Managing an enterprise from start to finish is no cakewalk. It requires managing employees, inventories, product sales, and many other aspects.

Furthermore, an effective firm demands expertise, talent, and commercial acumen.

But more importantly, it requires sensible management of business processes, using advanced technologies to maximize productivity and stay ahead of the curve. Fortunately, advanced software is available to make your life easier – ERP software!

These assist businesses in managing business activities from beginning to end, from accounting to recruitment/selection, client or records management, and much more. Users get all the benefits of ERP with a single tool! That’s why the ERP market is expanding rapidly, and the entire market size is estimated to be $49.5 billion by 2025.

But are you curious to know, can the benefits of ERP systems really make a difference ? What are the advantages and disadvantages of an ERP system?

Read on to learn everything about ERP in this article. Including its functions, drawbacks and benefits of ERP.

And soon, you will be on your path to choosing the ideal ERP for your company, increasing productivity and profits while decreasing stress.

What Are the Benefits of an Erp System for Businesses?

The advantages and disadvantages of ERP system are based on what it can do for your company. One of the main advantages of ERP systems is that it controls a variety of business processes by streamlining and automating processes. And also proactively manages operations.

The program enables a leaner and more accurate operation and delivers a complete, 360-degree perspective of your company’s operations. You can boost user efficiency and productivity using ERP software, becoming more nimble and enhancing customer service.

Organizations can reap multiple benefits of enterprise resource planning software if they invest in the perfect platform. Let’s look at the main ERP benefits of implementing a solid system.

Let’s look at the main ERP benefits of implementing a solid system.

1. Increases Productivity

   49% of organizations reported that ERP implementation enhanced all core business processes. The number of businesses reporting no improvement is only 5%.

   Productivity can be significantly increased with ERP systems. It automates several repetitive tasks, freeing staff to focus on more valuable projects for the firm. It can help them do their tasks more quickly by simplifying processes and lowering the time spent looking for information.

   Employees do not need to ask around for relevant data or analyze how procedures work because they will have visibility.

   Increased productivity implies you won’t need to hire as many employees as you would without an ERP system. Workers can take on new projects and concentrate on tasks that leverage their genuine skills and expertise when a sizable quantity of work is removed from their plates.

2. Minimizes Operational Costs

   As per the statistics, ERP software minimizes administrative costs by 22%. An ERP can help in cost savings and enhancing profitability across all areas of your firm, from production to accounting, by enhancing the effectiveness of operational procedures.

   An ERP can range in price from a few hundred dollars to $100,000, based on the system. It is, however, a worthwhile investment if you act efficiently and wisely.

   By entering data once, it can be transferred instantly to other sectors rather than having to do so manually. It is also possible to automate repetitive tasks such as report writing, invoice distribution, employee payroll, and so on, allowing you to focus on more important tasks.

   Furthermore, if you spend more on scattered systems than on a centralized ERP, you may save money on IT holistically.

   End-user training needs are also reduced when using a single system because they only need to understand one system rather than interact with several individual apps.

   Thus, centralization and automation are the primary enterprise resource planning advantages.

3. Total Visibility

   One of the major benefits of ERP software is that it provides complete access to every essential or key business process by making accurate data available to managers from every unit. This allows management to oversee inventory levels regularly, weekly, or monthly, along with future shipments yet to arrive.

   

   Source: Visibility

   Knowing where the company is in the inventory level allows managers to monitor cash flow more accurately.

   Furthermore, having all of the company’s information in one place enables greater collaboration and more rapid completion of complicated tasks. This total visibility improves workflows and enables inter-departmental procedures to be tracked efficiently.

4. Centralized Data

   ERP advantages are largely attributed to the fact that all information from all divisions is kept in a single area. One of the direct benefits of an ERP system include the consolidation of critical data. Without such a system, data is often dispersed throughout the company in various apps and spreadsheets. This process usually produces duplicate data in multiple formats, which adds to the issues.
   

   Since everything is stored in one software, you won’t have any issues running reports or data analysis because everything is in the same layout. 

   A centralized ERP system has enabled 80% of enterprises to co-create new applications. Thus, owing to centralized information, you may receive all of the facts you need to make better-informed choices that will assist the organization saves as much funds and time as feasible.

5. Scalability and Flexibility

   Scalability is one of the main advantages of enterprise resource planning systems. ERP solutions are designed to accommodate businesses of different sizes and shapes, enabling users to customize the system to meet their individual needs, such as unique processes or atypical KPIs.
   

   ERP systems, regardless of size, allow you to add more users and data packages when your company is ready to grow.

   You must guarantee that your chosen enterprise solution can help your organization expand.

   Several Cloud-based ERP systems benefit employees by allowing them to use the system remotely at any time and from any location as long as they have internet access, enabling them to make swift decisions.

6. Improves Reporting and Planning

   One of the primary advantages of ERP systems, in addition to enhanced visibility, is better real-time business intelligence.

   You have a single, consolidated reporting system for all processes when your firm adopts an ERP suite across teams. Reports and analytics can be provided at any time with an ERP system with a single source of information.

   With this program, you can examine and compare departmental functionality without the bother of spreadsheets and emails. One of the most popular reports is about money. Basic financial reports, like income and cash flow statements, are typically built-in and produce custom reports without IT intervention.

   With the software, several ERP companies also provide business intelligence services. The BI functionality enables firms to acquire a more in-depth analytical understanding of their processes. These insights aid in business planning by highlighting operational strengths and problem areas.

   Giving users this thorough perspective into a company’s data allows them to make more educated decisions based on patterns and metrics, make reports, and plan important ERP system features.

7. Enhances Collaboration

   Collaboration is a key element in any successful business. However, most businesses find their teams operating in isolation simply since workplace communication takes more time and energy.

   Collaboration features are among the most popular ERP benefits since they may significantly increase productivity and happiness among your workers, partners, and clients. An ERP platform simplifies collaboration by giving employees access to the required information when they desire it. They provide inter-departmental databases in which information flows through departments and is centralized.

   This allocation allows real-time data updates and improved collaboration within the enterprise. With the right ERP system put in place, every employee gets instant access to the whole company’s wealth of data, allowing them to make better decisions.

   As a result, your staff will have the tools required to make proactive decisions while feeling more esteemed.

   The overall result for the company is increased efficiency, lower operating expenses related to manual data recording, and increased employee participation.

8. Fosters Data Security

   Data security is at the core of modern ERP software. Constraints on who can view and update sensitive information are built into ERP systems that span multiple systems and business functions. Compared to scattered sources on disparate systems, combining all the business data into a single repository, either on-premise or in the cloud, strengthens security.

   

   Source: Seltekinc

   Currently, firms are suffering up to 90% more financial losses due to security breaches than they did four years ago, according to Toolbox. Due to this, it is imperative to use ERP software that enhances information security.

   Enhanced data security also aids regulatory compliance, and the abovementioned built-in reporting tools can aid in the lowering of auditing expenses.

9. Improves Customer Service

   Another practical benefit of today’s ERP software is improved client relationship management. By storing all relevant sales and customer information in one place, sales managers and customer service personnel can engage with customers more easily and respond to their inquiries quicker.

   

   Source: Startupbonsai

   Faster access to customer information and records with improved accuracy complements the other advantages described here. For instance, effectively acquired and processed data on customer relationships and behavior patterns may result in strategy refinements or more precise estimates of demands that must be met appropriately and on time.

   The majority of modern ERP systems now offer e-commerce platform integration. Owing to this union, companies can manage web-based order fulfillment and customer relationship management better.

10. Regulatory Compliance

    Having correct, up-to-date data that is easy to find and analyze can significantly minimize the effort required to adhere to any regulations your organization must follow.

    By allowing users to adjust reports within the software, compliance can be analyzed and adjusted more easily. This increases visibility since all the information an auditor might want to review is immediately available.

    Some new ERP systems can even handle financial standards such as GAAP or regulations such as the Sarbanes-Oxley Act (SOX). The finest systems will also keep you up to date on any modifications to these requirements, ensuring that you stay in compliance. It can be challenging to stay compliant, especially in highly regulated industries, but ERP makes it easier.

11. Streamlines Supply Chain Management

    An ERP system helps supply chain management (SCM) in a variety of ways for businesses that involve the movement of physical goods and production. This enhancement results in quicker turnaround times, more on-time delivery, and a variety of other advantages that assist your company’s core operation and performance.

    A well-designed ERP system can assist your supply chain operations to become smoother and more reactive by improving demand forecasting, inventory management, purchasing, and other functions.

    You can also save money and develop new products with a simplified supply chain, giving your company the competitive edge it needs.

    Furthermore, an ERP system may significantly improve profitability while also lowering inventory and production overpayments.

    Stock levels can be optimized using a centralized system with visibility into sales, manufacturing, and delivery times rather than depending on “best guess” forecasts for upcoming quantities. Monitoring SCM must be a major priority in the advantages of ERP system rosters, particularly in current times.

What Are The Disadvantages Of ERP?

With so many advantages to ERP systems, you may be ready to begin comparing programs. However, some people wonder, what are the cons of ERP? It is critical to understand the possible disadvantage of ERP systems to make an informed decision. That’s why we examine the advantages and disadvantages of ERP.

The following are the primary disadvantages of ERP systems that buyers may encounter while setting up a new platform:

1. Complexity

   ERP software’s significant complexity is due to its extensive functionality and features, which some consumers find difficult to manage. As a result, Businesses no longer think it vital to adequately plan and prepare for ERP installation, resulting in wasted time and resources.

   Your firm will need significant time and effort to grasp various ERP solution features.

   Furthermore, when seasoned ERP system users leave the organization, the newbies who replace their roles must spend a significant amount of time understanding the system from scratch rather than getting started immediately.

   ERP solutions are often viewed by businesses as a potential boon but are not implemented effectively. In particular, you may have trouble persuading your team to adopt the software due to its complexity.

   Engaging in role-based training ensures you don’t become a victim of ERP software complexity.

2. Implementation Time

   Another drawback of ERPs is that they might be challenging to set up and implement based on user-friendliness. They necessitate a business’s investment in a variety of items to ensure a successful implementation that pays out in the long run, including training sessions and regular maintenance.

   Time for stakeholders’ decision-making and deployment, as well as the effort of execution, data transformation, and training, as well as cost. As a result, another aspect to consider for your organization may be the quality of support provided by the corporation. 

3. The Cost of ERP

   The pricing of ERP can be a drawback based on how much your company has to invest. Most ERP solutions encompass various charges that must be paid, and so these can contribute to enhanced expenditures. Certain ERP systems may be too costly, from licenses to upfront costs, installation, and future monthly fees. Investigating ERP systems within your price range will assist you in avoiding spending more money than you intended.

   However, avoid becoming overly focused on finding the cheapest solution. Instead, choose the solution that best meets your requirements. This will help you get maximum advantage and a quick ROI, thereby saving you time and cash in the long run.

4. Slow Data Migration

   Data must be converted into a fresh format when you first start using an ERP system. When data migration is done manually, it might take a long time, depending on your industry.

   Even digitized data isn’t exempted from this. You must ensure that no data is duplicated or deleted during the transfer.

   Numerous ERP systems, fortunately, are compatible with current data storage tools, allowing for simple uploading and management.

5. Takes Time To Show Results

   Waiting for good things is a proverbial saying. This concept also applies to ERP. Installation, training, and getting accustomed to the new solution all take time and patience. You cannot expect to see benefits until the system has been running for some time (usually a few months, but it all relies on the vendor you select).

   ERP installation is analogous to purchasing a home. You won’t see a significant return on investment (ROI) unless you understand the system’s intricacies and how to use them correctly. The best solution for your company’s demands will help it prosper in the long run. There are no shortcuts.

6. Customization Process

   Another downside is ERP software requires a significant amount of time, attention, money, and skill to customize the system. Businesses frequently underestimate the required resources and either do not complete their modification or go significantly over budget.

   Many businesses may also rely on modification when their selected system fails to meet their needs. This could reduce the effectiveness of the system’s standard practices and make future upgrades more challenging.

Why Do You Need To Invest in an ERP System?

Many growing businesses will downplay the need for an ERP. 

“Oh, we don’t need a full-fledged ERP system; excel sheets work fine.” 

And this is where growth can slow down. Because as the company grows, the data grows too. Excel sheets or manual entries are notorious for being riddled with errors. Managing so much data is costly and prone to mismanagement. 

But ERP saves the day when it comes to data management. So let’s learn whether ERP is suitable for your business.

1. Your Company Is Quickly Outgrowing Existing Software

   If your IT infrastructure is stretched to the limit, it’s time to consider investing in an ERP. Some signs that you have outgrown the existing software and process are as follows: 

   • Expenses have increased

   It might be possible that you have multiple systems to manage things. For example, there is inventory management software for managing inventory, sales software for tracking sales, accounting software, etc. In addition to increasing overhead expenses, having multiple software complicates operations. 

   An ERP system resolves this issue by managing multiple tasks like inventory, sales management, report creation, and workflows in one place. This way, you only have to pay for one ERP instead of several. 

   • There is no automation

   One of the most key benefits of ERP is automation. If your employee still carries out all the tasks manually, it’s time to look into the process to see whether they can be automated. 

2. Your Business Reports Are Inaccurate

   Reports are a critical part of the decision-making process for most businesses today. If the reports are messed up, the decisions will lead the company in the wrong direction, thus causing losses. 

   ERP is a boon since most of the ERP today comes with automated report creation and management tools. In addition to collecting and organizing data in one central location, the ERP ensures uniformity across all departments. This way, there is uniformity in data and reports, so the business can run smoothly.

3. Increased Downtime and Slowed Processes

   When your systems do not communicate with each other automatically, human intervention becomes necessary. This means most time would go into cross-checking information for errors, duplicate entries, and so on! 

   ERP system is a perfect software that integrates all the processes in one place o give you a holistic overview of what’s happening inside your business.

4. Dissatisfied Customers

   If your customers have been feeling dissatisfied with your customer service lately, you might want to know why it’s happening. But without an integrated system like ERP, it’s impossible to find where the problems are occurring and why. 

   ERP makes this data available to you and helps you find the root of the problems that might be causing dissatisfaction among the customers. Moreover, you can communicate faster and better when you have the right data; this is exactly where ERP helps!

Conclusion

When determining which platform is best for your company, it’s critical to weigh the drawbacks and benefits of ERP software. But don’t let the possible drawbacks frighten you away from the solutions that could propel your company ahead.

Ultimately, even with these possible stumbling blocks, ERP software remains a critical component in the development of a successful organization.

The advantages of deploying an ERP system in your firm speak for themselves, providing your company with a competitive advantage and economic boost while increasing productivity, cooperation, and communication. With diligent study, your company can avoid potential problems and instead start reaping the many benefits.

Jahnavi Vekaria

Jahnavi Vekaria is a Senior Content Writer at an E-commerce company, that has offices in India and the USA.

With a savvy understanding of language and search, Jahnavi grew her love of the IT and SaaS industry’s technical side, gravitating towards learning about SEO, audits, crawls, and other aspects of digital marketing.