Let's start with the basics: What is ERP?
Enterprise Resource Planning (ERP) systems are applications designed to automate and optimize core business processes, while also providing insights, internal controls and workflow support. Effectively, your ERP is a large centralized database and the tools that allow you to view data and perform operations on the records.
The logic of an ERP system is quite simple - working and managing your organization usually requires the collaboration of multiple people and stakeholders with different functional roles, responsibilities and expertise. This becomes cumbersome when your organization's important data is spread across different systems and stored in dozens of different Excel spreadsheets. The ERP's job is to eliminate the redundancies in your systems by centralizing the data in a single repository (and hopefully eliminating redundancies and errors that can occur with different versions of the data).
It's your ERP system's job to keep your organization from being stifled by its own processes as it grows and evolves. At the same time, it helps you see the full range of inputs, causes and effects of different actions and processes on every part of your entire organizational system. By compiling your information into a central database that serves as a single base, your ERP system gives you visibility of all processes and workflows across departments, helping you analyze scenarios, discover potential improvements and achieve huge efficiency and productivity gains.
Thus, ERP can be a confusing concept as it does not describe a standalone software or application. An ERP platform usually comprises several different modules, each of which covers a specific functional area. Each of these modules accesses the central database to find, add, change or delete information as required.
How do ERP systems work?
ERP systems, as the name suggests, are designed to help organizations manage and plan their resource allocation by automating and streamlining routine back-office workflows.
An ERP system adapted to the needs of a service-oriented organization must include at least the following components:
A financial planning and accounting module to manage an organization's finances through the other major components of the system. In an ideal world, this forms the hub of all financial data and decisions (although in many organizations outdated legacy systems lack the necessary integration for this).
The finance module is generally considered the most important module as it provides the basis for financial control of the entire organization. It helps to understand the current financial situation and perspective. Key features of this module include functions for accounts receivable and accounts payable, general ledger management and storage of important documents such as balance sheets, receipts and tax returns. It also serves as a repository for data related to financial planning and analysis (FP&A) functions and is therefore important for profit and loss reporting, overall financial reporting and scenario planning.
This module can also be used to automate tasks related to your organization's entire financial cycle, including invoicing, vendor and supplier payments, cash management and account reconciliation.
A human resources module to track onboarding, leavers, performance and salary and benefits allocation.
Most solutions today include modules to perform routine HR tasks such as payroll.
Because this module is the central repository for information about your employees - and can even track hours worked - it can be an important resource in managing utilization and allocation of billable time in organization-based service businesses. With the right tools and capabilities to track your employees' skills, career goals and engagement, it can also become one of your most valuable assets in matching the right people to the right projects, ensuring they are rewarded for their work and that your projects are profitable and properly staffed.
A supply chain management module used to monitor all inputs into an organization's production process to ensure maximum profitability and efficiency.
Your supply chain management solution tracks every stage of the movement of supplies and goods through the supply chain, including suppliers. It can encompass a variety of functions, from procurement to order management to contract management or even the entire source-to-contract (S2C) lifecycle. Although it can also be a separate module, your supply chain management module can also have inventory management capabilities that are used in conjunction with supply chain management to manage inventory, but also to evaluate the performance and profitability of manufacturing processes and distribution centers.
In addition to these main components of an ERP system, marketing automation, e-commerce, workforce management, project management and other modules can also be added depending on a company's product offerings.
In a people-oriented organization, these essential components will still be necessary. However, the way they function will differ significantly from their functions in a production/manufacturing-oriented environment. In addition, various specialized modules or integrations will be required, including professional services automation (PSA) tools.
The function of ERP in a service-oriented company
ERP modules and functions are used in different ways in service-oriented and HR-oriented organizations. Although the use of ERP in these organizations is essentially analogous to that in more traditional manufacturing companies, your needs and requirements will be different.
In particular, you will need:
Greater flexibility in terms of how your organization and employees use and interact with each module of the system. People-centric organizations have much more flexible processes, and especially in the age of hybrid working, your employees need to be able to access and interact with your ERP system from different apps and devices.
Specialized functional modules or extensions may be required to complement the basic capabilities of your system. For service companies, professional service automation (PSA) tools are a good example. These solutions create a unified platform for collaboration across the organization, automate many functions and provide greater insight into project status, staff and capital resources.
Enterprise Resource Planning (ERP) systems are applications designed to automate and optimize core business processes, while also providing insights, internal controls and workflow support. Effectively, your ERP is a large centralized database and the tools that allow you to view data and perform operations on the records.
The logic of an ERP system is quite simple - working and managing your organization usually requires the collaboration of multiple people and stakeholders with different functional roles, responsibilities and expertise. This becomes cumbersome when your organization's important data is spread across different systems and stored in dozens of different Excel spreadsheets. The ERP's job is to eliminate the redundancies in your systems by centralizing the data in a single repository (and hopefully eliminating redundancies and errors that can occur with different versions of the data).
It's your ERP system's job to keep your organization from being stifled by its own processes as it grows and evolves. At the same time, it helps you see the full range of inputs, causes and effects of different actions and processes on every part of your entire organizational system. By compiling your information into a central database that serves as a single base, your ERP system gives you visibility of all processes and workflows across departments, helping you analyze scenarios, discover potential improvements and achieve huge efficiency and productivity gains.
Thus, ERP can be a confusing concept as it does not describe a standalone software or application. An ERP platform usually comprises several different modules, each of which covers a specific functional area. Each of these modules accesses the central database to find, add, change or delete information as required.
How do ERP systems work?
ERP systems, as the name suggests, are designed to help organizations manage and plan their resource allocation by automating and streamlining routine back-office workflows.
An ERP system adapted to the needs of a service-oriented organization must include at least the following components:
A financial planning and accounting module to manage an organization's finances through the other major components of the system. In an ideal world, this forms the hub of all financial data and decisions (although in many organizations outdated legacy systems lack the necessary integration for this).
The finance module is generally considered the most important module as it provides the basis for financial control of the entire organization. It helps to understand the current financial situation and perspective. Key features of this module include functions for accounts receivable and accounts payable, general ledger management and storage of important documents such as balance sheets, receipts and tax returns. It also serves as a repository for data related to financial planning and analysis (FP&A) functions and is therefore important for profit and loss reporting, overall financial reporting and scenario planning.
This module can also be used to automate tasks related to your organization's entire financial cycle, including invoicing, vendor and supplier payments, cash management and account reconciliation.
A human resources module to track onboarding, leavers, performance and salary and benefits allocation.
Most solutions today include modules to perform routine HR tasks such as payroll.
Because this module is the central repository for information about your employees - and can even track hours worked - it can be an important resource in managing utilization and allocation of billable time in organization-based service businesses. With the right tools and capabilities to track your employees' skills, career goals and engagement, it can also become one of your most valuable assets in matching the right people to the right projects, ensuring they are rewarded for their work and that your projects are profitable and properly staffed.
A supply chain management module used to monitor all inputs into an organization's production process to ensure maximum profitability and efficiency.
Your supply chain management solution tracks every stage of the movement of supplies and goods through the supply chain, including suppliers. It can encompass a variety of functions, from procurement to order management to contract management or even the entire source-to-contract (S2C) lifecycle. Although it can also be a separate module, your supply chain management module can also have inventory management capabilities that are used in conjunction with supply chain management to manage inventory, but also to evaluate the performance and profitability of manufacturing processes and distribution centers.
In addition to these main components of an ERP system, marketing automation, e-commerce, workforce management, project management and other modules can also be added depending on a company's product offerings.
In a people-oriented organization, these essential components will still be necessary. However, the way they function will differ significantly from their functions in a production/manufacturing-oriented environment. In addition, various specialized modules or integrations will be required, including professional services automation (PSA) tools.
The function of ERP in a service-oriented company
ERP modules and functions are used in different ways in service-oriented and HR-oriented organizations. Although the use of ERP in these organizations is essentially analogous to that in more traditional manufacturing companies, your needs and requirements will be different.
In particular, you will need:
Greater flexibility in terms of how your organization and employees use and interact with each module of the system. People-centric organizations have much more flexible processes, and especially in the age of hybrid working, your employees need to be able to access and interact with your ERP system from different apps and devices.
Specialized functional modules or extensions may be required to complement the basic capabilities of your system. For service companies, professional service automation (PSA) tools are a good example. These solutions create a unified platform for collaboration across the organization, automate many functions and provide greater insight into project status, staff and capital resources.