In the current business landscape, decision making is arguably one of the most important aspects. A large number of organizations that were once enlisted in the fortune 500 list have drastically lost their position because they are unable to effectively utilize data while making decisions. Many firms and industries have recently derived negative results because of their reliance on internal gut feelings or perceptions. On the other hand, those that use Enterprise Resource Planning Systems (ERP) integrated through analytical decision making tend to achieve success one step further.

An ERP system acts like a brain of the company making it easier to manage information and facilitates informed decisions. It enables timely and accurate decisions that enhance the owner’s business profitability and growth. The pieces of the Four R’s using ERP model frameworks are:

Retail

The need for profitability focuses on the sale of the correct stock at the right time, and Erp solves this problem. From chronic marketing forecasts to hourly sales, ERP can estimately determine what does well or not which allows decision-making flexibility.

Retain

Erp systems perform automatic calculations and estimations of various parameters such as gross profit margin per sale which helps in determining how much of the profit attained should be retained and how much is needed to give in for overall profit aided. This profits clarity enable business owners to set reasonable goals and revise game plans whenever needed.

Rotation:

ERP systems provide insight into both capital and inventory workflows. This implies that businesses can monitor the ratio of the stocks movements as well as the speed with which cash circulates. Both situations are important for controlling profitability and effectiveness capital.

Reduce:

With ERP, organizations are enabled to eliminate expenses that can potentially negatively affect future growth. ERP provides the ability to monitor operational and financial activities on daily basis, which assists in targeting and eliminating business inefficiencies.

A REAL-LIFE ILLUSTRATION: Problems Of the Car Dealerships

Think about a car dealership that has many problems,

Uncertainty over profit margins:

The owner is not clear which particular models would have the greatest profitability.

Internal issues:

There is poor knowledge around issues such as process inefficiencies and employee syndicate working against the organization.

Fraud and Mishandling:

Employees are suspected to have engaged in fraudulent activities regarding ensuring claims, RTO processes, applying discount, and recovery.

These issues pose an undeniable argument for the adoption of an ERP system in business which, by definition, deals with these problems.

Addressing Common Business Problems Using ERP Systems

Transparency:

ERPs goes a long way in addressing transparency issues by providing a clear picture of the business operations to guarantee that fraud is eliminated and accountability is accepted at all levels of the business operations.

Access Control:

ERP systems allows for the configuration and management of user access based on the hierarchy of the employees. This way, sensitive information to financials and operations can only be accessed by those within authorized positions.

Internal Audits:

ERP systems maintains and enforces strict periodic internal audits automating discipline over financial management to detect issues timely.

Real-Time Updates:

Every aspect of the business, from sales to even employee activities, is captured by the ERP system without any delays. This enables upper management to track KPIs and appropriately adjust where necessary.

Payment Recovery:

With overdue payments, ERP systems will trigger alerts which aid businesses in controlling their receivables balances better.

Informed Financial Decisions:

Rather than deciding on gut feeling, the finance team can now make decisions more informed than ever and based on real data, thus boosting business performance.

Action Plan for Business Success with ERP

To capitalize on ERP, a business needs to follow a Massive Action Plan:

Set Profitability Targets:

Set sales goals that need to be achieved so there will be profits for the given financial year. These goals should also be realistic and can be achieved with the data provided from the ERP system.

Calculate Margin per Sale:

Set the margin needed per sale to ensure reaching profitability. It is easy to track margins per sale with ERP systems.

Plan Inventory Rotation:

Schedule how often you need to rotate the inventory using ERP data, which makes sure that capital is always put to use to earn revenue.

Reduce Unnecessary Expenses:

Attempts should be made to cut down expenses where it is acceptable. ERP systems will identify where the money is being wasted which will allow a company to cut down on spending and increase profits.

By using ERP and following this plan, companies will be able to fully utilize the important resource of data to make decisions that provide growth and profit for a long period of time.

Conclusion

In this highly competitive business world choosing an informed strategy utilizing data will ensure success. Tools and systems that ERP enables provide business eye’s into their operations in full, step enabling them to improve their processes and profitability. If business owners work with the Four R’s- Retail, Retain, Rotation, and Reduce they will be able to overcome any hurdles that come their way and enable continued growth and profit for the business.

Categories: Enterprise Resource Planning (ERP)