Is ERP systems for Small Businesses? Breaking the Myth

Historically, small businesses have relied on local services and self-innovation to drive business growth. For example, a neighborhood retail chain uses local software to maintain its books of accounts. Technologies that streamline operations have become paramount — to sustain the business, enhance efficiency, and grow. The new wave of ERP systems that are customizable and adaptable to any business size is bridging this technological gap. These ERPoffer one cloud platform providing critical support in financial management, human resources, supply chain, manufacturing, and other primary functions. They integrate different aspects of small businesses and offer valuable analysis and data insights improving efficiency — thus empowering entrepreneurs with constant modernization and system optimization streamlining operations by reducing time and errors.

Like any other technology, integrating ERP system  with small businesses comes with numerous considerations and benefits. Let’s talk about these aspects in detail as we go along.

Considerations of using ERP systems

ERP systems offer numerous comprehensive benefits to small businesses, but owners must contemplate a few considerations beforehand. To begin with, small businesses often find themselves in uncertain financial positions with limited resources. Additionally, they face limited investor participation, leading to further resource constraints. Owners need to be vigilant enough to identify their shortcomings, and be decisive on their future goals to determine which ERP suit their needs, and can efficiently address these challenges.

Implementation Costs and ROI - Small business owners often describe the upfront cost associated with ERP as beyond their affordable budget. Many owners feel ERP systems are reserved for larger corporations that can afford them, as it does not offer any significant ROI to them. However, while the costs often seem expensive for small businesses, ROI is eventually met in long-term usage. Addressing concerns about implementation costs and ROI requires a meticulously planned, goal-oriented strategy for digital transformation, which can simplify the decision-making process.

Knowledge - Small businesses often have a small workforce with limited knowledge of ERP system. A significant consideration of implementing ERP in small businesses is the fear of change among the existing workforce, whose complete adoption remains critical for its success. This fear of change is driven by factors like potential job loss, which owners need to overcome to upskill the available workforce to operate ERP.

Resource Availability -  Adopting to ERP requires a commitment of both monetary and workforce resources for a successful implementation. A skilled workforce operating ERP ensures a more seamless adaptation to change and quicker improvement in efficiency. Whereas, sufficient funds are necessary to access and integrate these technologies. Small businesses need to optimize the management of resources to implement new technology smoothly.

Security and Compliance - It is vital for small businesses to examine the security measures offered by ERP before implementation. They need to look for strong encryption and protection mechanisms that protect the data otherwise at a greater risk of digital fraudulent activities. Furthermore, small business owners need to analyze the compliance and statutory requirement aspects of ERP, such as e-invoicing and e-filings before implementing them in their ventures.

Scalability and future growth plans - Small businesses need to prioritize scalability and future growth plans, and an unplanned implementation of ERP can potentially damage these initiatives. Strategic implementation and usage of these systems can make small businesses more efficient, but the financial and operational considerations should be scrutinized to make an informed decision.

Benefits of using ERP systems

Smart resource allocation has long been recognized as a key enabler of a successful small business. Bootstrapping and prioritizing investments in various resources, such as workforce and operational capabilities, are crucial for growth and sustainability. ERP offer an analytical and data-driven approach supporting strategic decision-making. Here are some benefits small businesses can expect through a successful implementation of ERP systems.

The most apparent benefit of using ERP is comprehensive business management, which brings diverse functions like operations, human resources, financial management, supply chain management, and others under one umbrella. These systems monitor inefficiencies and provide valuable data to overcome them as well. Additionally, ERP transform small businesses from a manual scattered operation to one platform digital outlook. Their cloud-based operations enable small businesses to store relevant data in a secure location and reduce the chances of human error through automation.

Furthermore, the high flexibility of ERP enhances the overall efficiency and accuracy of small businesses while improving their business visibility, risk management, and capability to scale. Their robust algorithms, with significant computational power, manage complex processes such as accounting, logistics, and supply chain management, resulting in improved business reporting, customer service, inventory outlook, and process management.

Conclusion

As technology development encompasses the world, small business owners are transforming and adapting to the digital domain to remain competitive and expand their footprint. The inclusive and innovative approach of ERP offers growth and scalability in a potent digital world through digitization. They align small businesses effectively and coherently, catering to the rapidly changing business environment. This directly translates into strategic decision-making for business growth. These are considered highly critical factors to ensure the expansion and growth of small businesses and have a strong foundation for the coming years. 

Authored by Geetanjli Dhanjal, Senior Director of Business Transformation at Yantra