An Accounting System is NOT an Enterprise Resource Planning (ERP) System!

Business Insights | Enterprise Systems

Well duh you might say but you’ll be surprised! If I received a dollar for each time someone said ERP is just an accounting system I’d have enough to put my kids in school instead of home schooling them. Okay that last part is not true. In this article I’ll explain what ERP can do at the various phases a business will go through and you can judge for yourself on whether you should invest in an accounting system or an ERP system.

There are typically four phases that every business will go through:

  • Startup
  • Growth / Survival
  • Rapid Growth / Expansion
  • Maturity

Let’s explore each phase.

Startup Phase

Congratulations! You’ve taken the bold step to start your own business! This is fantastic but you will need as much help as you can get juggling different roles, experiencing a myriad of emotions and run off your feet just to keep the business afloat. It’ll be a very challenging but immensely rewarding experience!

At this stage, ERP can help to

  • Integrate into a website so customers can place orders and make payments.
  • Automate basic repetitive and manual tasks like creating invoices, track inventory, basic book-keeping or payroll processing.
  • Reduce cost and time for tax filings and financial report submissions.

Your business is now in its 2nd-3rd year and things are looking great. Kudos to you in getting this far! You’ve hired a few more people so now you’re not juggling too many roles. Growth has been steady, you’re generating recurring revenue and you’re continually fine tuning your critical business processes.

At this stage, ERP can help to

  • Make your critical processes much more efficient with workflow automation.
  • Systemise the rules, routines and responsibilities put in place for these critical processes.
  • Easily track and monitor customer sales, stock levels and costs.

Rapid Growth / Expansion Phase

Your business is flourishing and is well established in one or two markets. These are exciting times as your business prepares to enter and penetrate new markets! If all goes to plan, rapid growth will ensue and alongside this, more complexities will be introduced with greater scrutiny to standards and compliance.

At this stage, ERP can help to

  • Keep an audit trail of all business transactions.
  • Define roles and responsibilities to ensure segregation of duties.
  • Reduce the burden of accounting and consolidations for multiple legal entities.
  • Run business analytics to support key management decisions.

Maturity Phase

Your business has reached the pinnacle stage of maturity. All that you and your founding partners and team have worked tirelessly for. The business is still growing but not at the same rate as the previous stages. Larger growth will now come from mergers and acquisitions. You may also be ready to take the business public or have piqued the interest of being bought out by a corporation.

At this stage, ERP can help to

  • Continually improve operational efficiency with Internet of Things (IoT) integration.
  • Develop greater insights into the business through data mining, business intelligence (BI) and artificial intelligence (AI).
  • Quickly meet and conform to all statutory and regulatory requirements especially with preparations for IPO or a due diligence.

I hope this helps clarify the difference. Don’t fall into the trap of purchasing accounting software being touted as ERP software. If you’re still unsure, just do a quick google search or talk to us.

Written by Tony Ta | Cheerleader and Connector at Cloude8 | www.cloude8.com