Lisa Schwarz | Senior Director of Global Product Marketing
Any business, regardless of its size or annual revenue, needs access to tools that increase their efficiency and foster growth. An enterprise resource planning (ERP) system is one such solution. Although these business management systems have been historically considered a “must” for large firms looking to unite and simplify their operations, smaller, growing businesses can greatly benefit from an ERP — especially as more flexible ERP systems with features designed to meet the needs of SMBs enter the market.
What Is an ERP for SMBs?
An ERP system for SMBs can be likened to a person’s central nervous system. Just as the central nervous system coordinates and controls all of the body’s activities, an ERP system helps coordinate and manage various departments and processes across an organization. An ERP system consolidates a variety of key business functions — from inventory management and customer relationship management (CRM) to accounting and human resources, depending on the small business’s needs — onto one platform. This unification helps eliminate data silos, informs decision-making, streamlines workflows and ultimately supports business growth.
Key Takeaways
- ERP systems aren’t just for large enterprises. They also offer a wealth of benefits for smaller, growing businesses.
- The scalability and flexibility of modern ERP systems allow businesses to start with core components and expand as needed.
- Cloud-based ERP solutions can be implemented quickly and with minimal upfront costs, benefiting SMBs with narrow budgets and limited resources.
- Growing businesses should look for an ERP with features including automation, advanced data analytics tools and a modular architecture.
- To select the right ERP system for your SMB, carefully evaluate factors such as functionality, scalability and total cost of ownership.
SMB ERP Explained
ERP systems were developed to increase the efficiency of entire business operations. In the past, these solutions have chiefly been used by larger enterprises with deep pockets and complex needs. But ERP systems are no longer just for big businesses. Smaller companies striving to stay competitive and flourish in a rapidly evolving business landscape stand to gain plenty from an SMB ERP, even when considering obstacles like narrow budgets and limited resources.
For one, ERPs can automate low-value business tasks like data entry, handle complex regulatory and compliance challenges, and provide real-time data analysis. These features help companies reduce the chances of human error, optimize efficiency, and make better decisions faster — giving workers and business leaders more freedom to tackle higher level work that directly contributes to business growth and success.
Equally as important, ERPs for SMBs bypass the need to invest in a costly, all-in-one solution with more features than necessary. Rather, these SMB-focused solutions prioritize flexibility and scalability without breaking the bank. Budding companies can start with just the essentials — finance and accounting modules, for instance — and tack on additional components over time, as needed.
SMB ERP Challenges and Opportunities
Any business can face the effects of resource and budget limitations. But these issues tend to plague small companies, stifling growth opportunities. And if money and labor are already limited, the time and cost of an ERP implementation might push already strapped smaller businesses away from making the plunge, further inhibiting success. Granted, deploying an ERP system is a considerable endeavor. The good news is that cloud-based, SMB-oriented ERP solutions can offer shorter deployment times and lower initial expenses, allowing small businesses to reap the benefits without burning the candle at both ends.
Similarly, some smaller businesses might steer away from ERPs because they carry the impression that all ERPs are fixed, off-the-shelf solutions that come at a high cost and with limited, if any, customizability. That’s not the case. SMB ERPs are scalable and adaptable, allowing businesses to conveniently and affordably integrate additional components or modules as operations expand and requirements change.
Another challenge: With a small workforce, small businesses can struggle to serve current customers and manage day-to-day operations — all while dedicating time to growing the business and managing risk. The time and cost required to adhere to regulatory expectations alone can sap key resources that could otherwise be expended elsewhere, while low-value tasks, such as data entry, and time-consuming tasks, such as data analysis, can further suppress productivity.
ERP systems present an opportunity to overcome those challenges, with the ability to automate tasks and streamline operations. For example, ERPs centralize data, maintain precise records and incorporate security features to protect sensitive information. Risk management and financial compliance is also part of the package, with features such as automated audit trails that provide peace of mind and free decision-makers’ time. In addition, real-time data analysis and business intelligence tools consolidate information from various departments and operations to produce valuable insights. This enables businesses to make more informed decisions, discover growth opportunities and improve performance throughout the organization.
ERP Features SMBs Need to Scale
ERP systems offer essential features that can help facilitate growth and enable smaller businesses to scale efficiently. Some key features to look for include:
- Seamless business management software integration: ERP systems allow companies to manage and analyze vital business processes in real time from one centralized hub. Even with the most bare-bones ERP system, a small business can manage accounting, budgeting, cash flow and financial reporting all from a single platform, leading to superior financial control. ERP systems can also integrate capabilities for CRM, warehouse management, inventory management, supply chain management and human resources management, among others. Data silos are obliterated as a result. This real-time view of business processes and data supports cross-departmental communication and collaboration, optimizes the decision-making process and helps determine how to best allocate resources.
- Automation: Workflows and tasks, such as payroll, invoicing and order processing, can all be automated via ERP systems. This significantly reduces the time staff spends dealing with manual data entry while minimizing errors, boosting efficiency and supporting scalability — in more ways than one: Employees can redirect their focus toward strategic, high-value business initiatives to achieve growth, while the system can automatically adapt to growing demands.
- Advanced data analysis tools: Access to comprehensive data analysis is vital for identifying growth opportunities and making informed decisions. ERP systems offer advanced analytics and business intelligence tools, such as customizable dashboards and auto-generated reports. Even smaller companies without dedicated data analysis teams can easily monitor performance, detect trends and derive actionable insights for better decision-making.
- Modular architecture: Smaller, growing businesses need an ERP system that can adapt to its evolving needs. The best ERPs for SMBs are designed with growth in mind. Scalable and modular architecture that allows for organizations to easily add or remove ERP modules as requirements change helps ensure long-term viability and cost effectiveness without compromising business efficiency. In other words, small businesses can start with just the essentials — such as financial management — adding CRM, human resources, order management or inventory management capabilities only as needed.
ERP Goals for SMBs
Goal-setting and ERP systems go hand in hand. To maximize an ERP system’s potential business benefits, small businesses should set well-defined, strategic goals that align with their business objectives. The ERP system then acts as a guidepost to achieving those goals — by directly supporting achievement through enhanced businesswide efficiency and by making it easier to track the key performance indicators (KPIs) and metrics necessary to help teams stay on track. Here are some examples of ERP-related goals that a smaller business might set.
- Cutting costs: One of the main goals for implementing an ERP system is to reduce operational costs. Through business process automation, increased efficiency and better resource allocation, smaller businesses can achieve significant cost savings. For example, a business that uses the ERP to automate inventory control can minimize the risk of overstocking or stockouts, improving its bottom line. Before implementing an ERP, it’s smart to establish baseline costs and subsequently conduct regular cost-benefit analysis to ensure your business is getting the most juice out of the squeeze.
- Improving KPIs and metrics: Whether the goal is to increase order accuracy, reduce customer churn or cut inventory carrying costs, businesses looking to grow should set specific targets for KPIs and other metrics that directly impact success. An ERP system can then track these KPIs in real time, enabling the business to monitor progress, analyze trends and make decisions that will boost performance. A manufacturing company, for example, can track production outputs, on-time delivery rates and equipment efficiency to help achieve the goal of increasing its overall equipment effectiveness by 10% over the next year.
- Enhancing business processes: Identifying areas for improvement in existing business processes is a common goal for any company implementing an ERP system. ERPs can streamline and automate workflows, reducing manual intervention and increasing overall efficiency. For example, a business looking to reduce a bottleneck in its procurement process might use its ERP to automate purchase order approvals. KPIs, such as procurement cycle time, can then be tracked to get a sense of whether the business is on track to meet its procurement goals.
- Ensuring regulatory compliance: Keeping up with and adhering to industry regulations and standards is crucial for any company. A small business with a tiny — or nonexistent — compliance team that is constantly trying to catch up with ever-changing regulations might look to reduce the time spent on manual audits, for example. ERPs can help companies achieve this goal by maintaining accurate records, generating necessary reports and providing audit trails, all of which helps maintain regulatory compliance. In other words, the business can essentially let the ERP do the work — streamlining the process and ensuring ongoing compliance.
- Boosting resiliency: Having a resilient business model is important for smaller businesses. Resiliency makes it easier to stay competitive even in the face of market uncertainties and unexpected challenges. ERP systems can help small businesses meet risk management goals in various ways, from providing greater visibility into potential supply chain bottlenecks to automating “what if” analyses to develop the ideal disaster recovery plan. A retail business with an ERP system, for instance, can get early warning of sudden supply shortages or shifts in consumer buying patterns — allowing the company to continuously adapt new strategies to mitigate revenue loss and maintain business continuity.
SMB ERP Software
Various ERP software options exist for small businesses, each providing distinct features and capabilities to address specific needs. But the success of an ERP implementation depends on factors such as the quality of the software, whether it supports the business’s processes, whether users can easily adopt it and whether it can readily integrate with existing tools and applications. Thoroughly comparing ERP systems will help lead to an informed choice.
Comparison Criteria: ERP Systems for Small Business
Choosing a system that aligns with your unique requirements and growth goals can help you get the most out of the ERP. To do so, evaluate not only whether the ERP aligns with your business needs, but how each option stacks up against the following criteria:
- Functionality: Assess the ERP system’s features and capabilities to ensure they support essential processes. Take into account both current requirements and future growth.
- Flexibility: Choose an ERP system that lets you start small — in terms of functionality and corresponding cost — and can evolve with your business. A scalable, flexible solution that allows for the incorporation of new modules and features as needed promotes cost-effective expansion and long-term success, while minimizing or eliminating the need to migrate to a more robust solution down the line.
- Total cost of ownership (TCO): Contemplate the initial and ongoing costs of implementing and maintaining the ERP. Consider any subscription fees, hardware costs and whether you’ll need on-deck IT support. Identify any hidden expenses, such as training and future upgrades, to make a thorough comparison among different ERP offerings.
- Implementation ease: Examine the time and resources necessary to deploy the ERP system, as well as the potential impact on business operations during the transition. Opt for a solution that offers swift implementation and minimal disruption to keep your business moving forward. It’s also worth finding out whether the software provider offers training programs to help get users up and running; the better your adoption rates, the more you’ll get out of the tech.
- Integration: Evaluate whether the ERP technology is compatible with your existing technologies and systems. For example, can the ERP easily integrate with your current financial application to seamlessly migrate data? Choosing ERP software that will integrate smoothly with current systems will ease the implementation process, especially when it comes to data migration. Also consider whether the ERP will have support for future integrations. Otherwise, operational efficiency could be suppressed down the line.
- Data security: Investigate the ERP’s security features. What protocols and best practices are in place to protect sensitive business data, including employee, customer and supplier information? Verify the ERP vendor prioritizes data security and will take the necessary measures to safeguard every last bit of your company’s information.
- Regulatory compliance: Find out whether the ERP system includes built-in governance, risk and compliance features. Is it designed to handle the increasingly complex regulatory challenges growing businesses can face? Will it have your back if you decide to go public?
- User experience: Assess the usability of the ERP system, paying close attention to the interface, navigation and overall user experience. High user adoption rates are crucial for maximizing the benefits of an ERP system, so choose a system that’s user-friendly and intuitive.
- Vendor reputation and support: Research the ERP software provider’s track record and customer reviews to ensure they have a history of reliability and success. Evaluate their level of customer support, response times and whether they offer ongoing training resources. Collect feedback regarding the system’s effectiveness, ease of use and long-term impact on business operations.
NetSuite Grows With Your Business at Every Stage
NetSuite provides a prominent cloud-based ERP solution that offers a comprehensive, adaptable and scalable approach to business management. The main advantage of NetSuite ERP lies in its capacity to integrate separate processes and enhance efficiency across various business functions, including finance, operations and customer relationship management. But it’s also designed to grow and adapt to shifting priorities and expanding operations. In fact, NetSuite caters to a wide range of industries and business sizes, from startups to multinational enterprises — instilling confidence in the system’s ability to evolve alongside your business.
NetSuite ERP easily accommodates new functionalities as they are needed, while keeping costs down. And with solutions like NetSuite SuiteSuccess, growing businesses can get up and running quickly with minimal operational disruption. SuiteSuccess’s industry-specific templates, for instance, help businesses implement best practices tailored to small and midsize businesses so that operations are optimized from the get-go. SuiteSuccess also offers tools including preconfigured dashboards, which provide real-time visibility into business performance, and industry-specific, real-time performance data, empowering small businesses to garner the real-time data they need to make growth-oriented choices.
By providing the flexibility and features necessary to address changing business needs, enhance operational efficiency and promote long-term success, NetSuite is a powerful tool that can assist businesses at every growth stage — making it a suitable choice for smaller businesses looking to grow and boost resiliency in today’s fast-paced business environment.
At the end of the day, financial and workforce constraints can be abated with efficient resource utilization. SMB ERP systems do exactly that, namely by integrating key business functions into a centralized hub to improve organizational efficiency. By consolidating core business functions onto one platform, smaller businesses are able to eliminate data silos to support more informed, companywide decision-making that supports growth. But you can’t just pick any ERP solution. Smaller businesses need to select a system that’s not only tailored to its specific business needs, but that also promotes easy integration and adoption, scalability and data security — all at a reasonable cost.