How to Improve Your Business Using an ERP System

First of all, what is an ERP system? Enterprise Resource Planning is the English term for a comprehensive information system in which all of a company's most important business processes are computerised and integrated. That means the following groups of processes:

• Purchasing and sales (the Commerce subsystem)
• Human resources management (the HR subsystem)
• Managing partners, customers and suppliers, as well as prospects (the CRM subsystem)
• Financial management
• Accounting
• Payroll
• Fixed asset management
• Project management
• Records management
• DMS and others

Very often these groups of processes map onto departments of the same name within the company.

The word SYSTEM is the most important part of that description. Any system implies a set of dependent processes or functions where the output of one process becomes the input of another. This avoids duplicate data, which brings nothing but wasted time and, very often, headaches caused by errors. To take a common situation in commercially oriented companies: retail has one POS system in the shops and a different system in accounting. What happens is that the retail system runs independently, tracking only goods in (processing receipts) and goods out (sales to end customers). The POS subsystem usually has no financial ledgers for customers and suppliers, because it does not process bank statements — that is, financial flows. The consequence is that accounting enters and posts the figures from goods receipts and daily takings by hand, which creates duplicate data (the data was already entered once into another system) and leaves considerable scope for error. In situations like these, hunting for mistakes is a daily activity in accounting, but the cause of a discrepancy has to be found before it can be corrected. Very often these discrepancies escape accounting — but not the inspectors. Meanwhile, the business itself has access only to the POS system, where it does not have comprehensive figures to plan with. It has to contact accounting to find out the bank balance, or the list of suppliers to pay, or the receivables expected.

ERP systems allow data to be entered at the point where it arises, and then used and processed further wherever it is needed across the system.

In the example above, that would look like this:

At the retail outlet a retail goods receipt is created, entering each item with the supplier's invoice price along with transport, customs, excise, insurance and similar costs, in order to calculate the purchase and selling price — that is, the expected margin. In accounting those same figures are posted automatically or semi-automatically (with an additional check) on the basis of a posting scheme defined once. Looking at the sales process, it is registered in the system at the moment of sale. The sales figures are likewise posted automatically or semi-automatically (with a prior check) on the basis of the defined posting scheme for the retail outlet.

Another characteristic example is fixed asset management. It is not unusual for fixed assets to be recorded in various Excel spreadsheets in order to track their location, the person accountable for them, stocktakes and so on, while accounting holds only figures that satisfy the legal requirements but do nothing to actually manage fixed assets as the important resource they are to any company. Here too we are talking about duplicate data. If we record the purchase of a new asset in the fixed asset module by entering the purchase invoice, we immediately assign the asset a person accountable, a location, descriptive details and a value. The value is the figure of interest for posting, and as with the commercial data described above, this can be automated. Doing it this way avoids duplicate data and reduces the scope for error. Every activity in the fixed asset module is supported by automatic posting. Fixed assets are also used in other modules, such as Project Management. A project may require the use of an asset — an excavator, for instance. The same excavator cannot be assigned to two different projects at the same time. The Project Management module takes fixed asset information as an input, and can produce as an output the number of machine hours worked or similar, which in turn feeds usefully back into fixed asset management.

There are further examples of integration between HR and payroll, between HR and project management, between payroll and accounting, and so on. The links between a company's departments are many and they cross over. Data is exchanged within the information system in exactly the way information and cooperation flow physically between departments.

Naturally, errors are unavoidable even in well-organised ERP solutions, but here they occur only at the point of data entry, which is where they are easiest to spot. Very often they are corrected before the entry is posted — that is, before the figure is finally accepted and acted upon.

If your company has grown to the point where different people are needed for different departments or roles, then it is time to start thinking about implementing an ERP system.

TiramisuERP is modern business software containing every module needed to manage a company's processes successfully: wholesale, retail, finance, service, POS, human resources and production. It is available online, so you can reach it wherever you are and get all the information you need to make important business decisions.