Monday, November 22, 2010

Advantages of ERP for SMEs

Small business owners spend most of their valuable time in daily operational activities and very little time goes into planning. Today it is very critical for an SME owner to leverage IT smartly to grow the business. For this purpose, effective usage of IT solutions like enterprise resource planning (ERP) is essential.

Typically SMEs have the following challenges, which can be solved to a great extent if a good ERP system is used effectively -

Increasing sales and retaining customers
This involves generating enquiries and following up. If you have a system which can help to monitor and analyse the leads and enquiries, conversion rate can be increased significantly. This becomes more important when you have a sales team and need to monitor and motivate them. This will also take care of your sales team attrition.

In this regard, it is important to remember -

• Maintain a common system where follow-up details on each enquiry are captured. This helps to understand what type of customers are giving you enquiries and how you can help them to take a faster decision.

• Maintain a common database of all your customers so that you can send them offers and updates of your new offering or renewals.

Managing timely deliveries to customers

Most of the information among SMEs is in the mind of the owner which is not always shared with other people in the company effectively. This result in ad hoc activities and quick fixes, which affects the quality of the product and the service delivered. Simple and timely data entry in an ERP can help you plan your operations and save a lot of time and money.

Managing receivables and cash flow

There is no systematic tracking of customer outstanding and his/her credit history. This is very critical for an SME where cash is the most important thing. Even to have an outstanding report the owner has to depend on the person looking after administration. This leads to various errors and delay in collection and also higher write offs. If a systematic entry of invoice, due date and credit limit of a customer is maintained by deploying ERP solution, the collection period and write offs can be improved significantly.

Regulatory activities
An ERP system can give ready reports for filing taxes, profit and loss reports and balance sheets. Also, financial audit becomes very smooth if all the data and supporting documents are available in a single system.

Raising capital
A systematic approach will help give ready reports required by banks for raising capital. SMEs can adopt such an approach by deploying ERP solution.

Hope this helps.

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