Today a small business can connect a number of third-party cloud programs to their accounting software to replicate the functions of an ERP. However, an ERP has several key advantages.
A well-designed ERP system tracks all key information relating to resources in an organisation in a single interface.
Accounting software requires a business to store financial information and non-financial information in multiple systems, meaning users must switch between multiple interfaces.
Each interface requires training and ongoing education for staff and potentially conflicting information where systems are not syncing properly.
ERPs can customise approval workflows, whereas accounting software doesn’t differentiate enough between users. Access to parts of the accounting program is often either all or nothing. Restricting access means employees are unable to see information in the business they need to make decisions (such as sales). Or a company has to reveal commercially confidential information to employees for the sake of efficiency.
An ERP stores all information in a single database, ensuring information is current across all functions within the ERP. Accounting software uses multiple databases that sync data between them. This syncing can occasionally fail, especially when one of the syncing applications has a major update.
ERP removes the need for manual inventory management and reconciliation. It is replaced with a system where inventory management is fully integrated with back-office and accounting processes managing optimal levels of stock at multiple locations based on demand.
An ERP can set minimum and maximum stock levels calculate expected demand for products and suggest re-ordering based on these forecasts.
Real-time visibility means a business always knows what inventory it has and whether it can meet sales orders and correctly forecast future sales. It can detect slow-moving inventory in real-time which may prompt a business to take action. For example, a special promotion could clear stock before it becomes obsolete.
An ERP also frees up working capital from the process of storing, counting and reallocating inventory, and reduces associated errors. It improves margins and ensures customers receive the products they’re expecting.
ERP platforms are designed to work within the most complex businesses that use a variety of costing methods. If a business is importing stock, an ERP can manage total landed costs in multiple currencies by automatically converting them to the local currency.
ERPs are especially well suited to businesses with multiple sales channels – for example online, retail shops, discount outlets, and trade sales. An ERP can set up systems to manage all these channels, whether it is to send stock to certain customers or to fill orders from multiple warehouses.
You can use an ERP to set rules for fulfilling orders. For example, an online retailer with warehouses in different states can set up a rule to ship products to a customer from the closest warehouse.
ERP gives a business complete, real-time visibility over its operations from beginning to end. This is a critical benefit to a manufacturer. By effectively managing its supply chain, a manufacturer can reduce delays in waiting for parts to complete orders. Whether it’s a global or domestic supplier, contract manufacturer, or vendor, stock levels flow right through the chain.
If the ERP solution is cloud-based, this enables a business to enter new international markets faster. It eliminates many of the traditional limitations of a supply chain that covers different geographical locations.
An ERP can potentially track all the costs associated with manufacturing. NetSuite for example provides inventory tracking by maintaining a complete history of components sold in a product kit or package throughout its lifecycle.
Crucially, an ERP also offers scalability. If a business starts with light manufacturing but expands to advanced manufacturing, the system can handle the increased complexity.
An ERP system provides a single source of truth on data: inventory, customer information, debtors, sales; business-critical information is visible in real-time.
When inventory is accounted for in real-time, across multiple warehouse locations and multiple sales channels, a business can make quick and well-informed decisions.
Activities such as storing, counting, and reworking inventory that ties up additional working capital and potentially reduce the availability of products, are eliminated.
It is also much easier to run accurate financial reports. Financial integrity is much easier to maintain when transactions in the inventory system are integrated with the back-office chart of accounts.