Enterprise resource planning systems, or ERP software, are an integrated suite of business applications to help your business manage financials, sales, and operations. Breaking down these core 3 areas, you'll find accounting capabilities such as a general ledger, accounts payable and receivables, and payroll. Within operations, you'll be able to manage inventory and supply chain management. And finally, sales can include order management and procurement.
In addition to the above, companies can include human resource management (HRMS) and customer relationship management (CRM) for even greater control over their organization.
Because of the flexible nature of what an ERP system can be, your business has likely asked itself, "Which features do we need to prioritize?"
ERP integration is where an ERP software is connected with other applications and/or systems, with a goal to share data across these systems to improve productivity and insights. In short, connecting ERP software to other systems such as eCommerce applications or EDI tools creates a single source of truth.
ERP systems are widely desired due to their ability to communicate with every application in the same ecosystem, or with other existing business software. Having a fully integrated ERP software means you have a suite of applications that are built to work together.
Many businesses find themselves in the market for an ERP software for the integration alone. They may be running two disparate systems (such as an accounting software and a production scheduling software) and are looking to combine the two into one. This is beneficial for companies that have a variety of departments that need to connect with each other to avoid data duplication, repeat orders, or to avoid bottlenecks through a reduction in human error.
ERP integrations can help streamline processes across multiple departments and workflows. This is known as automation. This will help limit the required manual input and the time it takes for tasks to be completed.
ERP software was originally developed to automate and link the processes of manufacturing operations--connecting departments by automating processes when certain steps or procedures became complete. This helps knock down previous barriers organizations used to have when it came to silos.
Before, companies would have to wait for other workstations or departments to complete their work before they would be able to complete their own tasks, as they relied on the physical passing of information around. With an ERP system, businesses processes can be automated and data kept in a centralized location--letting all users access it whenever needed.
A business may use reports in order to answer questions about the strength of the business, but where does the data come from that is included on these reports? With every area of your business working under a unified ERP software, data on day-to-day operations can be shared across multiple entities and departments. Data can also be broadcast to multiple streams and allow companies to get real-time feedback for better decision-making.
Anytime a transaction occurs in your organization, whether an operational movement such as inventory control or a financial transaction such as payment for a sale, this data can be accessed by production, operations, and finance departments. Companies looking to stay ahead of their competition collect as much data as possible which can later be displayed into visual and accessible formats.
Reporting falls into the category of business intelligence tools designed to gather and sort historical data, create engaging visuals, and help analyze and report your findings. This feature can be called many different things or appear in may different forms. Examples include dashboards, data visualization, Gantt charts, pie charts, bar graphs, and more.
Reporting features occur in all types of business software, and reports can be created from nearly every type of data. This includes contact management, marketing success levels, sales activity, and lead management.
The main goal of a reporting features is to improve reporting by offering intuitive reporting interfaces and visual data display capabilities. Business intelligence tools are helping companies base key decisions on information derived from financial and non-financial key performance indicators. Better reporting can empower both executives and stakeholders to make more informed business decisions such as enhancing how you run your business and identifying problems before they occur.
Financial management helps business track income and expenses and plan for growth. Commonly referred to as accounting, financial management modules are designed to help businesses make better spending decisions, create accurate financial reports, and manage assets. Because of this, accounting can be thought of as a subset of ERP software.
While many differences between ERP and accounting software exist, accounting tends to only provide features such as accounts payables, accounts receivables, general ledger accounts with reporting, and payroll. Meanwhile, ERP software provides all of the above as well as applications for supply chain management, inventory management, human resources, and eCommerce.
CRM features provide an integrated tool set for managing customer data and tracking interactions with customers. CRM software complexity varies between programs, as it may include some combination of dedicated lead management, service tracking, order management, and marketing functionality.
CRM capabilities help give an integrated view of your customers and prospects so businesses can get an integrated view of customers and prospects--allowing you to get the most out of marketing, sales, and customer service efforts.
The use of CRM features within an ERP software can lead to more effective identification of new prospects, reduce time and labor costs involved with managing customer information, and assist with customer upselling.
Sales forecasting and providing sales quotes are a large part of your overall sales management and marketing efforts. Sales forecasting applications uilize historical data and sales funnel status tracking to create better projections for future sales. Sales quotes provide the ability to create, share, and track customer facing sales quotation documents.
Sales and marketing features within ERP software can also include point of sale (POS) capabilities to facilitate in-person or register-based customer payments, order entry to create sales orders and communicate order requirements throughout the organization, and eCommerce capabilities to help host online product catalogs and shopping carts.
While more commonly found as a standalone solution, most ERP software will include some level of human resource capabilities. These capabilities store employee information and automates tasks involving the people in your organization, such as employee scheduling, recruitment, and boosting employee productivity. HR features in an ERP software help your organization achieve it's goals by allowing managers to better allocate employee time and resources to become a more productive and profitable business through better employee record keeping and increasing employee performance.
Human resources also encompasses payroll capabilities, which offers functionality for all employee payment tasks, including calculation of periodic wages, application of deductions, payment processing (check writing or direct deposit), and generation of governmentally required payroll forms. Tying in with payroll is time tracking, which is useful for recording employee time both for payroll, as well as human resource management purposes.
Supply chain management (SCM) features within an ERP software help manufacturers, logistics providers, distributors, suppliers, and retailers manage the flow of goods and services between locations as efficiently and as cost-effectively as possible. This provides assistance from the acquisition of raw materials to a finished product being delivered to a customer.
SCM features can handle everything from beginning to end, including the demand planning, control, and execution of supply chain processes. Most importantly, it maximized cost reduction opportunities in getting products provisioned from the vendor to the customer.
Core applications within supply chain management features include requisition and approvals management, purchase orders, vendor and supplier management, sales forecasting, warehouse management, and inventory control.
Manufacturing ERP features prevent machine downtime and improve upon the quality and efficiency of the products being created by your shop employees. More commonly known as MRP software, most manufacturing software tracks your purchased materials as well as current stock levels to ensure you always have what you need on-hand and don't have to wait on materials to come in to start a new order.
The history of ERP itself stems from the world of manufacturing, as MRP (materials requirements planning) is known as the predecessor to ERP software--created by manufacturers to better plan raw material requirements for manufacturing, purchasing, and delivery.
The right manufacturing features in your ERP will give your shop a competitive edge by increasing operational efficiency, shortening order cycles, and making it easier to open new revenue streams. The right manufacturing features can also help you understand and control your processes to make the business run more smoothly.
The ongoing expansion of the ERP market makes it difficult for business leaders to answer some basic questions:
In order to answer these questions, we studied a representative sample of mainstream ERP packages oriented for the SMB market. As a result, we were able to assign percentages to the likelihood of ERP products to provide different ERP features your company may require.
To make the data more digestible, we grouped features into 5 basic categories: accounting, operations, sales, human resources, and non-departmental.
Here's what we found:
Mainstream ERP products reliably include a core set of accounting and financial management features. The consistent inclusion of ledgers like accounts payable, accounts receivable, and general ledger in ERP products is unsurprising. Strong financial management capability is a cornerstone of any ERP solution.
But the breadth and sophistication of financial modules can vary. For instance, while electronic funds transfer (EFT) features provide a more advanced payment alternative to traditional check-writing, there are some mainstream ERP products that lack the tool. Fund accounting and progress billing features appear even less frequently--a consequence of the fact they hold relevance only for certain industries (non-profit/government and service/construction firms, respectively).
The ambition of ERP software developers is to comprehensively address both financial and operational management requirements. The reason it's a challenging goal is that while many accounting tasks are consistent between industries, operational needs vary substantially. However, there are some mainstream ERP programs which include features diverse enough to meet the needs of manufacturers, distributors, contractors, retailers, and service firms alike.
ERP has origins in the manufacturing sector, making it reasonable to expect a fairly strong representation of manufacturing oriented functionality. Bill of materials and material requirements planning modules do appear in a solid majority of mainstream ERP programs. However, nearly half of ERP products oriented toward the SMB market lack quality management and manufacturing execution system (MES) functions.
Features which deal with standard product tracking tasks such as shipping, receiving, and inventory control are more common. These functionalities apply to a broader audience. While they represent fundamental needs for manufacturers, they are also required by distributors, retailers, and many service-based companies.
Project and service-oriented businesses have some distinct requirements related to communicating project and job work instructions. Nearly all mainstream ERP products support work orders. More in depth project management features show up in roughly two-thirds of ERP solutions.
Service companies who perform their work off-site, though, may find it more difficult to locate the right solution to support their needs. Field service management and dispatching modules appear in only about half of SMB oriented ERP systems. Fleet management modules are even more rare with more than three quarters of solutions not supporting this functionality.
Support for sales oriented tasks is another hallmark of ERP software. But differences in both sales channels and the nature of what is being sold lead to differences in the software required to support sales processes.
Standard invoicing and order entry appeared in each of the mainstream ERP solutions we surveyed. But support for more specialized sales channels such as direct and online retail is less common. In fact, based on our data, only about a quarter of SMB oriented ERP products include native point of sale or eCommerce platforms.
Many ERP solutions provide functionality designed to enable other sales-related processes. A strong majority of ERP solutions now offer CRM features. Additional sales process features such as contract management, RMA, and forecasting functionalities are also common.
Payment-related functionalities are the most frequently represented human resources features in ERP software. Payroll and commissions applications show up in all but a small percentage of mainstream ERP products. Time tracking features, which facilitate not only payroll but other employee management processes, are also consistently found in SMB oriented ERP programs.
Modules for managing other human resources tasks, such as applicant tracking, benefits administration, and maintaining employee records, each appear in about half of the ERP products designed for the SMB market.
ERP features very often serve cross-departmental needs--but most map to a primary business function. There are a handful of ERP features which flexibly serve a wide variety of management or administrative requirements.
Most ERP features provide some management reporting capabilities but are tough to be called business intelligence tools. BI software has a more specific meaning when applied to flexible reporting modules that offer advanced functionality such as visual display dashboards. Even with this more restrictive business intelligence definition, BI modules can be consistently found in mainstream ERP products.
Similarly, many ERP modules offer application-specific document management capabilities. But an application-neutral document management system can be useful for consistently managing for a variety of business documents and a majority of ERP products offer this functionality in some form.
For the representative sample, we selected the 25 specific SMB oriented ERP products based on three main factors:
When calculating feature inclusion, we did not include features which would need to be provided by sister products from the developer or 3rd party add-ons.
Here is a comprehensive list of the 25 products studied: