5 Business Issues an ERP System Can Solve

For businesses to achieve growth, they need enough revenues to support operations and to profit at the end of an accounting period. But, there is actually a lot of things going on behind the scenes of a growing company.

The transformation of the storefront is the last thing that you will see when a company undergoes changes. The technological foundations of the business are changed first so it can handle the demands of its anticipated growth.

While transitioning, problems must be solved so it can manage to operate with stability on a larger scale.

In this article, we will dive deeper to gain an understanding on commonly experienced business issues and challenges an ERP software can solve. Additionally, we will enumerate the kinds of ERP systems that can help address these issues.

Part I: Business Issues an ERP System Can Solve:

1. Growing Workforce

During startup, businesses can function with the founders heavily involved in daily operations along with few other people. But if owners want to grow the business, their focus should be on strategy, and not on leverageable tasks.

They must learn to delegate tasks to people so they can free up time to focus on their strategy.

Therefore, if owners want to scale their business, their involvement in the business operation changes. Instead of working “in the business”, they start working “on the business”, instead. They transition from micromanagers to strategic leaders.

When a founder disengages from the daily operations, he needs people to take his place. Moreover, throughout the growth period, new tasks and roles, such as marketing, customer support, operations management, etc. are created. That’s why amongst the most important ingredient of a business’ growth is hiring the right people and getting enough manpower.

This entails the need of the business to find and recruit the right people. However, recruiting the right people is a long and tedious task. Hiring people at scale makes it even more difficult.

As these new recruits join the workforce, they affect the company’s hierarchy, altering the company’s organizational structure. New departments may also be created to handle new roles such as procurement, marketing, logistics, human resource, etc.

Making sure that each man is productive in his own field is another challenge that comes with a growing workforce. Otherwise, time and money are wasted.

2. Technological Limits of Outdated Software

Businesses, regardless of the nature of their activities, must know how to integrate technology into their operations. This applies to startup businesses, and more so on growing businesses.

Understanding the role of technology on your business and how it can be applied to increase productivity is a must. Loss of productivity is a result of inefficient/redundant processes, ineffective management, and poorly trained or uncommitted workforce. It is equivalent to paying for hours that are not used for anything – throwing away company finances.

Everything starts from poor oversight over the business. A small business can be supervised with little difficulty even without the aid of technology. However, a growing business (increasing workforce, expanding operations) is hard to oversee without the appropriate technology to take care of everything.

Nonetheless, these challenges can be solved with the right software/technology solution in place. Growing organizations need to use several sets of software for different activities. Startups and businesses with small operations can work with unintegrated tools because the data they process is not overwhelming. They can still be handled manually by employees.

However, when a business grows, its workforce must be used in more productive areas instead of processing data manually. Hence, to use your employees in your favor, you should also invest in applications that are integrated to each other to facilitate productivity.

Finding the right technology is an arduous process. But if executed properly, restructuring your company’s technical landscape could result to more efficient and improved productivity on the long term.

3. Cash Flow Management

The lack of sustainable cash flow is one of the more common reasons why startups fail early on; or why long-standing businesses suffer or fail when their sales decline.

Businesses must spend money (on supplies, salaries, marketing, etc.) to make money (sales and profit). However, spending money leads to a downward spiral if not properly planned and managed. This is especially true for startups where finances are tight, and they literally juggle with very little cash on hand.

This is true with seasoned businesses as well. Because of lack of proper account, money is unnoticeably spent on things that do not immediately help the business.

Businesses, if generating enough revenues, can sustain operations if funds are properly allocated. It also happens that, businesses miss their chance to generate sales because funds are spent on irrelevant or unimportant things instead of using money for marketing purposes.

The challenge in cash flow management lies in the presentation of numerical data and the difficulty of analyzing. Numerical figures presented in spreadsheet without analysis may not lead a business owner to do the right decisions immediately.

Shooting for growth is a delicate process. If cash is not properly accounted for on every little spending, you may achieve growth, but with very little cash available to continue operating.

4. Increasing Sales and Problems in Retaining Customers

Sales or revenue is the fuel that keeps a business going. When a business does not generate revenues, it cannot purchase its products and pay for its expenses. Therefore, it cannot operate.

Every business, either large or small, sees acquiring new customers as a challenge. However, it is cheaper to maintain loyal customers than to acquire new customers every time. Hence, efforts to retain customer must be taken seriously.

To maintain customers, expectations must always be met. However, it is not that simple. A decline in the quality of your product or service could destroy your effort to retain customers. This could happen if during the transition stage, the quality of your service is not monitored.

Another challenge in customer retention is when customers get access to your competitors (or inception of newer competitors) that can offer similar (or better) services at the same price or even at a lower price.

Growth must be accompanied by a solid marketing plan that has a high probability of return on investment. Not neglecting to make consistent effort to take care of existing customers. Hence, generating sales is a continuously subsisting problem a company must solve.

A company cannot close shop doors or push the “pause button” in its operations while scaling. That is why manpower, cash flow, technology, and strategic planning must all be cohesive to manage a company’s transition.

5. Management and Oversight of Every Process as a Whole

Management of an organization means having the ability to control and coordinate different departments across the company. It touches every aspect of the business.

Scaling a business requires a business owner to transition from a hands-on operations manager (working in the business) into a strategic leader (working on the business) planning the business’ future actions. This means leveraging and hiring someone to take his place.

A strategic leader defines the direction of the business through a set of plans properly delegated to other team members. He must remain engaged on important aspects of management such as in the conception and execution of plans and actions, analyzing the trend inside and outside the business, and seeking better opportunities for the business.

A strategic leader can be compared to a musical conductor. He cannot lead the orchestra while playing the violin. He must be standing at the front, visible to all team members so he can stress the musical pulse, and everyone else can follow the same metrical rhythm.

With all this in mind, a strategic leader can no longer be involved in the management of small tasks like he used to do during startup. As smaller tasks can be delegated, it’s counter-productive to spend important hours in them.

Part II – Specific ERP Systems to Help Solve Business Issues

1. Growing Workforce – Human Resource Management System (HRMS)

Business issues related to human resource are solved by an ERP system called HRMS. It comes as a module or as a component of an ERP system, or it can also be a standalone software.

A good HRMS contains:

  1. Candidate management – a function that oversees candidates from resume application, initial interview, and all the way through hiring and onboarding.
  2. Employee management – gives managers a structured view of a company’s workforce organized into roles, teams, departments, and organizational hierarchy. Basically, this is the core function of an HR department.
  3. Payroll – also a core function of HR, a payroll system automatically computes each employee’s net salaries including their withholding taxes. A payroll system may also automate tax (withholding) filings and employee payment through direct deposits.

2. Cash Flow Management – Accounting and Financial Management Module

In a company’s growing operations, outdated software and accounting methods cannot generate comprehensive real-time analysis of a company’s financial situation. ERP systems solve cash flow management problems through an Accounting and Financial Management software.

A comprehensive accounting and financial management module provides:

  1.  Automated, real-time, and detailed financial reports which include cash flow projections based on your inventory, projected sales, accounts receivables, and other related areas.
  2. Accuracy of data because it eliminates the need to manually input values, therefore lessening the probability of error.
  3. A bird’s eye view of the company’s financial situation, showing the cause-and-effect of every single decision made. Therefore, it grants business owners a higher degree of control because of the software’s responsiveness and accuracy.

3. Increasing Sales and Problems in Retaining Customers – Customer Relationship Management (CRM)

A bigger business needs a relatively bigger customer base to maintain its operations. While the company strives to gain new customers, it must also work in furnishing lasting relationship with its existing customers.

The best way to do this is to always meet expectations. And the easiest way to meet customers’ expectations is to know their needs.

ERP systems solve customer-related problems of a business through a CRM. Information of customers that is stored in a CRM software is used by the company to uphold better service to existing customers. These data are interpreted by different departments according to their functions:

  1. Marketing Department – to build more focused marketing efforts.
  2. Sales Department – uses the data to communicate to customers so the company can offer newer products or upsell upon repeat purchase.
  3. Customer Care Department – to take note of common customer complaints to solve potential customer disputes in the future. To promote better customer experience.

4. Technological Limits of Outdated Software + Management and Oversight of Every Process as a Whole – ERP System Integration

A critical business problem solved by an ERP system is a business’ outdated software. All technological innovations have their limits. An application developed 10 years ago to solve a specific problem may no longer be the best solution today. Businesses evolve, and so are the problems that they encounter.

An effective way to address the technological limits of business software is to use a cloud-based ERP (but this is a different discussion that we will tackle in the future).

An ERP system is an umbrella term for a complex software or an integration of multiple applications. It is used for managing, automating, and linking vital business processes so that manual human labor is reduced. These tasks could be related to sales, human resource, inventory, financials, etc.

ERP centralizes all the data and information in the company so that all business processes are unified and connected end to end. It provides managers a single view of everything that’s happening in the business.

Data access makes it easier to get a bird’s eye view of how business resources are used. This helps in development of future actions, find ways to improve business processes, and make better use of company resources. As a result, it promotes growth, and reduce time wasted by employees on tasks that can be fully automated.

Aside from the above-mentioned functions, the ultimate goal of ERP is to help businesses improve efficiency and profitability. Decision-makers can formulate concrete plans if they know how company resources are spent.

Final Words

These are the vital business issues an ERP system can solve. In the modern world, the business landscape has drastically changed. Although strategy is still a vital component in doing business, business is no longer just about strategies. Strategies, if executed at a larger scale, may not produce desirable outcomes if there is no technology to back everything up.

Technology is now the name of the game. Unlike before, data can now be acquired in a single search of a keyword. And this is how it should be. For business, every minute counts.

Having the proper system in your business will help you save significant amount of time and effort. ERP can solve almost all the managerial problems of a business. Therefore, those who know how to use technology to their advantage has a better chance of achieving growth and sustainability in the future.

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