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?
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Yet, a company’s strategic goals are often held up by reality in the form of outdated enterprise applications and technologies that consume IT resources and interfere with worker productivity.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.
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.
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.
New, next-generation technologies—such as AI, machine learning, chatbots, and process automation—are changing how finance operates. When you migrate to a cloud-based ERP system, you can access the capabilities from these technologies to gain efficiency and improve decision-making.
But how do you know your current ERP system is not built for growth? Answer the following questions about your current back-office finance and operations environment to help you find out if your existing ERP is holding you back:
1. Is data downloaded and manually re-entered into other systems, especially Excel spreadsheets?
2. Do the lines of business trust the data, and is there a single source of truth?
3. Has decision-making stalled as data is questioned or not viewed in real-time?
4. Are spreadsheets used more than your current ERP system?
5. Does closing the books seemingly take forever (weeks rather than days)?
6. Can your teams support new revenue models or planning, budgeting, and forecasting methods?
7. Is your ERP system a cobbled-together collection of point solutions from different vendors with multiple internal or third-party integrations?
8. Are customer experience complaints increasing?
9. Are you dealing with any of the following: Skyrocketing ERP system support costs? End of life for your current ERP product support? A required ERP upgrade coming soon?
For most SMBs, growth and market share are top goals fueled with a singular laser-like focus., they are not the only objectives that SMBs care about—not by far. Another important concern is profitability. Even though SMBs often gain margin improvement due to scale and volume, it still becomes imperative to know all product and service costs, to manage expenses tightly, evaluate direct and indirect procurement procedures and processes, and to work with established budgets through ongoing forecasting, planning, and analysis.
SMBs can’t afford to be left behind as new practices, such as mobile access, ecommerce, big data, and AI, start to take over the competitive business landscape. Modernizing business systems remains an ongoing responsibility for SMBs. Adopting new technologies will enable them to compete in a changing marketplace.
Customer service is equally important for every SMB. Growing profitably while keeping systems current and up-to-date helps to provide both the framework and governance for every SMB business. Modernizing software systems allows companies with a customer-centric approach to factor their customers' needs into decisions and investments. Exactly how to service customers best will vary by company, but it’s usually some combination of brand, products, services, and/or some unique capability a company might have in their industry.
Small-to-medium businesses struggle with what a modern ERP system should look like and the specific functionality that it should provide. For any SMB focused on strong financial performance and business growth, here are the key requirements that define a modern ERP system. They provide a great starting point for any conversation about deploying a modern ERP:
When it comes to why companies are likely to change or upgrade their ERP systems, there are many drivers. Taking advantage of the latest capabilities and functions tops the list.
As business grows for an SMB, handling an increased volume of transactions, accelerated speed of information, and new process requirements may demand adding functionality. Ease of use is key to engaging employees and ranks second on the list. The priority is that the ERP solution must do the job while also being easy and intuitive to use.
Based on their business offering, SMB flexibility should enable profitability and growth—two critical business goals. Flexibility is equally important for the enterprise resource planning solution itself as well as for its deployment.
Simply put, if an ERP system does not meet your company’s current business needs, it’s time to change. Companies in this situation must reconsider their entire IT and systems strategy if they want to successfully pursue their goals. A cloud-based ERP approach—one with a provider that can handle growth and integration support— is the best viable solution. Options vary, but a focus on flexibility and security is a wise approach.
ERP adoption usually starts with financial solutions. Just like large enterprises, SMBs require a means to track costs against accounts, balance sheet, and P&L generation as well as general ledger functionality. Four of the most common ERP processes that SMBs initially adopt include accounts payable, accounts receivable, general ledger, and payroll. Accounts payable and accounts receivable are two processes SMBs use to connect with customers and suppliers. Accounts receivable covers the order-to-cash process on the customer side (taking orders, delivering a product or service, billing, and collecting payment from the customer). Accounts payable manages transactions with suppliers.
Accounts payable are key to procure-to-pay or source-to-settle process, involves ordering goods or services from a supplier and includes receipt, invoice processing, and payment. General ledger is the backbone of any accounting system.
Other solution areas that are also gaining importance regarding financial management with SMBs include expense management, procurement, inventory and project management.
In addition to common financial applications, SMBs should expect their ERP system to include basic administrative and functional applications.
Core HR functionality may also be part of some ERP systems; this is another area that SMBs might initially outsource. As they grow, they may look for an HR solution that integrates well into their ERP.
Basic workforce management software allows companies to forecast labor and workload demand; define and assign schedules to meet business objectives; capture time worked, absences, and other labor data; track adherence to schedules and productivity; and adhere to labor laws and pay rules. As labor management and reporting requirements become more complex, leveraging a workforce management or a time and labor solution integrated with the ERP system might be the next step.
In addition, as companies of all sizes compete for talent cloud solutions that not only improve recruiting but enhance the overall employee experience – which contributes to retention – are becoming more important. Together, these employee management solutions increase the need for comprehensive applications that work together across recruiting, on-boarding, career development, payroll and benefits.
Beyond financial accounting and administrative applications, there are many other capabilities related to controls, processes, visibility, and integration that SMBs are more likely to adopt.
While SMBs typically indicate that their overarching goal is to grow, profitably and cost control is still important. as it is impossible to operate confidently without visibility into what costs are involved. At some point, it is not possible for any SMB to survive without understanding and then controlling their costs.
With cloud-based ERP, SMBs can gain an integrated business system that provides a complete and auditable system of record for the organization and establish one version of the truth. Cloud ERP solutions facilitate communication and collaboration by eliminating data silos and disconnected processes. A central repository for performance metrics and KPIs—available on-demand—reinforces this approach. Putting the information in the hands of the right people, based on their roles and responsibilities, also establishes control. Ensuring the right people have access to the information they need is vital, so they can make informed decisions in a timely manner.
As organizations grow and expand, it’s critical to ensure the channels are in place to facilitate the flow of information. ERP solutions integrate different departments (operations, customer service, logistics, sales, and finance). Having tightly integrated departments with a common data model eliminates time wasted on verification and error correction between silos that previously existed. The result is a faster flow of information and improved collaboration between and across departments.
When SMB leaders evaluate what they need from their ERPsystem to best manage their finance and operations, perspectives will initially be different depending on each employee’s background, training, discipline, and role in the business. But while answers will vary at first, SMB companies often reach the same conclusion when assessing their options for a modern ERP solution. For many SMBs, a cloud-based approach to ERP is the right solution. By standardizing on a single platform across multiple departments, cloud-based ERP addresses integration issues for organizations that struggle to merge legacy and best-of breed solutions.
ERP cloud simplifies integration within the finance function and across the different lines of businesses. Not only that, cloud-based ERPs can reach directly to the customer, providing the foundation needed to offer the self-service features that customers love.
SMBs need to have the agility to expand as needed. They often select the cloud because it delivers an ERP solution that scales easily. Moving to the cloud also eliminates much of the cost to manage on-premises ERP systems. SMBs need a solution that can be easily integrated and avoids expensive upgrades, as well as one that offers constant, industrial-strength security for all their data.
Equally important, an ERP cloud solution reduces the need to retain an IT staff that "keeps the lights on." This lets an SMB use its IT resources for more strategic tasks focused on market growth and other business initiatives.
To stay ahead of the competition, your small or midsize business needs more than on-premises ERP. You need embedded best practices, up-to-date functionality, and the latest transformative technologies delivered through an industry-leading global cloud infrastructure. Oracle’s ERP cloud suite is the most comprehensive and scalable solution available today and is ranked the market leader by key analysts. Oracle Cloud ERP is a proven SMB solution with more than 8,500 global customers of every size found in every industry utilizing every critical ERP business process. With Oracle Cloud ERP, your SMB gains a competitive advantage that helps your entire organization drive market growth and profitability.
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