What is ERP?

 You might have heard the initials bandied around and wondered: “What is ERP?” ERP stands for Enterprise Resource Planning.
It has two key functions:
  • It allows businesses to understand and plan how resources are used across their entire enterprise in a single software solution, rather than being restricted to a specific department.
  • It enables businesses to simplify their operations by bringing multiple systems into one place. These might include accounting, stock control, order monitoring and customer relations management (CRM) products.

What is an ERP finance system?

The origins of ERP systems date back to the 1960s, although the term itself was first used by the technological research and consultancy business Gartner Inc in the 1990s – at a time when the use of such systems was growing fast.

The scope and capabilities of ERP have expanded significantly over the last two decades – so the answer to the question “What is ERP?” has evolved somewhat.

ERP was originally used to describe a system that provided an inventory management and control solution to the manufacturing sector.

Today, however, ERP now describes a way for any business to manage its accounts, sales and human resources in one system. The result of this rapid evolution is a software solution that offers a vast array of choice to consumers.

This has meant that ERP software is no longer restricted to use by large enterprises, with smaller businesses also increasingly recognising the value to their own productivity.

This can be seen from the fact that as of 2021, the ERP market was worth $40bn, according to Gartner, accounting for four per cent of the overall software market.

What is ERP and what functions does an ERP handle?

An ERP system might include functions such as:

  • Accounting – both financial and management accounting
  • Human resources
  • Manufacturing
  • Order processing
  • Supply chain management
  • and management
  • Customer relationship management (CRM)
  • Supplier relationship management (SRM)
  • Data services.

Modern ERPs will tend to be cloud-based, so the information is stored offsite rather than being held on servers on an organisation’s own premises. This means the system can be accessed securely from wherever the user might be and is protected by the latest security fixes and updates.

What are the advantages of an ERP?

An ERP solution offers a wealth of advantages to its users, which serves to increase business efficiency. These are encapsulated in three broad categories:

What is ERP’s role in eliminating errors?

ERP automates business processes to reduce the amount of time employees spend entering data into the system themselves. Rather than spending two days manually inputting bank statements into the accounts system, for example, an ERP solution inserts the data automatically. This reduces the likelihood of human errors and also enables a business to reallocate resources away from redundant tasks.

What is ERP’s role in business understanding?

By bringing together disparate systems that operate across a business, it becomes possible to analyse performance from within one solution. It breaks down barriers between departments and naturally improves transparency.

How does ERP help with business decisions?

The correct ERP vendor provides customised reports and performance analysis. Businesses are therefore able to decide how they view information in their system, rather than having the format dictated to them by their supplier. With ERP providing a personalised overview of the entire business in one place, the management team is able to make better decisions based on a real-time assessment of the vital data.

These benefits demonstrate the significant potential to transform the way any business works, regardless of its size or industry. The rapid growth of the ERP market in recent years is a testament to the fact that this has already been achieved. 

For more help with finding the right financial software, get in touch with our team or watch one of our webinars to learn more.

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