When you think of companies who use Enterprise Resource Planning (ERP) software, you normally think of a 100,000 employee, multi-national juggernaut deploying complex software in the attempt to streamline its 24/7/365 business. However, what about the “little fish,” self-employed small businesses and owners? Are there benefits of having an ERP software for your small business? And if so, what might those benefits be? Well, the first step to answering these questions is to understand what ERP software is.
Essentially, ERP is a single software system that integrates inputs from all areas and business processes in which a specific business is involved in a single place. General business process categories captured under this umbrella software include product and production planning, manufacturing or service delivery, marketing/sales, inventory/raw material purchasing and management, shipping, and payments/finance.
To understand the benefits that ERP software provides, it’s helpful to first think about the normal way in which a business is started and grows. Generally, a business starts off small, with very few employees and little capital to spend. As the company grows and needs gradually expand, business process tools are added one at a time as funds become available. For example, tax software is purchased from one company, HR software is purchased from another, manufacturing automation is purchased from another, etc. This piecemeal accumulation results in having numerous different programs that don’t interface with each other, requiring manual transcription of data in some form. On the other hand, ERP software is aimed at replacing all of these single systems into one contiguous platform in which the functional area software communicates back and forth.
Now that we have a basic understanding of what ERP software is, let’s take a look at an example of how it can potentially help a self-employed small business owner. In this example, we’ll consider a sole proprietorship-structured, 1 person, owner-operated business. The business is a high-volume bike equipment Powerseller on eBay. The owner purchases bike equipment from a wholesaler and then resells for a profit online.
“One Version of the Truth”
The first major benefit that ERP software can provide a small business is that it allows for a single source that can be queried for all information. Using our bike equipment business example above, this means that the owner could view all information relating to inventory levels/costs, purchase tracking, taxes paid, profit margins, shipping status, and advertising in one software package. This provides a great benefit over having to view information in disparate spreadsheets that may not be up to date and/or transcribed correctly from multiple different source software.
Automating Your Business
Another benefit of ERP software is that it can provide additional automation for your business. Automation is great for a self-employed individual who already has his or hands full with running all aspects of a business. An example of this from our previous bike equipment business relates to the area of inventory replenishment. Since ERP software links supplier ordering and sales, it is possible to implement automatic re-ordering of a popular bike pedal through the owner’s supplier when a set level of sales or inventory is reached.
Overall, there are many possible benefits that ERP software can provide, even to very small businesses. The key is performing the cost-benefit analysis for your specific situation and being sure to shop around for the best all-around deal.