpreting business information from various company activities with zero manual effort. Modern ERP systems are deployed on cloud-based technology for increased business productivity. Cloud-based ERP applications also enable you to access essential data from any location, readily.
What Is ERP Software?
Enterprise resource planning software is a comprehensive and automated system that is used on-premises, or on the cloud to manage all facets of an enterprise. Along with primary functions such as accounting, ERP systems cater to inventory, financial administration, supply chain management, production, and manufacturing operations.
Manufacturing ERP software helps to plan, predict, budget, and report concise, data-driven information to the management. The shared transactional information from various businesses helps the ERP software to prevent and eliminate data duplication and ensure data integrity within a single platform.
ERP software offers transparency and control over multiple functions of the business. ERP systems and software provide several functions for large, medium-sized, and small organizations, along with industry-specific customizations to reduce manual dependency and enhance business growth.
As automation and technology are becoming easily accessible today, the use of ERP software has become an integral part of the majority of business operations.
Having understood what is an ERP software, let's see how ERP systems work and why they're important for your SME business.
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How Do ERP Systems Work?
An ERP software system brings together complex business processes in a simple manner. It eliminates the need to depend on scattered resources to run a business optimally, ensuring higher quality and customer satisfaction. This system works differently from single-function applications, facilitating other enterprise modules to integrate and collaborate with each other, to perform tasks from a centralized database. ERP for SMEs enables users to access data-driven insights across all processes from the smallest to the largest operations. The system effectively manages cross-functional dependency to ensure accuracy without duplication. For example, when your business initiates a shipment order for the last item in stock, the inventory management module records the information about the inventory to be replenished and informs the concerned admin to review purchase requirements to maintain stock levels.
Read Also - What Is Purchase Order Management Software?
Why Is ERP Important for Your Business?
All businesses can partially move to the cloud with a hybrid ERP system, in a short development window. Thereby, good ERP inventory software can help your company adopt automation with cloud abilities, enhancing and modernizing everyday tasks. Especially, for an SME manufacturing business, the use of an ERP system can resolve several pain points by improving communication across departments. Inventory management ERP also supports improving production cycles and vendor relationships, ultimately boosting productivity. Through the use of ERP for SMEs, you can manage reporting and analytics without third-party involvement, evolve your company's production and inventory systems, and enjoy enhanced data security. Moreover, the advantages of ERP also help to attract a next-generation, skilled workforce who prefer seamless manufacturing technology.
Functions of ERP
ERP systems tie together a multitude of business processes and enable uninterrupted data flow between them. With the use of the right ERP software, SME businesses can achieve cost savings, improved performance metrics, and strategic efficiencies.
In addition to these responsibilities, inventory management ERP automates various key functions such as:
ERP software for inventory management offers user-friendly tools to manage orders, deliveries, sales, and shipping processes. It also ensures that all transactions are auto-listed in the ledger, out-of-stock items are well managed, and orders are shipped on a timely basis.
- Sourcing and Procurement
ERP for SMEs helps to secure materials and components needed for production from suppliers. An ERP software solution provider helps to maintain a list of approved vendors and tie them to specific products ensuring efficient supplier relationship management. ERP software for inventory management automates quotation requests and tracks incoming and outgoing inventory.
An ERP designed for manufacturing enterprises leverages a manufacturing execution system that helps to plan production, ensure the availability of raw materials and machinery capacity, update the status of goods-in-progress, and more. With this function of ERP, companies can easily track final manufacturing output against forecasted production charts.
- Supply Chain
This feature in ERP tracks overall supply and goods movement from sub-suppliers to suppliers to manufacturers, including distributors and retailers. It also manages returned products for replacement or refund. It also includes collaboration with procurement, order management, and warehouse management.
With an effective ERP sales module, SMEs can drive more leads, build ideas, execute campaigns, and track customer activities. They can also automate the process of customer notifications to ensure customers are always in the loop and are satisfied with delivery.
ERP with finance allows businesses to assess their current financial dashboard and improve future plans. It helps to track accounts payable and accounts receivable and manages the general ledger. It also creates and stores financial data like payment receipts, balance sheets, and tax statements. An inventory ERP software integrated with accounting, also automates vendor payments, billing, account reconciliation, and cash management tasks so that the accounting department can close the books on time, and comply with relevant revenue recognition standards.
- Human Resources
Certain ERP software also offers detailed records of employees and documents regarding performance reviews, job descriptions, and more. It also tracks working hours, paid time off (PTO), sick days, and employee incentives for effective human resource management.
Benefits of ERP
ERP implementation has resulted in business process improvement for SMEs across the country. Listed below are some benefits of ERP software to help in determining its value for business:
- ERP for SMEs provides real-time information with the help of intelligent reporting tools. You can get a centralized and integrated database for all business procedures.
- ERP business software solutions ensure better access to all information related to the customer, leading to on-time delivery and higher-quality goods.
- It also helps you to identify the amount of stock present in your inventory eliminating the chances of overstocking or understocking.
- An ERP software solution also offers automatic invoicing to ensure seamless payments and collections.
- It streamlines procurement management for companies along with multiple other services such as material requirements planning, production support, and accounting tools, all under one platform.
- With an ERP software solution provider, especially with cloud ERPs, you can be assured of high security and data safety.
- ERP inventory system reduces production bottlenecks by ensuring effective lean inventory and demand forecasting. You can also achieve business transparency and ease of transactions across all your vendors.
- With an ERP system, you can implement smarter workflows and easily automate routine and manual tasks.
Read Also - What Is Product Lifecycle Management?
Difference Between ERP And Financials
Financials include cash flow operations in the business, including accounting and fund management. It also refers to revenue management activities reported by different departments.
Although financials and ERP are closely related, they are different based on certain factors, and financials are a subset of the ERP system. Let's understand more about each of these systems to understand how they are different from each other:
- Financials include all business functions of the finance department of a business enterprise.
- They include several modules for sub-ledger accounting, financial accounting, accounting hub, revenue management, payables and receivables, asset management, project management, job venture accounting, and others.
- For all related operations, financial software utilizes analytical and reporting capacity, to comply with reporting necessities of government institutions. This includes institutions such as the International Financial Reporting Standards (IFRS), the National Financial Reporting Authority, or other applicable institutions.
- In the case of public organizations, financial software produces periodic financial statements for governing bodies.
- A narrative reporting tool determines financial reports for the Chief Financial Officer, who ultimately oversees end-to-end financials.
- While financials only take care of one function, inventory ERP software handles many core functionalities, including going beyond finances.
- ERP software helps to streamline end-to-end business operations like supply chain management, procurement, production, manufacturing, inventory, order management, and maintenance.
- It also includes project management, product lifecycle management, logistics, enterprise performance management, risk management, and in some cases, human capital management.
- ERP for inventory management also integrates with front-office apps to ensure a holistic view of consumers while providing Customer Relationship Management (CRM) solutions.
- Cloud-based ERPs leverage advanced technology to offer tools like digital chatbot assistants, business intelligence dashboards, and smart integrations.
- ERP software solution providers ensure real-time data updates across modules and capacities to enhance everyday business functions, drive efficiency and derive deep business insights.
- ERP systems are primarily meant to centralize the complete enterprise, and their management requires partnership with all management roles, including Chief Information Officer (CIO), Chief Financial Officer (CFO), Chief Operating Officer (COO), and other leaders.
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Why Should You Move to Cloud ERP Solution?
Businesses across India have recognized the growth that an ERP can facilitate. If you're an SME business owner, adapting ERP cloud solutions can accelerate several business functions for you, within a short time.
Keeping these benefits in view, we have also outlined the following reasons why you should move to a cloud ERP solution:
1. Modern cloud abilities
Real-time design and a flexible business model enable cloud-based ERP systems to improve functionalities without needing to be updated manually and periodically, unlike legacy systems. Also, without any manual dependencies on users, ERP inventory systems can automatically process inter-connected data and inputs for easy decision-making.
2. Value addition beyond existing ERP
The emergence of the cloud has empowered businesses to operate at a renewed pace, combined with reduced costs, higher speeds, and optimum infrastructure. This has enabled them to scale faster than they did earlier.
A cloud ERP provides a similar upgrade to a business that traditional ERPs fail to provide due to design limitations.
3. Reduce third-party dependencies
Earlier, analytics and reporting for a traditional ERP system were dependent on third-party vendors. But a Cloud ERP interconnects diverse business functions, in a computerized way to provide all insights to business owners without external dependencies.
This enables businesses to access all important reports via cloud ERP applications, without depending on third-party interventions.
4. High flexibility
Cloud applications provide easy data migration from existing ERP modules. They also help you to customize your ERP features based on your unique business requirements. This ensures that your ERP software solution meets your business needs and delivers business value without high operational change.
5. Improved collaboration
In order to cater to business requirements, especially for SMEs, a cloud ERP provides a continuously updated view of all shared databases and dependencies to ensure faster collaboration between teams.
These databases are maintained and supported by a centralized database management system. This ensures accurate data flow and smooth communication for better stakeholder relationships and revenue.
5. Robust security
ERP cloud solution is based on trusted web platforms with highly encrypted servers to ensure complete data safety. This ensures that business data is always safeguarded from potential threats and data loss. Read Also - Cost of Goods Sold: Definition, Formula, Example and Calculation
ERP Implementation Challenges
ERP implementation involves multiple phases of research, discovery, planning, design development, and testing. Amending huge data repositories into renewed operations can be a difficult task.
Since company operations work endlessly, any change in the system causes workflow abruptions. Hence, the implementation of an ERP system comes with challenges as discussed below:
1. Costs of the software
Despite the established importance of ERP, many businesses are hesitant to adopt it, because ERP costs increase with the facilities that it provides. It's important to select an ERP software solution according to your organization's business needs. It would be best if you also calculated third-party software add-in costs, continuous training, and maintenance costs.
2. Complex data conversion
Once you install the right ERP software for the manufacturing industry, you can ensure optimum business processes under a central system, backed by automated data conversion. This enables every team member to access the same information in real-time.
However, the following factors may affect the costs related to data migration and conversion:
- Building a data conversion strategy can be time-consuming, demanding efforts from all business verticals.
- Bad data conversion leads to increased costs and delays.
- Ineffective definition and analysis of data sources can lead to wastage.
3. Requires training
In order to integrate new software with existing software, you will require to train your staff and administrators. This can lead to an increase in training costs and delay other business procedures, due to time commitment requirements.
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ERP integration is the process of connecting your ERP software with other internal systems. This includes various cross-functional integrations for ease of business. An example of this is the integration of inventory management with sales, purchase, and production to effectively analyze minimum or maximum stock levels and inventory valuation.
TranZact offers value-driven ERP solutions with important integrations across all manufacturing functions. It is focused on four core modules including sales, purchase, inventory, and production. All these functions are closely interlinked on TranZact with the power of the cloud. TranZact offers Tally and BUSY integration for easy outflow of accounting data, so that business owners can continue using their existing accounting tools yet automate all other functions in their company.
It helps to improve productivity by automating business procedures through real-time reports, top-notch privacy and security, instant access to all business data, and more. With its dedicated inventory module and barcode tracking, it helps to oversee dead stock, while also enabling auto stock adjustment, and real-time inventory valuation. It maximizes production capacity by closely integrating production functions with inventory and sales verticals.
How to Choose the Best ERP System?
If you're wondering which is the right ERP solution for your business, you might first need to determine your company's needs and requirements. It is recommended to look for an ERP solution provider that offers services as per the needs of the business and potential customization requirements.
Ensure that the ERP system you consider integrates with relevant software solutions that your business is already dependent on, or at least provides an easy substitute for the same. Choose a vendor with the expertise and reputation of providing the best service in your industry.
Another important aspect is the cost of the ERP software or system. Ensure to consider the cost of implementation, customization, add-ons, maintenance, training, and overall hidden costs before deciding on any ERP tool. You may also opt for free ERP software for a small business, to cut down on ERP costs.
Access the Best ERP Solution With TranZact
As business needs are becoming more complex, modern solutions like TranZact can help you meet advanced customer demands with customizable features and broader integrations.
TranZact is a zero-effort, cloud-based business automation software that provides best-in-class ERP solutions specifically for Indian SME manufacturers. With TranZact, you can access all ERP functions and also a lot more.
With TranZact, you can easily manage production, inventory, material requirements planning, and supply chain and also optimize production planning to eliminate downtime and ensure cost-cutting. It offers a multilevel bill of material, BOM costing, production routing, and testing tools. Therefore, TranZact's cloud ERP solutions ensure intelligent and automated processes to accelerate business growth and profitability.
FAQs on ERP Software
1. What is ERP Software?
ERP or Enterprise Resource Planning software, is a comprehensive and integrated system that enables organizations to manage and automate their core business processes. This includes management of inventory, production, manufacturing, accounting, customer relationship management, and more on a centralized platform for better decision-making.
2. What is an example of ERP Software?
An example of an ERP software provider is TranZact, which integrates inventory, production, material requirements planning, sales, purchases, and more. TranZact enables SMEs to automate processes and grow with its cloud-based ERP platform.
3. What is the importance of ERP?
The importance of ERP lies in its ability to streamline core business processes for efficient data management, and improved collaboration in the business. By providing a centralized system, ERP enhances productivity and reduces operational costs. It helps organizations gain a competitive edge in today's dynamic business environment.
4. What is ERP in accounting?
In accounting, ERP (Enterprise Resource Planning) refers to the software and systems that help manage and integrate financial processes within an organization. It encompasses functions such as general ledger, accounts payable, accounts receivable, financial reporting, and budgeting, providing a comprehensive solution for financial management and reporting.
5. How does ERP software work?
ERP software works by integrating different modules that correspond to specific business functions, such as finance, human resources, inventory management, manufacturing, and customer relationship management. It facilitates data to flow seamlessly between departments, increasing productivity.
6. Is ERP suitable for SMEs?
Yes, affordable ERP software like TranZact can benefit small businesses by improving efficiency, automating operations, and minimizing costs. TranZact is an intuitive ERP solution that caters specifically to the needs of small businesses.
7. Is ERP software secure?
Trusted ERP software is highly secure as it typically includes security features such as user access controls, data encryption, audit trails, and regular security updates to protect sensitive business information.
8. How much does an ERP cost?
ERP software price may range between ₹10,000 and ₹10 Lakhs, depending on the features, number of users, functions, and other factors. The price may also be lower or higher based on the expertise of the ERP tool and its credibility in the industry.
9. What are the 3 common types of ERP software?
The three common types of ERP software are cloud ERP, on-premise ERP, and hybrid ERP, which is a combination model of a cloud and on-premise ERP.
10. Which is the best ERP software for manufacturers?
TranZact provides the best manufacturing ERP solutions with production planning, management, reporting, and inventory solutions. It offers a real-time overview of raw material availability and machinery capacity for efficiency in manufacturing processes.
As a free ERP software, TranZact provides a lifetime free sign-up with all base features, available for an unlimited free period. Advanced features can be availed only when your business is ready.