ERP is the right tool for the times

macro photography of green leaves

macro photography of green leavesAIthough 2023 is set to bring economic challenges, there are still growth opportunities ahead. Last year, LinkedIn data shows over a third (38 per cent) of Australian SMEs enjoyed a better-than-average performance. There was even something of a new small-business boom, research released by Accenture shows.

Unfortunately, many SMEs don’t have access to the clarity of operations they need to meet challenges or take advantage of growth opportunities. Issues are often dealt with reactively, resulting in day-to-day operations becoming sluggish and inefficient. Outdated processes and technology can be costly in terms of lost time, productivity and efficiency, and represent compliance risks, as a new Forrester study reveals.

With the economy on the brink of a recession, SMEs simply cannot afford to operate in such a way. In uncertain and volatile times, ensuring efficiency in business operations is critical. SMEs need visibility across all the key aspects of their business, from stock movements and operating costs to an in-depth overview of their supply chain.

Investing in an Enterprise Resource Planning (ERP) solution is just one simple way SMEs can build resilience to weather a downturn and set themselves up for future success.

A vital tool for managing operations

ERP is a software tool that streamlines business operations. Put simply, it brings all business operations – from accounting to inventory, manufacturing, business reporting and CRM – into a single system. This makes it easier to have a unified view of the entire company’s operations. An ERP system can also automate many processes, resulting in cost savings.

This can be particularly important during an economic downturn, when businesses may need to tighten their budgets.

Too many companies still rely on old and outdated legacy systems; some still work with paper, clipboards and physical files. This means they don’t even know what’s in their warehouse, let alone how they can efficiently communicate among partners, staff and customers on the whereabouts of products and provide a timeline of when to expect delivery. This is an untenable way to do business at the best of times but during turbulent economic times it leaves a company open to compliance risk, lost revenue, stock mismanagement and frustrated employees.

ERP software is critical in providing businesses with a real-time overview and reporting system that streamlines inventory and delivers clarity on how it can best be leveraged. Instead of being across multiple systems, an ERP feeds a single source of data that reveals exactly what there is in terms of stock levels and customer commitments and how businesses can match these two things. Companies adopting new technologies and prioritising innovation and customer service are more likely to succeed, CPA Australia’s 2021-22 Asia-Pacific Small Business Survey found, with Microsoft research revealing “digital technology” as the top priority for SMEs.

Other priorities include securing data and managing remote teams. This is much easier with an outsourced cloud solution, as the provider can offer enterprise-grade security that SMEs are unlikely to be able to access or manage internally. Similarly, it helps improve operational efficiency by migrating on-premises workloads such as servers, storage and networking.

Cloud ERP also delivers easy HR features that allow employees to have greater control over their working arrangements – from accepting or rejecting shifts to submitting leave and expense requests. This facilitates greater flexibility and collaboration that addresses what employees want, another top priority for SMEs, Microsoft’s Work Trend Index shows.

Supporting agility and flexibility

Investing in ERP software during this year’s anticipated downturn can future-proof the process of scaling up when markets do eventually recover. And we know that companies that invest in their business during a downturn are those that come out stronger in the recovery phase.

Many companies are now moving from purely transactional business models to service models, to better serve SMEs. The majority of SMEs are looking for long-term partner support, where they can get specialist advice according to their specific evolving needs. Businesses want more services as well as pricing flexibility from their partners, so they can afford to invest in what they need, when they need it.

SMEs that can implement disruptive new tools will be more flexible and better positioned to weather a potential recession. As KPMG reports, empowering workforces with the best technology will also make attracting and retaining staff easier, addressing one of the key challenges in 2023.

Once a business has a clear overview of its systems, capital and customer preferences, it will be able to pivot, adjust and thrive more easily in the face of changing market conditions.

Helping to understand business value

Economic uncertainty and recessions often bring higher levels of acquisition and consolidation in many industries.

In 2022, Australian mergers and acquisitions (M&A) spiked, with US$103.5 billion worth of deals announced in the first half of 2022, a 25.4 per cent increase over the first half of 2021, Refinitiv data shows. It’s possible that M&A activity will ramp up in 2023 as the economy tightens and valuations continue to contract.

This environment can lead to opportunities for SMEs to grow through M&A. But businesses that don’t have a clear overview of stock struggle to demonstrate a precise valuation of their company. Those that can provide real-time clarity around their financial position will command a premium for sale – or an easier path to external capital if growth is on the agenda. The right ERP solution can provide an accurate view of key business metrics and is an essential tool for SMEs looking to make informed decisions about buying or selling a business.

Downturns are never easy, but SMEs can use them as an opportunity to work on their business, improving it to become more efficient and agile and to be prepared to capitalise on the next phase of market growth.

There is no better time to invest in technology to give business leaders the data they need to make informed decisions. Investing in an ERP system during an economic downturn can help SMEs position themselves for future growth by streamlining their operations, reducing costs and improving efficiency. This can help businesses emerge from the downturn in a stronger position.

By Charlie Wood, CEO Wiise

This article was first published by Inside Small Business magazine