If there is one system that most companies implement nowadays, it is the ERP. Enterprise Resource Planning is a system that automates core business functions such as inventory and order management, accounting, human resources, customer relationship management, manufacturing, and others. These functions are integrated into one system, improving the company’s efficiency, productivity significantly, and ROI.

Effective enterprise resource planning has been a priority of many businesses ever since. In fact, the ERP Report from Panorama Consulting Solutions revealed that over 81% of organizations are either implementing ERP software or have already completed implementing ERP software for better ROI into their company’s system. With this huge number of companies relying on ERP, there is no doubt that it is indeed a system worth investing in.

How to Calculate the ROI of an ERP System

There is no need ERP ROI calculator; You can simply use this formula to calculate the ROI of ERP:

ERP ROI = (total value of investment – total cost of investment) / total cost of investment x 100%

How does ERP System Help Businesses to Get a High ROI (Return on Investment)?

1. Cost-Efficiency

   By integrating the core functions of a business into one enterprise-wide system, a business can streamline its once-disorganized processes, saving them a lot of money along the way. Eliminates the need for an independent system for each department, so the amount of time and cost associated with training additional users for different systems is also avoided.

2. Efficient Data Sharing

   It allows its users to upload, edit, and share critical data with other key personnel in the company. This seamless data-sharing capability improves the quality not only of the deliverable but the communication between employees. A more pronounced work collaboration in business makes every output more precise and on-point.

3. Increase your Productivity

   Using an outdated resource planning module to run your business is not only expensive but also degrades the productivity level of your employees. With ERP system, your workforce will experience a more efficient system, and their attitude towards the task – even if it’s distressing and repetitive –  will also change, increasing their productivity level.

   Working through software might imply that you would have to navigate through complex processes. On the contrary, the ROI of an ERP system by implementation in your business will greatly increase growth and reduce time by eliminating manual entry and replications of invoices, increasing overall productivity. ERP for small business owners stuck in Excel will come in handy and help them automate their processes. You can even automate operations inter-departmentally to provide real-time data to all the employees using the software.

4. Agile Decision Making

   Many of the most successful businesses today know that enterprise resource planning software is a vital tool to improve operational efficiency and is a key resource when making critical business decisions. Having said that, many modern ERP software today allows C-suites to access even the most vital information in real-time through cloud technology. Cloud-enabled ERP systems are more cost-effective and allow small businesses to track their key metrics and analytics in real-time.

   With those benefits, it’s almost impossible to think that a company would still be hesitant to invest in this system. However, it is also important to note its impact on your company’s most treasured stronghold-  our employees. In this infographic, let us learn the factors that affect our employee’s performance and why investing in ERP software can help address these issues effectively.

5. Greater Supply Chain Visibility

   ERP software can help immensely with supply chain management for large and small companies dealing with shipping. A proper quality ERP system implementation will interpret supply chain numbers efficiently and optimize expenditures in purchase and inventory departments.

   This, as a result, will give businesses better insight into their supply chain operations, from which owners can then make informed decisions to stay ahead of their competitors. Issues arising in the supply chain can be quickly notified and averted with the help of the system.

6. More Savings & Centralization Of Software

   ERP solutions may make you think twice since you have to invest upfront for ERP system implementation in your business, but it gives you a high enterprise resource planning ROI in the long run. And here’s how – first of all, ERP software fuses all your departmental processes and systems previously scattered in your company.

   This will ultimately result in easy access to data for your staff from one unified and centralized system. Not only this, but a combined system also provides quality security, which means less expenditure will be made in training the workforce to manage their personal and departmental systems, reducing logistic efforts, if any are involved.

7. Happier Customers

   Customer satisfaction is essential to fuel to keep any business running. And the best way to do that is by providing exemplary services centered toward them. ROI of erp implementation in your business can help you ensure customer satisfaction in several ways. Most of these ERP systems nowadays come equipped with a CRM tool that provides you with all the necessary details about your customer, such as order history, billing information, shipping address, etc., to give you a better understanding of how to provide your clients’ requirements.

8. Communication And Business Intelligence

   Analyzing and interpreting business data is not as easy as cutting a piece of cake. But with a sound ERP system, you can organize your company’s information within one system and make informed business decisions by utilizing a variety of analytical tools from it. It will help you remain competitive in the industry sector and improvise communication in departments as teams won’t be differentiated based on separate systems.

9. Supplier And Partnership

   Partnerships and the supply chain become more complex as your company and business interests expand. You can improve handling your business operations with ERP implementation in your company which will enhance ease of access to documents such as contracts, approval data, policies, orders to pricing, etc. Also, supplier information stored in the system will help you with inventory management and production planning.

10. Human Resources

    All aspects of HR departments can be streamlined with the help of enterprise resource planning software to improve business operations. An ERP return on investment within your primary business will help automate and speed-up all administrative and data storage challenges your HR departments might face making the process smooth.

11. Regulatory Compliance

    Since the enterprise resource management software gets fully integrated with all your business departments, it provides the most valuable asset to the company in times of need – traceability. ERP software will always ensure that your organization has everything operating efficiently within your chosen legal framework, from quality control to audit trails.

12. Transactions

    The target needs for the point of sale may differ for your company, depending on your sector. Regardless of it, a proper ERP ROI will help you provide a complete centralization of all your orders and customer transactions, as the information can be linked from your website directly to your system. This allows you to generate real-time sales reports and manage inventory stock levels efficiently and accordingly.

13. Better Analytics & Accounting

    Keeping track of financials during growth is difficult to manage without a centralized system. With ERP solutions, you can automate data entry tasks and keep track of your transactions, thus avoiding repetitive work from your employees and preventing human error.

    Since ERP is a consolidated system of all departments generating reports becomes easier for analytics and business intelligence. A customizable board, through which all the organization executives can study and interpret data and reports, will help you gain better insights into your business deals to make better decisions.

14. Real-time Data

    Growing businesses require a proactive workforce ready to work on the go. Such employees need to access real-time data from anywhere since they don’t run operations solely from their desks and must attend meetings and conferences worldwide. Through an ERP database, you can store all the database information of the organization and access it with a login account anywhere.

15. Stats & Figures

    Not getting the right statistics and figures to interpret the values and inputs employees to give to the organization can make them lose interest in working efficiently. Large and small companies lose much money financially due to these miscommunications, and employees lose productivity daily.

    ERP helps you get the best stats about your work and resource input automatically. That help to increase the ERP return on investment. Its application significantly reduces operational and administrative costs while executives can interpret the efforts put in their organization to grow the businesses better.

Final Word

The ROI of ERP implementation in your organization mentioned above is the major one, in our opinion.

Nowadays, ERP solutions come with upgraded seamless technologies to help you go through all your business processes like the back of your hand. So, we hope this blog enables you to choose and understand why an ERP is vital to help your business grow better and increase ROI.

Rick Siddiqi

Rick Siddiqi is a 20 year business and technology veteran. He is Managing Principal of companies that specialize in business management software.