In this series of articles, we’ll discuss how to take your business to the next level, and how the supporting business systems are critical to your success. We will look at identifying when there is a need for change, what the next level can provide and how to go about successfully moving to that next level.
Products like MYOB, QuickBooks and Xero are all fantastic packages for small business, and all have their strengths and weaknesses. However, as your business grows these systems don’t necessarily have what it takes to provide the control and management reporting required to go beyond a certain point; in fact, they could even be hindering your growth.
This is understandable as these systems were specifically designed for small business and as such are referred to as entry level systems. Their functionality is designed to support the accounting and bookkeeping requirements but not the more complex business processes around them. For this you will generally need a system that has ERP capability: Enterprise Resource Planning
ERP systems take a ‘whole-of-enterprise’ approach and help you monitor, control and automate processes within your business, as well as handle the accounting and bookkeeping side. In order to do this, they need to be more sophisticated and have a complete understanding of all the aspects required to drive those business processes.
As an example, say we wanted a system that is going to aid or automate the process of reordering stock. Firstly, the system needs to know all about what is going on in the stock system:
- What is our stock on hand?
- What has been reserved for customers?
- What has been reserved for job production?
- What stock is in the manufacturing pipeline?
- What products are we expecting in from suppliers?
- What products are we expecting in from our own warehouse?
- What products do we need to ship out to the branches?
- What are our customer back-orders?
- What stock do we have on consignment?
Based on all these figures we can then get a true picture of where our stock is really at. Then we can start adding some smarts around the reorder levels:
- What has our trading pattern been for the past 12 months?
- How many months do we want this order to cover us for?
- What is our expected growth or downturn over this period?
- Are we ordering for the whole company or just one branch?
Without knowing all the parameters required in your business, a system is not able to provide you with accurate and automated processes. At the same time, if these figures are not maintained and accurate then the system will not work either; garbage in garbage out.
A major goal of good software design – and especially ERP based software – is to be able to turn certain elements on and off as required. This helps to present users with a clean, consistent and user-friendly interface. Sure, you need the sophistication, but at the same time you don’t need to be cluttered with things that aren’t relevant to you and your business. So, if you don’t have jobs and manufacturing, multiple branches or warehouses, or stock on consignment, then all this can be hidden to make the system simpler to use. However, as your business grows, and you find a need for these features in the future, then you should be able to add this functionality one step at a time.