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4 things you need to know about ERP system

As the business grows, so do the number and complexity of the processes going on in the company. Their effective management is simply no longer limited to human resources. Large and medium-sized businesses have found a solution in ERP systems, through which they plan, manage, and produce all the processes with complete analytics.

  1. What is an ERP system?

ERP (Enterprise resource planning) system is a powerful program that allows businesses to automate all important processes. By doing so it drastically reduces costs and the likelihood of making mistakes, thereby increasing efficiency and profitability. The system automates all directions of the company. Imagine – manufacturing, distribution, procurement, sales, warehouse management, accounting and finance, HR management, CRM, and all other business processes of the organization are not only recorded in the ERP system but also planned, controlled, and enabled for comprehensive analysis in any period.

  1. Why is an ERP system necessary for a company?

In the modern market, medium and large companies that do not use smart systems to automate processes will find it difficult to gain a competitive advantage. Especially when competitors work with an organized system – they have plans, control mechanisms, and information to make timely and correct decisions in a changing environment.

Even today, many companies use several programs for different areas – they have separate programs for warehousing, HR, manufacturing, accounting, etc. These programs need to be integrated, which is associated with many problems – data duplication, delayed exchange of information, technical problems, etc.

For example, in a supermarket chain, without a proper ERP system, there will always be queues at the cash registers, incorrect prices indicated on products, delays in inventory, excess or deficient stocks, and other similar problems. This can lead to customer dissatisfaction and loss consequently. In a modern ERP system, these problems can be avoided with various functions – by pending checks, making automatic orders, inventory in an open store, accounting for product deadlines, etc.

In addition, without an ERP system, it is very difficult to get information about the ongoing processes in the company – you need to export documents from all programs in Excel format, then put them together, and finally, these documents must be integrated by someone. It takes a lot of time and human resources, while the ERP system with powerful reporting, performs the same process completely painlessly, in seconds, and with white accuracy. Consequently, the company’s management always makes informed and fact-based decisions.

  1. What is a mini ERP and how is it different from an ERP system?

In addition to large and medium-sized companies, small companies also need to streamline business processes and improve accounting. There are mini ERP systems on the market for them. If you look at their menu, you may find that they look very much like a large-scale ERP system. They, like real ERP systems, have modules for purchasing, sales, accounting, warehouse management, and so on. However, unlike the ERP system, the mini ERP functionality is mainly focused on process accounting rather than planning-management. For example, in mini ERP systems, you will be able to record inventory spending and carry out accounting, but you will not be able to budget in advance and you will not be able to control sanctioned spending at the expense of those responsible. The capabilities of mini ERP systems, compared to real ERP systems, are limited and will not be able to fully automate the complex business processes of a large or even medium-sized company.

We should also mention the programs that serve only one specific part of the companies’ activities. For example, there are accounting programs that make it easier for accountants to operate, but unlike the same mini-ERP, they can not account for and automate operational processes. For example, if a trading company uses only an accounting program, it will be very difficult for it to organize and manage the warehouse efficiently, because the accountant and the warehouse manager communicate with each other through papers, or at best – EXCEL files. Such a relationship is ineffective and errors are often made, which is associated with additional costs. This process is easily managed by even a mini ERP system, because warehouse managers, store managers, and other operating personnel of the company can also work in it in addition to accountants. Between them, communication takes place in real-time, automatically, in a unified system.

  1. How should the ERP system be introduced in the company?

The introduction of an ERP system in the company requires a team of professionals. They must be thoroughly familiar with the business processes of the organization in order to be able to optimize the system for the specific requirements of the company.

Despite the fact that the ERP system is equipped with numerous features, almost all companies have specific needs and requirements that may require some modification of the system. Therefore, the ERP program provider company should also be ready for development.

The introduction of an ERP system is a complex and two-way process where the involvement of the client company is just as important as the implementation team itself. There is one thing that a company interested in implementing an ERP system should know: sometimes, rather than changing the ERP system in a way to suit each specific requirement of the company, it is better to change the work process of the company. Why is that? One reason is that world-class ERP systems are being developed in the footsteps of numerous client companies and their functionality is based on best practices. Therefore, sometimes it is better to think: are we doing something right in the company? Maybe rather than modifying the program and paying the associated costs, it would be better to rearrange the processes, and organize it according to the system logic?

ERP is a system of enormous capabilities, during the operation of which, especially in the initial period, the company may face some difficulties. One of the reasons for this is that the introduction of an ERP system for an organization means a transition to a higher level of work culture. However, there is a lot of news for employees and they need to master the functionality of the system. The support team must respond effectively and promptly to help the organization navigate the system quickly.

To summarize, the introduction of an ERP system helps organizations achieve maximum efficiency. However, one important thing to keep in mind here: in order to be able to further measure and evaluate the benefits of the program, the company needs to know exactly for what does it need the ERP system, what are its goals and expectations. However, the introduction of the ERP system is a responsible process, which, together with a qualified team, requires active involvement and work from the company. Nevertheless, the system gives the company a competitive advantage, which is crucial in the modern market.

BDO Digital offers SAP Business One and 1C ERP to businesses in Georgia.

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