3 Ways SMEs Running Without ERPs are Losing Out On Business Potential

One of the biggest myths held by Small to Medium Enterprises (SMEs) is that Enterprise Resource Planning Systems (ERPs) are meant for large enterprises. The reality, however, couldn’t be any farther from the truth. As a matter of fact, SMEs often tend to lose out by running their operations on manual systems. Here are three ways in which they are potentially missing out on the possibilities that can be harnessed from using ERPs.

Historical information is what predictions run on
It sounds almost basic that any enterprise with a thinking strategy will always watch the trends of the happenings in the market. For instance, for agricultural enterprises, one way to improve the odds of the next bet can be predicted, almost to a safe certainty, by watching supply, pricing, demand, internal production – all as a function of the cost of production and potential profit. It’s certainly the smart way to ascertain the strongest points to consider for future planning.

Which means, historical data has to be stored. Not just historical data for the current season. Data for the past 10 or more seasons. Why? Because it’s through studying trends over expanded periods that predictions and more important, projections can be made.

No matter how small the enterprise is, reporting tools come in handy in this respect, because they easily provide a source of information which guides the next business decisions to be made. SMEs operating without capable systems which can store and process this information therefore lose out on the opportunity to learn the strategic direction business should be taking.

Without the 360, there is too much guessing
The complexity of business, especially small ones, is often understated because the determinant of whether ERPs are needed or not is the daily volume of transactions. However, some SMEs are involved in more than just one plane of business – and instead, are involved in reselling, which means, supply sourcing and managing, transaction logging, stock control and financial accounting are also present factors in operations. Once neglected, there is very basic understanding of the flow of finances, poor relations are maintained with suppliers, stock is potentially poorly managed and the transactions, cumulatively, become unmanageable in spreadsheets or manuscripts.

Business potential is suppressed because of this lack of a 360 view of business, especially relating to the information flow of the A to B relationships of the different business functions.

Automation increases efficiency
Tuckshops (or mini-shops) are a very common form of enterprise in African countries, and in many cases, they are run as family businesses. Finances are written down, usually manually in books and stock determinations are determined on opinion. It’s a classic case of a small business, often with modest transaction volumes. What is the benefit in automation in this case?

A point-of-sale system integrated to a light ERP with an inventory or stock control system can easily, through reporting, indicate what stock is going fastest and at what rate – in that way informing the enterprise owner when to put in new orders so that they don’t fall short of stock. The reverse is also true – reporting can show, in aggregate, what products are in low demand, but more than that, pointing to when there are changes in the same. Most of this functionality is a tedious process without a system to put the data together and make sense of it.

As for the return on investment that stands to be realised from this employment of technology, there is vast potential for increased sales, reduced wastages and better financial control when earnings can be easily tracked and stock easily accounted for.

All in all, SMEs stand to gain from adopting ERPs and interlinked electronic systems to help them manage their enterprises. As discussed in an earlier post, we discussed how with ERPs business size is an outcome, not a function. It points to a simple but fundamental idea; that businesses, regardless of size, often stand to gain from adopting electronic systems for enterprise management.

2 thoughts on “3 Ways SMEs Running Without ERPs are Losing Out On Business Potential

  1. PADDY MUTIMUSAKWA

    It is amazing and very impressive how companies worldwide have embraced technology, particularly business intelligence to gain insights into how their businesses are performing – and in turn help them make informed/intelligent decisions. Businesses are accumulating so much data at an imaginable rate and without the right tools to capture and analyze this data, businesses are “missing out” on what could be a life-saver for their sustenance.

    Reply
  2. Pingback: Achieving real Integration through ERP's — TTCS Blog

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