What is small business (SMB) ERP?

For many small-to-medium businesses (SMBs), evaluating enterprise resource planning (ERP) solutions can seem like a challenging task. But it all comes down to one question: Is your current system supporting your business objectives? Or is it holding you back?

To continue growing, SMBs must evolve from spreadsheets, on-premises software solutions, and limited cloud point solutions. To be successful in today’s global, fast-paced, digital environment, SMBs must adopt a modern approach to finance and operations with their ERP selection. But, what is a “modern ERP”? And is that a solution for SMB ERP?

How tactical distractions impact the strategic business goals of SMBs

The ultimate goal of many SMBs is to eventually grow into a larger enterprise. This aspirational objective may require acquisitions, expansion into new regional, national, or global geographies, the addition or evolution of new products or services, additional distribution approaches, or the adoption of new business models, such as subscriptions or franchising. For most midsize businesses, the strategy for achieving growth is a multipronged approach involving multiple combinations of all these activities. But no matter what the action plan is, the ability to execute with speed is critical for meeting—and hopefully, exceeding—growth targets.

Yet, a company’s strategic goals are often held up by reality in the form of outdated enterprise applications and technologies that consume IT resources and interfere with worker productivity.

For example, when an SMB has multiple on-premises software applications for running their business, IT staff and partners spend time dealing with important, but mundane, activities involving data backups, disaster recovery planning and testing, security patching, and a myriad of updates and upgrades. These activities create multiple, ongoing distractions that keep IT departments (internal or contracted) from more strategic tasks that could help companies innovate and grow the business.

This is why SMBs are increasingly adopting a comprehensive “cloud-first” approach. With cloud ERP applications, SMBs divest most of the responsibilities of disaster recovery planning, data management, patching, updating, and most of the other tactical IT activities to their cloud vendor. This, in turn, frees up valuable IT talent for more important, strategic objectives. Plus, with a cloud-first approach, SMBs can grow confidently knowing that their data and systems are available and secure twenty four hours a day, seven days a week through their vendor.

ERP cloud as a competitive advantage and equalizer

Beyond shifting core finance and operations activities from a tactical to strategic emphasis, SMBs that adopt a cloud-first approach for ERP gain two additional advantages:

1. Competitive advantage over other SMBs

When an SMB uses cloud applications for core business tasks, their teams can put more emphasis and focus on growth goals. When competing against other SMBs operating in their space, this delivers a competitive advantage.

2. Competitive equalizer with large enterprises

Often an SMB will be chasing market share or ideas dominated by larger companies, many of which are already transforming their enterprises by using cloud applications. Instead of building their own tech stack, larger enterprises are saving money on their IT infrastructure and making their businesses more streamlined, agile, and secure. With a cloud-first approach, SMBs can leverage the same applications and infrastructure their larger competitors are using today. And if those larger enterprises have not yet embraced cloud applications, then an SMB gains yet another competitive advantage.

SMB ERP business challenges and opportunities

SMBs face the same financial and talent pressures as their larger counterparts. However, SMBs weigh and prioritize issues differently because their downstream goals and objectives are focused on gaining market share, using innovation to grow services and products, rapid geographical expansion, and delivering disruption, all while recruiting and employing the best talent and other resources. Protecting margins and avoiding cash flow issues is still important for SMBs compared to their larger competitors because SMBs have fewer financial and human resources at their disposal, but the priorities are focused on growth, flexibility and innovation.

While revenue and costs contribute to business pressures for SMBs, Executing on growth expectations are the main concern. Why? Because while growth is generally a positive sign for any business, long-term success is particularly important for SMBs who are promoting their company’s ability to build a strong foundation to deliver rapid business expansion through innovation and increase market share. Avoiding missteps is key. And taking on operational risk —might permanently ruin a growth opportunity. This is why it is equally important for an SMB to make sure that it has the back-end IT systems in place that will be able to support its future growth.

Which is why cloud ERP becomes critical for any SMB focused on growth. For most companies, but particularly for SMBs, CapEx funding is limited. When SMBs leverage a cloud-first ERP plan, they deliver their finance and operations capabilities with an OpEx monthly budgeting model that scales with their growth, consuming what they need when it is needed. Rather than deploying or managing on-premises systems that rely on limited and steep up-front CapEx funds, SMBs can grow and pay for their ERP as needed. This frees up CapEx for critical investments in new equipment, added facilities, and R&D activities focused on reaching the SMB’s growth goals. And this becomes even more important when Cap-Ex is required to upgrade out-of-date on-premises systems with numerous customizations, integrations and data conflicts.

SMBs are also challenged when it comes to sharing financial information effectively. Often the foundational elements of an SMB’s accounting system use processes that evolved from manual, paper-based, spreadsheets. This lack of financial collaboration also drives siloed business functions. But if an SMB transforms its operations with cloud ERP, financial processes become streamlined. More importantly, they establish one version of truth for accounting and data across the enterprise. This alone can be a competitive advantage over other competing SMBs and larger enterprise rivals who are struggling with disparate financial systems.

In our fast-paced business environment, the ability to generate prebuilt reports as well as easily create ad-hoc outputs, isn’t just something that’s nice to have—it’s a critical requirement for financial management systems software. Add in requirements for in-depth data analysis, information visualization, more operational visibility, and narrative reports, and companies quickly discover that their ERP software solutions need to easily work with advanced reporting systems like enterprise performance management (EPM) solutions.

Yet, entry into the cloud can seem daunting for an SMB. For many SMBs, growth sometimes happens quickly and faster than planned, which makes it difficult to determine precisely how to leverage cloud ERP.

Comprehensive cloud solutions offer capabilities well beyond the best on-premises systems that trace their roots back to the last century. But the good news is that because of the plethora of features and functionality found with software-as-a-service (or SaaS) applications, very few companies—regardless of size—start with a complete cloud ERP solution suite; most add capabilities as needs arise.

Constantly changing customer needs are also a disruptive force for SMBs as business users expect—if not demand—their work applications be similar, if not better, than what they experience in their personal lives. This is another area where modern cloud ERP offers SMBs clear business benefits. Since cloud ERP is typically engineered with the same up-to-date technologies that drive modern consumer experiences for desktop and mobile applications, SMBs can instantly deliver improved user experiences to their employees and customers.