Small and midsize businesses (SMBs) have a few advantages over large companies: they are nimble and change quickly to meet the changing needs of their customers, and they win customers with the personal touch their size allows, which isn’t always possible for enterprises. One area that’s more difficult for SMBs is computer systems and the software needed to run their businesses.
Large companies need complex enterprise resource planning (ERP) systems because they have complex operations. The large company also has the people to make ERP applications work. For companies that start small, they can usually track and manage their operations in spreadsheets and packaged accounting applications. When companies grow, they typically add specialized applications as the need arises and the budget permits, continuing to do some work in spreadsheets and computer databases.
Often, SMB’s operate using a blend of applications from several different vendors. A lot of manual labor goes into making the applications work with each other. At some point, senior management comes to the realization that the organization needs an ERP system. This decision can be based on production needs, but the lack of financial visibility in the company tends to be the key driver in buying an ERP system.
Some SMB managers thrive on disorganization. Internal and interdepartmental communication works, but few think of their operations as a well-oiled machine. Most SMB managers think of this as organized chaos. Likewise, the IT department is usually taxed from keeping the different servers, databases, and operating systems working smoothly. Invariably, IT problems are fixed by using the quickest and easiest solution, sometimes at the cost of security.
The first problem many SMB’s have is a reliance on “key people”. This isn’t bad by itself, but the SMB manager usually dreads when those key people take a vacation, get sick, or leave because they cannot be replaced quickly. One or more of these key people almost certainly performs some manual calculation that is critical to the business’s operation, most likely in a spreadsheet on their local machine. The manual calculation is done to tie data coming out of one application to the input needed for another.
As the company grows, senior management is less involved in day-to-day operations. Although this transition is inevitable, it means that senior management must rely on reports to monitor the company’s status. Here’s where an ERP system shines: the system can collect all necessary data and automatically present it to senior managers in the form of reports or Key Performance Indicator (KPI) dashboards. Sure, some custom reporting will probably be necessary, but that’s easy compared with manually assembling all the information into spreadsheets.
Financial reporting takes less time and effort with an ERP system. As companies grow, the timeliness of their reporting becomes increasingly critical. Handling such reporting within spreadsheets becomes more error prone and increasingly time-consuming the larger the company grows. Being able to follow a routine that the ERP system provides means that the company’s financial reporting is done much more efficiently and much more reliably.
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