What is ERP & How it Can Help Your Business
ERP – it stands for Enterprise Resource Planning — but the problem with this definition is that it doesn’t illuminate what is possible with the system. And that’s a problem – because there are many users of ERP who don’t realize the full potential or nuances of a good ERP program. So let’s dig a little deeper.
�Ш�ШLet’s suppose there’s a business that wants to buy a good that you sell. In this typical business-to-business (B2B) transaction, the ERP program allows your organization to take the order while checking to see if there is inventory in the stock ledger. But it’s more than an order taking and inventory system. The ERP also allows for the timing and planning of payment requests. In this example, when the order is fulfilled, the system can generate a request for payment through an invoice and account for the payment via a cash receipt.
These accounting capacities are all part of the finance function within an ERP.�Ш�ШSo as you can see – there is a great amount going on within an ERP just by the sheer accounting function alone. It allows for your business to plan ahead and schedule key action in the organization without the need to have multiple Excel sheets or other various programs to keep track of various customer information and purchase data.�Ш�ШIn essence, an Enterprise Resource Planning program is managing all the areas where there is a commitment to act.
ERPs differ dramatically from their less complicated cousin, the Customer Relationship Management system. The CRMs track speculative actions such as Marketing and Sales. An ERP, on the other hand, manages all the areas where there is a commitment to act such as purchasing, distribution, manufacturing, warehousing, shipping, and accounting. When there is a promise to fulfill on the part of the customer, the ERP is the system that makes for a smooth delivery of those promises among the many actors in all but the smallest organizations (when there are only one or two people involved, they can get away with lightweight ERP systems such as QuickBooks).
As a result of an evolution without a design-in-mind, in many businesses, you will find that there are typically multiple systems to track the accounting and fulfillment functions. As you can imagine, this causes a lot of headaches – so much time is spent tracking down and pulling together lists, performing information lookup, or creating reports, that valuable time and money is lost.
In many cases, businesses hire employees to keep track of the information that can easily be stored and managed in an ERP system.�Ш�Ш
What makes an ERP system so important is precisely this: it is more efficient and it is more cost effective to track your fulfillment and accounting functions in one system. And ERPs also allow owners to plan these communications and work ahead of schedule – for example, if you have a monthly subscription program, the system can automatically handle recurring credit card charges while creating future orders to fulfill in a fully-automated fashion.�Ш�ШA quality ERP system allows for the planning of your future growth. QuickBooks,for example, works for a very small business. But the QuickBooks design breaks down when there are 15 or more employees; it’s not the right tool as you grow; — think of it as using a shovel to dig a swimming pool when you really need a bulldozer. Most any organization that has experienced significant growth has at least contemplated or captured the value offered in an ERP system.
Copyright © Marty Zigman 2011
Marty Zigman, founder of Prolecto Resources, has developed scalable eCommerce systems for companies such as Time Warner and Bank of America which processed over $1.6 billion in order revenue within 12 months. Prolecto Resources invents with Cloud based software to make business owners more profitable. For more info, visit http://blog.prolecto.com