If you have looked into software for your business, you have met the letters ERP. They appear on websites, in sales pitches and in conversations with your accountant, usually without explanation.
It stands for Enterprise Resource Planning, which does not help much. So let us put it plainly.
An ERP system is one piece of software that runs the main parts of your business together, using one shared set of records.
That is all. The rest of this guide explains why that simple idea makes such a difference.
The problem it solves
Picture a typical growing business.
Sales are recorded at the till. Stock is tracked in a spreadsheet. The accountant has their own software. Staff details are in a file. Customer balances are in a book, or in someone's memory.
Each of these works well enough alone. The trouble is that they do not know about each other.
So when a sale is made, someone has to update the stock sheet. Then someone has to tell the accountant. If a customer bought on credit, someone has to write that down as well. The same event is recorded three or four times, by different people, at different moments.
Every one of those copies is a chance for a mistake. And when the figures disagree, which they will, nobody can say which one is right.
One record, used by everyone
An ERP removes the copying.
When a sale is made, it is recorded once. From that single entry, the stock count goes down, the income appears in the accounts, the customer's balance updates and the day's report changes. Nobody passes anything along.
Everyone in the business is looking at the same information, each from their own angle. The storekeeper sees stock. The accountant sees money. The owner sees all of it.
What an ERP usually covers
The parts are often called modules, and a business uses the ones it needs.
- Sales and point of sale. Recording what is sold and how it was paid for.
- Stock and inventory. What you have, where it is and when to reorder.
- Purchasing. Orders to suppliers and what you owe them.
- Accounts. Income, expenses, and profit and loss.
- Customers. Who they are, what they have bought and what they owe.
- Staff and payroll. Records, pay, deductions and leave.
- Reports. A view across all of the above.
Then there are parts that belong to particular kinds of business. A school needs admissions, fees and exams. A hospital needs patient records and a pharmacy. A landlord needs tenants and rent. A petrol station needs pump readings and tank stock.
This is why ERP systems are often built for a specific industry. You can see how different they look across the systems we build, from schools and hospitals to retail and payroll.
Is this not only for big companies?
It used to be. ERP systems were once enormous, expensive and installed by teams of consultants over many months.
That is no longer the case. A system today can be sized for a single shop or a small school, run from a laptop and a phone, and be extended as the business grows.
Small businesses arguably gain the most. A large company can employ people to reconcile its records. A small one cannot, so the owner does it at night.
Signs your business is ready
- The same information is entered in more than one place.
- You cannot say what you made last month without several days of work.
- You find out you have run out of something when a customer asks for it.
- Stock or money goes missing and you cannot tell where.
- Certain things only work when one particular person is in.
- You are opening a second branch and wondering how you will keep track of both.
If three or more of these sound like your week, you have outgrown separate tools. We described what that feels like in The Spreadsheet That Runs Your Company.
What to expect when you get one
It is fair to be told the truth about this.
There is work at the start. Your existing records have to be moved in, and they will need tidying. Your staff have to learn a new way of doing familiar things, and some will resist it for the first few weeks.
Then it settles. The daily tasks get faster. The end of the month stops being a scramble. And you begin to see things about your own business that were always there but never visible.
A few things make it go well.
- Begin with the area that hurts most, and add the rest in stages.
- Choose a system that fits how you work. Whether to buy or build is a question we looked at in Custom Software or Off-the-Shelf?
- Insist on proper training, for everyone who will use it.
- Make sure it handles local needs such as M-Pesa and electronic tax invoicing from the first day.
An ERP does not change what your business does. It lets you see it clearly, all at once.
In short
ERP is a grand name for a sensible idea: record each thing once, in one place, and let every part of the business work from it.
If you are curious whether your business would benefit, talk to us. We will ask how things run today and give you a straight answer, even if that answer is "not yet".
