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What is Stopping SMB Organizations from Using ERP?

August 13, 2012BY AMS Editor

An interesting blog post titled “What Can ERP Do For Me?” by Aberdeen Group Analyst Nick Castellina discusses results of research conducted by Aberdeen and published in the report “To ERP or Not to ERP for SMBs” and are worth revisiting below.

The Challenges SMBs Face

According to Aberdeen Group, “SMBs without ERP perform worse than those with ERP in the amount of time it takes to close a month, issue invoices, collect cash, and make decisions, as well as in inventory accuracy, growth in operating margins, and, ultimately, customer retention.“

The report states that those companies without an ERP system face tough challenges in the form of more day’s sales outstanding, taking longer to receive cash they may need to reinvest in the business. In addition customer retention becomes an issue because of the inability to respond to customer needs leading to diminishing revenue.

Benefits of ERP for SMBs

The benefits of ERP for SMBs were also measured and interestingly enough, even companies considered laggards have benefitted from their ERP implementations. Improvement in inventory turns, operating costs, administrative costs, complete and on-time delivery, and inventory holding costs are all examples of what an ERP brings to the table and how it helps small and medium-sized businesses become more competitive.

Best-in-Class companies, the top 20% of aggregate performance scorers by Aberdeen Group, showed that an ERP system helped them the following ways:

  • 61% improvement in inventory turns
  • 24% reduction in operating costs
  • 23% reduction in administrative costs
  • 23% improvement in complete and on-time delivery
  • 18% reduction in inventory

The ERP Decision for SMBs

The full post from Aberdeen Group showing the tables and metrics is worth checking out. The question remains, though. Why not implement an ERP system? If your company has been limping along with a basic accounting package but is growing, now is the right time to look at an ERP solution. Contrary to what you may think, business management systems have come down in price significantly (thanks in part to the advance of cloud-based ERP solutions) and are more affordable than ever.

Why not take advantage of the benefits you will gain from an ERP implementation? Your competitors probably will.

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