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What is an ERP System?

Brad Ewin
Written by

Last editedApr 20202 min read

ERP – which stands for Enterprise Resource Planning – can be an immensely powerful business tool, if you understand how to use it correctly. Enabling you to streamline business-critical processes and information flows across your entire organisation, an ERP system can help your business keep pace with the relentless speed of modern enterprise.

Find out more about the characteristics of ERP systems with our helpful guide and see whether it could be a good fit for your business.

ERP system meaning

First and foremost, what is an ERP system?

Essentially, an ERP system is a type of software that is used to manage and integrate important, day-to-day business activities. This covers a broad range of areas, including project management, supply chain management, procurement, and so on. In a nutshell, ERP systems tie together numerous business processes to create a single, fluid system and enable the flow of data.

There are several different types of ERP system, each of which has their own unique benefits:

  • Cloud ERP (also known as SaaS ERP) - an ERP system hosted on cloud-based software

  • On-premise ERP - an ERP solution that runs in your own data centre

  • Hybrid ERP - a solution that allows you to run some applications on-premise and some applications on the cloud

Characteristics of ERP systems

ERP systems integrate all the systems that are essential for running the business. From order management and accounting to human resources and customer relationship management (CRM), you can use an ERP system to streamline these processes and information flows, creating a shared database that everybody in the organisation has access to.

Without an ERP system, this data is siloed by each department and can be difficult to access. This reduces the efficiency of your business, hinders information flow, and provides a significant barrier to collaboration and communication.

It’s also important to note that ERP systems allow for an improved level of automation, reducing your business’s reliance on time-consuming manual processes.

For example, you could automatically reimburse employees who haven’t taken all their PTO by the end of the year by integrating HR with your accounting processes. Alternatively, you could set up accounting within your ERP system to send invoices automatically by pulling data from customer history.

Advantages of Enterprise Resource Planning (ERP) systems

There are a number of benefits associated with ERP systems.

One of the key advantages of Enterprise Resource Planning (ERP) systems is the fact that it can provide you with real-time information, which enables companies to proactively address issues before they become significant.

Plus, an ERP system can offer enhanced customer service by providing a single source for tracking billing and relationships.

In addition, the improved automation provided by ERP systems can help you to streamline your business model and cut down on unnecessary manual processes. This automation can make it easier to achieve financial compliance with local regulatory standards, reducing the amount of risk that your business is exposed to.

Does my business need an ERP system?

While all businesses are likely to benefit from an ERP system in some capacity, there are certain conditions that may make an ERP system particularly beneficial for your organisation.

  • You’ve got too many disparate systems – When your business was growing, you may have developed different systems for each department, each with multiple data sets. However, problems can arise when these disparate systems stop working together effectively.

  • You’re unable to answer basic business questions – After a certain point, you may struggle to answer basic questions about your business because you don’t have visibility into siloed data and systems. If you can’t answer questions like “what was the overall number of returns last quarter?” or “what was our order cycle time from every distribution centre?” then it may be time to consider an ERP system.

  • You’re spending longer on daily activities – You may find that as time goes on, you’re spending increasing amounts of time on key activities, such as closing your accounting books. By integrating solutions and data within one system, you can complete these basic tasks much more efficiently.

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