Do small businesses need an ERP system? Key pros & cons to consider

It would be challenging to find a large, well-established organisation that does not use an ERP (Enterprise Resource Planning) system to manage their business operations. From CRM and project management to accounting, HR and asset management- ERP software helps centralise all of these activities into a single, integrated dashboard. While the value of business management systems is evident, many small business owners are unsure whether it is the right move for them.. To help you answer that question, here are some of the key pros and cons of ERP systems for small businesses.

How an ERP system benefits businesses

Certain pros of BMS (business management systems) can vary from one company to the other, depending on their industry and specific needs. However, the below benefits are equally relevant and important to all businesses. 

  • Improved efficiency and productivity - No matter how small the company, an ERP system can help centralise, optimise and automate a wide range of core business processes. It creates a frictionless, smooth working environment for the employees, which also results in significant improvement of efficiency and productivity across the company. 
  • Future prospects - Advanced business management systems allow for ample room when it comes to long-term growth and scalability. It is typically highly flexible and adaptable to a huge selection of business needs. Open code ERP systems can also be customised with tailored solutions.
  • Savings of resources - While implementing an ERP can require a lot of resources, the ROI of this investment tends to be quick and significant. The ability to automate or optimise certain processes results in financial, time and other savings.
  • Effective use of data - An integrated solution for your data management allows you to not only safely collect and store the data but also offers advanced reporting possibilities. This enables data-based decision making for future operations. 
  • Better communication - Managing your team, assigning projects and tasks, holding meetings and overall collaborating on the common goals is much simpler when all of your processes are interconnected with each other. 

Cons of implementing an ERP system as a small business

While the benefits of an advanced ERP system are similar for both small and large businesses, there are certain drawbacks that specifically affect companies with less resources available. Here are the key drawbacks of ERP systems for small businesses to consider:

  • Costs - The implementation and maintenance of a business management system can add up to substantial costs, depending on which software you choose and the services you need. This is an investment into the company’s future, which requires enough financial stability to see through the implementation process as well as any additional outgoings for maintenance. 
  • Time - Besides money, the process of ERP implementation will cost you a lot of time too. There are so many activities and apps that have to be integrated based on your business requirements. All of your data must be migrated into the new system and everything thoroughly tested to ensure that it works smoothly from the get go. 
  • Adapting - Small businesses with a small number of employees don’t tend to encounter much change in their day-to-day activities. Therefore, the adaptation process when implementing fundamental changes in the way you operate will not be easy. This will temporarily affect the productivity of your staff, as they undergo training and learn about the benefits of these changes. 
  • Customisation - If you wish to customise certain features or apps of your chosen ERP system, this will require a lot of additional resources. You are essentially requesting bespoke solutions, tailored specifically to your business needs, which can be quite complex and time-consuming for the programmers.

When should a business seek an ERP system?

Based on the above pros and cons, it is clear that the question is not "should small businesses use ERP systems” but rather “when is the right time for a small business to implement an ERP system”... 

The right time, however, will highly depend on your individual business processes and needs as well as the resources you currently have available (both financial and personnel). There are certain signs, though, that tend to indicate when a company is ready, or even in need, of an advanced business management solution: 

Issues with current software

The majority of small businesses tend to use multiple software in order to run their core business processes. This may not always be the best option in terms of their value for money (as subscription fees can become substantial) and it may end up causing various efficiency issues. 

For example, having all projects and CRM activities separate from the financial and accountancy software leads to the extra time spent transferring data from one to the other. Now, if you add other activities to the equation, such as marketing, this will introduce another third-party app with its own database. Having to access numerous systems to handle a single project adds unnecessary friction to the day-to-day tasks and results in loss of valuable resources. 

Lack of collaboration between the departments

Ensuring that your team is capable of working together in a harmonious and productive manner is key for your long-term success. If you notice certain issues amongst them, this may be a sign that you need to find better tools and processes they can use to work and collaborate on projects together. The most common problems tend to include poor communication, lots of misunderstandings on who is responsible for which tasks and struggles to efficiently plan joint assignments. 

Struggling to manage data

Data is one of the most important assets a business can own and so having sufficient processes to manage it is of paramount importance. The data you collect about your customers most likely comes from numerous different places, meaning that it can also easily get lost. If you find yourself struggling to collect and analyse the data as well as store it safely, then your current solution is not good enough. This is not only crucial in terms of your operations but also when it comes to staying compliant with data privacy regulations

Unhappy customers

There may be many different reasons as to why a company is struggling to satisfy their customers. More often than not, however, it comes down to mistakes made during the shipment of products, long waiting times for replies, unpleasant experiences at the time of purchase, constant errors in service, etc. Again, a lot of the time these issues are rooted in outdated, inefficient systems the business is using to manage their processes.

Fast growth

A period of fast growth is a highly exciting time for any business. On the other hand, it is incredibly challenging and tests whether its existing processes are sustainable long-term. Typically, companies find that their current software does not allow enough room for scalability and don’t cover the newly acquired needs of a fast growing business. This is when you must fundamentally rethink the way you work and adapt to the changing circumstances. 

Final word

All in all, there is no one rule to decide on if and when a small business is ready to acquire an advanced ERP system. Each situation is different and there are quite a few factors to consider, including the budget and resources you have available. 

If you are still struggling to understand whether a BMS is the right choice for your small business, we are more than happy to consult you! Don’t hesitate to book a meeting with us and one of our experts will guide you through the processes and cost estimates of Odoo implementation for your business.

Is Odoo the ERP system your small business needs?

Get in touch and we will help you find the best solutions for your individual needs!

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