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Advantages and Disadvantages of ERP Software for Small Businesses

If you’ve heard the term ERP in passing, it sounds more like a medical tool than it does a business tool. But that is exactly what it is- a powerful software tool that millions of larger companies use to run their internal processes effectively. But what about ERP effectiveness for smaller businesses?

Small and independent businesses should weigh up the disadvantages and advantages of ERP systems before deciding if the software is right for them. Here’s what you should know before integrating this extensive software into your business.

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What is ERP?

Enterprise resource planning, or ERP, is a system that integrates multiple software applications and business processes into one standardized platform. ERP software streamlines accounting and finance, human resource management, administrative, distribution, inventory costs, and many other functionalities.

ERP systems offer organizations a shmorgishborg of operations. This software is like the buffet of processes that allow companies to pick and choose specific internal functionalities to fit their needs. However, each industry will likely use one group of key features packaged to particular business types, as complete customization is too costly for many.

How Does Enterprise Resource Planning Work?

The manufacturing industry was responsible for the creation of the first ERP system. Over time, the software system gained popularity in many other industries, expanding to include hospitality and service industries, health care, government bodies, financial services, and education.

Each industry has its own variant of integrated software and business operations, as companies all require different things to run optimally. ERP systems streamline processes into one central software, improving efficiencies and effectiveness of companies overall.

Such ERP software solutions and information systems can be used by companies for:

  • Customer relationship management
  • Human resource management
  • Business intelligence
  • Financial management and accounting
  • Inventory stock levels and order processing
  • Merchandise procurement and purchase orders
  • Project management
  • Risk management
  • Administration tasks
  • Ecommerce integration
  • Storage of company data and customer information
  • Demand forecasting

Features of an ERP System

Even though an ERP system’s functionalities change from industry to industry, there are still certain features that every system will have in common. Such common traits include:

  • A shared database
  • Company-wide integration
  • Consistent design and interface

There are advantages and disadvantages to using this type of system for your internal processes. It’s vital to take them all into account before deciding whether or not to integrate ERP software into your business.

Advantages of ERP for Small Businesses

If a company decides to use enterprise resource planning to integrate all of its internal processes, there are many benefits of ERP to be gained. These ERP benefits for business leaders include:

  • Company-wide integration: Streamlining all internal applications into one platform can go a long way in making collaboration more manageable and efficient. Different departments can easily share data and collaborate on projects together, without a disconnect when working through connected applications.
  • Consistent processes: Since all operations are integrated into one platform, the tools and interfaces are all uniform in nature, making it easy to navigate across all applications.
  • Business insights: With all business information in one place, it is easy to run reports and gain a complete picture of the business’ processes. These insights can identify strengths and weaknesses, production bottlenecks, and supply chain issues to help you tailor a business strategy effectively.
  • Improved efficiency: ERP software can be slow to integrate into an organization, but once done, business functions are more efficient and effective than ever before. As the applications work on one platform and all data is funnelled into one database, employees can quickly find what they need and share information with the whole company to improve productivity levels overall.
  • Comprehensive workflow: The system creates an unobstructed workflow within and between departments, streamlining tasks from one department to another without the hangup of shifting data to a different application.
  • Scalable software: As a business grows, their ERP system can grow with them, taking on higher activity levels and more users without overloading or malfunctioning.

The advantages of ERP are immense when the system is integrated smoothly and applied correctly within a company. That being said, some applications work better than others when integrated into one enterprise solution, and certain functionalities are left out altogether.

Disadvantages of ERP for Small Businesses

Even with the extensive capabilities and power of ERP technology, there are still some downsides to this software that companies should be aware of. Such disadvantages include:

  • Slow integration: Since ERP systems touch every aspect of a business, the time it takes to integrate all applications into one central system reflects that. You will also need to integrate the use of the software into your team’s daily activities. This onboarding of software also requires a large amount of time and effort.
  • Expensive to implement: Integrating a new ERP system into a business is an extensive undertaking. On top of the software’s cost, employees must relearn their internal processes causing lower productivity and output, costing the business further.
  • Slow data migration: The software takes information from all data sources of your business; finding and implementing that information into the system can take a long time, especially for larger companies that use multiple software systems for their processes.
  • Customization is timely and costly: Even though ERPs are customizable and can be tailored to suit whatever a business needs, highly customized integration is expensive and time-consuming. Not only does it cost more to implement, but ongoing management and data security is also tougher, as any issues reported to the supplier of the software must be uniquely addressed, and upgrading the system can be just as painful.

Time Tracking and ERP Software

Time tracking tends to be an add-on feature or side note when integrated with enterprise resource planning. However, time tracking serves an essential function and should operate as a fully-fledged application in its own right.

Time tracking touches all aspects of a business. Human resources, payroll, sales and accounting are all directly tied to employee time tracking. The time data collected from tracking employees’ work hours, job costing and invoicing, and tasks will funnel into all aspects of your company. Payroll processing can be especially reliant on time tracking, as you must have your staff’s time data to pay their wages.

Time tracking should not take a back seat in your business’ ERP system, as it is an integral part of managing a company and affects many other parts of the business. But how can organizations gain all the high-level functionality of ERP software without compromising on any application?

How to Combine Softwares

ERP benefits larger companies as it can handle a wide range of applications and is just what they need. But for smaller businesses, the disadvantages of ERP can outweigh the benefits. Sometimes the better option is choosing one reputable brand that offers multiple applications and bundling them together to get a similar service to enterprise resource planning without the slow integration and high cost.

Accounting softwarepayroll softwareinventory tracking, and time tracking software are part of the QuickBooks family providing app integration for all facets of your business. QuickBooks software easily integrates with thousands of apps to streamline all of your data and internal functions.

With so many add ons and app integrations, like QuickBooks Time, you can roll all your business practices into one without the cost of ERP systems. Try it for free today to see how powerful a tool it can be.

Back: Time Management Strategies to Help Take Control of Your Time

Next: Why Small Businesses Should Use an Employee Time Clock System

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