COVID19 Shook the world to the core it not only impacted nation’s economy or common man but also impacted businesses to the core. But why do businesses fail during the COVID19 especially the SME and MSME sector. One of the important reasons why businesses fail was lack of ERP system. Most of the manufacturing sector is still working on manual mode of planning due to which they were not able to handle the lockdown and restrictions as they failed to do planning. Now why it is so much important for all of us to understand that why ERP are must for every firm who are above 5 people company. Most of the time we do get queries and out those few queries I would like to share are as follows
What is an ERP? Do I need an ERP System? Will my business really benefit from such a system, because my business is running fine anyways? These are some common questions that come to the mind of a business person when he hears about various options and the hype about ERP software solutions. So, let us look into the details to get answers these and many other related questions.
An ERP stands for ‘Enterprise Resource Planning’, and generally speaking, ERP Systems are software that enable various departments of a business to work in co-ordination with each other using a shared database and application platform. So, for example, if a sales person is standing in front of a customer to take an order for an item, then how can he commit the correct quantity to the customer if he does not know how much stock is readily available, and how much more can be available in the next few days? Similarly, if the Purchase Manager needs to place the raw material Order to take the advantage of the low price today, how can he do that unless he knows how many Sales orders the firm is getting that require this raw material, the current raw material stock, the pending purchase orders to be received and the quantity being currently produced? All this need for information from other departments in a timely fashion is the key to making correct decisions in the benefit of the business.
Now, what if we are just a 5-10 person company, do we really need an ERP? And again, will it really benefit us in our business? The answer depends upon how much you want to grow your company. If you want to remain a 5-10 person company with the same turnover, then you don’t need any system. However, if you want a system that reduces your time and effort in daily operations, making you efficient, and get more time for innovative, expansion and new activities, then you should strongly consider adopting a business management system.
But we are already using the accounting software, and our CA / accountant files our returns on time, then what is the use of another system? This is the most common mindset and the most common mistake. People use accounting package to maintain their data for statutory / tax filing purposes and forget about the real business management needs. What you really need is a simple system that you, and your team can easily work on, for daily transactions, and does not require deep accounting knowledge or special / extensive training. The system should be good enough to meet your business process needs and give out reports for statutory / tax filing purposes as well as business management needs. The system should be visually simple and attractive. A user should feel comfortable while using the system. At the same time, the system should be able to control the data and the authorizations of the users as per business requirements. Your ERP System should be simple enough to be used by semi-skilled staff, and allow easy co-ordination between staff members, and management. The better systems also give you option to co-ordinate with subcontractors, vendors, and customers also.
But, such ERP systems are expensive and difficult to implement, how can we afford them? This is another roadblock that business owners face when they try to find the correct solution for their business. Good thing is that Indian companies are coming up with new business management / ERP systems that are affordable and can also be adopted on a Subscription / SaaS model. Another nice feature that some of these software options give is modular implementation. In modular implementation, you can start with a single module and then increase the modules later on, as your business grows. This makes the adoption simpler, and also eliminates the risk and complexity associated with full implementation. There are companies that try to adopt an ERP System when they realize that most of their managers’ time is being consumed in reports generation and co-ordination activities between different departments. In this situation, the business has already been suffering from last few years, and in-efficient, repetitive activities eat up the valuable time of managers that could have been used to improve and grow business. Adoption of a new system at this stage becomes very difficult and also has risks involved. This is one of the reasons why many ERP implementations tend to fail. Such failures are very expensive for the companies, as it harms the company in terms of money as well as company morale.
In summary, we can say that any progressive business should start adopting a business management system as early as possible during business growth phase. This will also accelerate growth and enable the business to expand based on the new market opportunities as they arise.
