15 Benefits of ERP for Businesses in 2024 (2024)

Data has become a prized possession for businesses because it’s so critical tomaking the best possible decisions, and ERP software can help protect that asset.The fact that all this data is in one place, rather than spread across multiplesystems with varying levels of security, increases the level of protection. Itreplaces spreadsheets and other documents sitting on employees’ desktops andbeing passed around via email. With a cloud ERP system, your information istypically distributed across multiple remote servers to establish redundancies andprotect against a single point of failure, adding another layer of security. This isespecially important if your company handles a lot of sensitive customer data.

In another sense, an ERP system can increase data security by limiting who can viewand edit data. Most systems have permissions that are easy to control, ensuringemployees only see the information they need to and reducing opportunities for fraudor other nefarious activities.

Much of the value of ERP can be traced back to the fact that all information fromdifferent departments is stored in one place. Without such a system, data is oftenspread far and wide across an organization in various applications and spreadsheets,making it harder for staff to track down whatever it is they need. Additionally,this approach often results in duplicate data in inconsistent formats, posing morechallenges.

An ERP system can help with that, too, by standardizing all your critical data. Sinceit’s all in one system, everything will be in the same format so youdon’t run into issues when running reports or analytics. Standardizedinformation allows you to get all the insights you need to make more informeddecisions that help the business save as much time and money as possible.

Having accurate, up-to-date records that are easy to find and searchable can reallyreduce the work required to comply with any regulations your company must adhere to.Customizable reporting tools within the software also make it far easier to trackcompliance and adjust as necessary. This makes you much more auditable, as well,because all the information an auditor might need to review is easily accessible.

Certain ERP systems can even support specific financial standards like GAAP orregulations like the Sarbanes-Oxley Act (SOX). The best solutions will also updateto reflect any changes to these regulations so you remain compliant. Stayingcompliant can quickly become difficult, especially if you’re in a highlyregulated industry, but ERP makes it much more feasible.

There are countless ways an ERP system can give a major boost to productivity. Oneway is that it automates many basic, repetitive tasks, freeing up employees to workon other projects that bring more value to the organization. It can also allow themto complete a variety of tasks faster by making processes more straightforward andreducing the time spent searching for the information they need. Since employeeshave visibility into the entire company, they don’t have to ask around for aspecific set of data or details on how certain processes work.

Greater productivity also means you don’t have to add to headcount as much aswould be necessary without an ERP platform. By removing a significant amount of workfrom the plates of employees, they can then take on new tasks and focus on projectsthat use their true skills and expertise.

Visibility is another one of the broad, fundamental benefits of ERP — everyonehaving visibility into various aspects of the business is a powerful thing. Itenables faster and better decisions because managers have all relevant context thatcan assist them. For example, if the purchasing team can see the status ofin-transit purchase orders that have not yet reached the warehouse, they can factorthat into the orders they’re about to submit to avoid excess or insufficientstock.

Visibility into the status of processes and data managed by other teams ultimatelyhelps all teams and individual contributors do their jobs better. It also eliminatesthe time and effort spent trying to simply find this information.

The beauty of leading ERP systems is that you can use the functionality you need nowwhile leaving the door open to add more capabilities down the road. In that sense,the system can scale with your business as it grows and evolves. You can also addnew users as your teams grow. There’s no need to get a new ERP solution justbecause your business has changed — even in big ways — since youimplemented the existing system.

If your business has rapid growth plans, a cloud ERP system will provide the mostscalability. Since cloud systems run on remote servers, it’s a cinch to addthe extra resources needed to keep the solution running smoothly — far easierthan handling that yourself. That reduces the work put on IT and can eliminate theneed to hire a team of technical experts.

Employees have become very comfortable using smartphones and tablets instead ofcomputers to complete many tasks, and in light of that trend, today’s ERPsystems are mobile-friendly. Since users access cloud systems through the web, theycan pull up all the dashboards, reports and other information they need to see in amobile browser. Many vendors now have mobile apps, as well, that can provide abetter user experience on smaller screens.

For some companies, mobility is not just a nice-to-have but a need-to-have. They mayhave workers in the field or employees who travel frequently and must be able to seean up-to-date view of their business from devices other than a computer. Theseemployees can also take care of critical tasks like approvals and monitoring cashflow (AR and AP) when they have a mobile-friendly ERP solution.

For business owners and leaders, the most convincing reason to buy an ERP system isthat it lowers overall costs, often in a big way. The automation we’ve alreadydiscussed can reduce or even wipe out many administrative and operational costs.Manual data entry or processes that require long paper trails, for instance, areoften eliminated with this software.

All the insights this software can provide mean ample opportunity for other costsavings. The ability to monitor the pulse of your organization in one place meansyou can quickly identify the source of higher expenses, which makes it much easierto reduce costs. Additionally, the improvements to planning that an ERP systemenables should prevent rush orders, over-production or over-ordering, all of whichcan drive up costs. There are countless ways an ERP system can reduce your costs,which is why these solutions often have a fast ROI.

As you go through an ERPimplementation, it’s a good idea to work with an expert on your systemto evaluate processes and determine if there’s a better way to complete thattask in the new system. Often, work is done a certain way because that’s howit’s been done for years, not because it’s the best option. So an ERPcan help in that way, cutting out steps and making other improvements to make itfaster and easier to get things done.

Much like an ERP standardizes data, it also standardize workflows. The way onedepartment handles a certain process may differ from that of another department.Even two employees within the AP department may not follow the same steps to makepayments, for example. An ERP system should eradicate those discrepancies, ensuringeveryone is following the same best practices.

Reporting is without question one of the biggest and most immediate benefits of usingan ERP system. The possibilities are endless with the ability to customize reportingacross all functions — finance, inventory, orders, procurement, sales andmarketing, HR and anything else you can dream up. Whatever you want to measure, orwhatever KPIs matter most to your company, an ERP solution can calculate it. You cannot only track the performance of different components of the business, but alsocompare departments to understand what’s driving the business forward andwhat’s holding it back.

It’s essential that your report reflects the latest data, and that’s whyreal time is so important. If it takes two weeks to receive revenue numbers from thelast quarter, that’s not very useful because the information is alreadyoutdated and may not be relevant. But if revenue totals update in real time, as eachsale happens, you can immediately use it to inform decision-making. This has becomecritical in today’s fast-paced, hyper-competitive environment.

An ERP solution increases efficiency across your organization since it touches everypiece of the business. Everyone from recruiters to warehouse managers to C-levelexecutives should see improvements that help them thanks to greater automation andavailability of information. Processes become less time-intensive, which oftenbenefits not just the company, but customers as well. That can reduce operatingcosts in a big way and generate higher profits.

Consider a manufacturer that makes 10 products and has an average profit margin of20%. With an ERP system, it can easily spot its least profitable products, then workthrough the data to find that labor costs are much higher for the two items with thelowest margins. After talking to staff, the company discovers that most of the workthat goes into making those items is manual and time-consuming. So the manufacturerdecides to purchase a piece of machinery that can automate the production of thosegoods and sees its average profit margin climb to 25%. Just like that, the ERPsoftware has saved the business hundreds of thousands of dollars annually.

Just about every business is competing with other businesses for the same customers.That’s why the customer experience is so crucial, and much of that is shapedby the level of customer service a company can provide. An ERP helps companies stepup their service because it puts all customer information, from contact details toorder history to support cases, in one place. That facilitates faster solutions anda more personalized experience when customers do need assistance.

And an ERP system can improve your level of service in another way: more accurateinventory and order information mean customers will almost always receive the rightitems and orders arrive on time. Limiting those issues will keep your customershappy and increase the chances they turn into repeat buyers.

So many of the benefits we’ve already covered here facilitate collaboration.Visibility into the way other teams work and what information they’re lookingat makes it far easier to work hand-in-hand and for staff to reach out proactivelywhen they see an opportunity to help colleagues. No longer are teams operating on anisland and using applications that only they have access to and that aren’tintegrated with other back-end systems.

When employees communicate more frequently and work together, the entire businessbenefits. Together, they may uncover duplicate work that can be eliminated orbrainstorm better ways to take care of daily processes. Lapses in communication orunawareness of what others are working on only leads to problems, but an ERPsolution helps prevent those.

ERP platforms are designed to work for companies of all shapes and sizes, which iswhy the top providers have built deep flexibility into their systems. Thatflexibility allows users to tailor the system to meet their specific requirements,like unique processes or uncommon metrics. This ability to satisfy your exactrequirements is the same reason ERP systems can be complex, but one is not reallypossible without the other.

This flexibility is especially important as your business evolves over time. The mostefficient workflows and KPIs may change over time, and this flexibility means thesystem can still work for your business — there’s no need to replace it.

Your business can only be prepared for what’s coming if it knows what toexpect. That’s where forecasting comes in: it uses a wide range of historicaldata and sometimes other inputs to predict future demand, revenue, expenses andother numbers. Forecasts are much more accurate once you’re running an ERPsystem because they’re based on more accurate and comprehensive information,since all that data is now in one place.

More accurate forecasts mean you can make the appropriate preparations for what islikely to happen. If sales are expected to climb 30%, you can strategically purchasemore inventory or, if you’re a services business, hire more employees with theskills where you expect increased demand. If costs are expected to climb at a higherrate than sales, you can start looking for ways to cut back expenses. Ultimately,better forecasts can help organizations both make more money (by having all thenecessary resources available) and lower costs (by not overspending in the wrongplaces).