What does ERP mean and what does it do?
Enterprise resource planning (ERP) software brings the different parts of your business together in one system. In most small businesses, every department has its own tool: sales in an Excel file, stock in another file, purchasing in emails, and accounting in a separate program. The same information is typed in by hand several times, and a mistake made in one place carries over to the next. With ERP, information is entered once and every related department sees it at the same time. The real stock in the warehouse, the order on its way and the payment still to be collected are the same figure for everyone. For example, at a furniture manufacturer, the moment a customer order is entered, the same screen shows which fabric and boards are in sufficient supply, when the missing ones will be sourced and on which date the order can be shipped. An ERP usually covers the following areas:
- Stock and warehouse: how many units of each product you have, which warehouse they are in and when they will hit a critical level.
- Purchasing: supplier quotes, orders, receiving goods and what you owe your suppliers.
- Production: the bill of materials (which materials a product is made from), work orders, production stages and waste.
- Sales and shipping: customer orders, delivery notes and shipping status.
- Accounting link: invoices, collections and payments are passed into the accounting records, so the same information does not have to be entered again.
- Reporting: a view of cost and profitability by product, customer or period.
When is ERP too early for a small business?
ERP is a big investment, not only in money but also in your team's time and in changing habits. For a service business that holds no stock, a team of a few people or a small shop with no production, a full ERP is usually heavier than needed. In these businesses, a good basic bookkeeping program plus orderly customer and sales tracking covers most of the work. If your processes have not settled yet, it also makes sense to wait. Putting work that is not yet clearly defined into software means reworking the software every time a rule changes. It is less tiring to first keep the way the work runs steady for a few months, and then move to software. Even if you have growth plans, the first step is usually not a full ERP but a smaller system that fixes the part of the business that gets stuck the most.
Which signs show it is time for ERP?
- You write the same information separately for sales, the warehouse and accounting, and the numbers do not match.
- A product that shows as in stock cannot be found in the warehouse, or a shortage is only noticed when an order comes in.
- Working out how much of each material was used in production, and what it really cost, takes days.
- You work with more than one warehouse, branch or company, and seeing the overall picture has become hard.
- Month-end closing is spent merging and correcting scattered files.
- When you give a customer a delivery date, you guess without knowing the real state of production and stock.
- You make purchasing decisions by looking at the warehouse and guessing, not by using past sales data.
Ready-made ERP or a custom system?
Ready-made ERP packages are designed around the common needs of many sectors and come with general accounting rules built in. If your business fits this mould, it is the fastest route. Still, setup is not just a matter of opening the program; product records, bills of materials and the chart of accounts have to be entered into the system, the team has to be trained and the first months have to be watched closely. Some businesses, however, do not fit the mould: in construction, progress payments and subcontractor tracking, working out the flats in a land-for-flats deal (where the landowner is paid in apartments), or sector-specific pricing and approval rules are examples. In that case, a custom ERP-like system that includes only the parts you need can be simpler and easier to use. New modules can be added to such a system as the business grows: stock and orders today, production and shipping tomorrow. Adorb develops this kind of business management system, bringing sales, customers, orders, stock and team processes together in a single panel; connecting to infrastructure such as e-Fatura (Turkey's electronic invoicing system) is part of the job. Before deciding, write down the three tasks where you lose the most time, and for each one note which department the information is carried from, and to which, by hand. This list makes it clear whether you need a full ERP or a smaller, more focused system.