Enterprise Resource Planning, commonly known as ERP, might sound like a buzzword that only the tech-savvy elite bandy about in corporate boardrooms. However, in reality, it's a term that modern charities, both big and small, are becoming intimately familiar with.
Why? Because ERP systems are rapidly becoming the backbone of charities worldwide, streamlining processes and boosting productivity.
Origins of ERP
Go back a few decades, and the concept of ERP would be alien to most. The late 20th century, though, witnessed an enormous shift in how businesses approached process and information management. Let's dive a little into its evolution:
In the 1960s and 1970s, businesses began with simple Inventory Management & Control systems. These were designed to optimise the most basic of resources – stock. Fast forward to the 1980s, Material Requirements Planning (or MRP) was the new buzz. It wasn't just about stock anymore; the entire production process, from raw materials to finished product, needed coordination.
Then came the 1990s, the era of MRP II (Manufacturing Resource Planning). It expanded the scope beyond manufacturing, delving into other business operations like accounting and human resources. By the end of the 1990s, the term 'ERP' was coined, encapsulating this broader, enterprise-wide approach.
It wasn't just a simple evolution, though. The dawn of the Internet, the increasing complexities of global businesses, and the demand for real-time information paved the way for ERP's ascent.
Definition of ERP
Alright, so we've established ERP's historical trajectory, but what exactly does it stand for? Let's break it down, shall we?
What does ERP stand for?
This refers to the whole organisation entity, irrespective of its size or type. Often in the case of charities, it will involve more than one entity, for example a trading and charity entity is common, even with quite small charities.
Whether you run a small local bakery or a multinational corporation, it's your 'enterprise.' ERP systems are designed to integrate various processes and parts of this entity into a unified system.
In business, resources aren't just physical commodities or assets. They can be human resources (your employees), financial resources (your capital and cash flows), materials, and more. Managing these resources efficiently is fundamental to running a successful charity.
In the case of charities and social enterprises, there is often a need to link incoming funds (‘income’) to outgoing funds (sub grants). So cash itself is the resource that an INGO is managing, almost as ‘reverse inventory’. It is reverse, because unlike a commercial organisation, it starts from the Accounts Receivable side and flows to the Accounts Payable, rather than the other way around.
This isn't just about predicting future needs or charting out a roadmap. In ERP terms, 'planning' is about organising resources in the most efficient manner to meet the charity’s mission and objectives. It's a systematic approach to ensuring every piece of the charity puzzle is in its rightful place, working harmoniously.
Components of an ERP System
Stepping into the realm of ERP, you'll quickly notice that these systems aren't one-size-fits-all. Instead, they're like building blocks, each module tailored to address specific areas of business.
While every organisation's ERP setup might differ slightly based on their needs, there are some common components most businesses consider essential.
In particular, a strong ERP will be pre-built and proven within the charity sector and then within your particular micro-vertical (membership organisations, INGO, education, care provider etc).
Our NetSuite consulting services means we not only implement the ERP system but train your organisation to harness it.
If you want to find out more about our services and how they can help your organisation, please contact us.
Finance and Accounting:
Think of this as the heart of your ERP system. This module keeps the pulse on your company’s financial health, tracking assets, liabilities, cash flows, and more. From general ledger to accounts payable and receivable, it ensures every penny is accounted for.
Human Resources (HR):
Employees are the lifeline of any organisation. The HR module aids in managing personnel details, attendance, payroll, training, and performance evaluations. It's not just about managing your workforce; it's about optimising it.
For charities that provide grants to others (eg INGO), this module is indispensable. It oversees the spending on charity money on its mission, via third parties.
Being funded is key and linking incoming funds to outgoing grants or activities that deliver the mission is key..
This is all about smart purchasing. By efficiently managing purchase orders, suppliers, and vendor relations, this module ensures that charities get the best bang for their buck.
Grant Management and Fundraising:
In the end, income is crucial to fund a charities mission. This module helps businesses track leads, manage constituent relationships, and oversee pledges. Plus, with data-driven insights, marketing campaigns can be more targeted and effective.
Benefits of Using ERP
Adopting an ERP system isn't just about jumping on the tech bandwagon; there are tangible benefits of ERP that organisations can reap.
Streamlined business processes:
Imagine trying to solve a jigsaw puzzle with pieces scattered everywhere. Without ERP, that's what managing a charity can feel like. ERP systems bring all these pieces together, ensuring seamless inter-departmental coordination.
Automation of repetitive tasks:
Why waste human resources on mundane, repetitive tasks? ERP systems can automate processes like invoicing, data entry, and reporting, freeing up employees to focus on more strategic activities, driving the charity mission forward.
Enhanced Decision Making
Real-time data access:
Ever been in a situation where a decision was delayed due to the unavailability of data? With ERP, such instances are history. These systems offer real-time data access, enabling decision-makers to act swiftly and confidently.
Consolidation of information from various departments:
No more sifting through heaps of data from different departments and manual creation of the crucial donor reports. ERP systems aggregate this data, presenting a holistic view of charity operations, including for donors.
This consolidated data becomes a goldmine for strategic decision-making and raising more funds.
Reduction in administrative and operations costs:
With streamlined processes and reduced manual interventions, the operational and administrative costs naturally dwindle. This means charities can allocate resources to more strategic activity.
Improved resource utilisation:
ERP systems provide insights into resource allocation and usage. Whether it's human resources, fund management, or activities, charities can identify underutilised assets and optimise them for maximum efficiency and increased impact.
Adapting to charity growth and changes:
As charities evolve, their operational complexities grow. ERP systems are designed to adapt to these changes, ensuring that even as a charity scales, its processes remain streamlined and efficient. International scaling is an area where a strong global ERP can really assist.
Adding new functionalities and modules:
The ‘single source of truth’ nature ERP systems is one of their biggest strengths. As a charity grows, they can end up with a mass of different spreadsheets and systems being used, none of which talk to each other easily.
A good ERP/cloud charity finance software system can really help simplify an organisation.
ERP Trends for the Future
While ERP systems have profoundly transformed businesses over the last few decades, they aren’t resting on their laurels. With technological advancements surging ahead at a breakneck speed, the future of ERP promises to be even more revolutionary.
Let’s gaze into the crystal ball and explore the trends shaping the future of ERP.
Benefits and challenges of cloud solutions:
The cloud is not just a buzzword; it’s the future of ERP. Cloud-based ERP systems offer scalability, cost-effectiveness, and flexibility. Organisations no longer need hefty investments in infrastructure, and updates become seamless.
Integration with AI and Machine Learning
With AI and machine learning integrated into ERP systems, businesses can predict future trends based on historical data. Be it sales forecasts, inventory management, or customer behaviour, predictive analytics offers invaluable insights for proactive decision-making.
Automated decision making:
Gone are the days when ERP just offered data. Future ERP systems, armed with AI, will suggest and even make decisions in real-time. This doesn’t just reduce the decision-making timeframe but also ensures that decisions are data-driven and optimised.
User Experience and Mobility
ERP accessible on mobile devices:
The modern workforce is increasingly mobile. ERP vendors recognize this, making systems accessible and functional on mobile devices. This ensures that decision-makers have access to real-time data and functionalities, irrespective of their location.
The ERP systems of yesteryear were often criticised for their complex interfaces. Modern ERP solutions prioritise user experience, ensuring that interfaces are intuitive, easy-to-navigate, and pleasing to the eye.
NetSuite ERP’s precursor began in 1998 as NetLedger, a cloud-based accounting software. In 2003, NetLedger’s capabilities were expanded beyond accounting into Enterprise Resource Management.
This brought CRM, financial management, ecommerce and many more functions under the same roof.
NetSuite ERP stands out from the competition for its intuitive and easy to learn design coupled with a modular and easily scalable system.
This means that as an organisation grows, the ERP system can easily add new modules as required without the need for a complete overhaul of the core system.
Whether it is 5 or 500, your organisation is able to enjoy the benefits of a unified cloud based system regardless of its size.
From its nascent stages in the late 20th century to its formidable presence today, ERP systems have continually evolved, becoming an indispensable tool for businesses worldwide.
They've moved from mere process facilitators to being the nucleus of modern businesses, offering insights, automation, and strategic advantages.
For businesses on the fence about ERP, remember, it's not just about staying current with technology; it's about future-proofing your operations, staying competitive, and leveraging data for strategic growth.
So, whether you're considering adopting an ERP system or pondering an update, the time is ripe. Dive into the world of ERP, harness its myriad benefits, and propel your business into a future of unparalleled efficiency and growth.
To learn more about harnessing NetSuite, please contact us.
Frequently Asked Questions (FAQs)
What is ERP software?
ERP software, or Enterprise Resource Planning software, is an integrated system used by organisations including social enterprises and charities to manage and automate various business functions, such as finance, human resources, funds managements, and grant management. It centralises data, streamlines processes, and facilitates information flow across different departments, ensuring that organisations operate efficiently.
Many modern ERP systems are now cloud-based, and they better systems are easily configurable without coding to cater to specific organisational needs. By offering a unified view of an organisation’s operations, ERP software aids in informed decision-making and improved operational efficiency.
What is ERP cloud software?
The difference between Cloud ERP software and on-premise ERP is that Cloud ERP is stored on the cloud. Having your ERP system stored on the cloud promises a secure, safe, scalable and readily available platform which you don’t have to maintain. As all the servers are looked after by the ERP provider, client organisations do not need to invest in any physical ERP infrastructure.
Why ERP software instead of pure accounting software?
Enterprise Resource Planning (ERP) is a type of business management software. NetSuite ERP includes the features you would expect in your accounting software, such as tools for accounts receivable and payable, general ledger, reporting forecasting and grant management, as well as non-financial tools.
ERP systems go beyond standard pieces of accounting software because they also allow for other business processes to be integrated. From integrating personnel management capabilities to customer relationship management modules, ERP systems are the gold standard for business management software.
Am I ready for an ERP system?
Whilst every organisation faces different challenges, there are signs that you have outgrown legacy financial management systems. Excel spreadsheets can only take an organisation so far; eventually all organisations need to consider alternatives because:
- Administrative tasks like account reconciliation take up too much time, meaning you are neglecting development.
- You lack insight into your financials. You might be recording them effectively, but if you are unable to use this financial data within the decision-making process an upgrade might be in order.
- There are gaps between processes and departments. If one business process is rapidly expanding but other departments are struggling to accommodate this growth, having a unified view of both finances and non-financial KPIs is essential.
- Data management if becoming a full-time job. If you are having to reconcile different data sets between departments because of frequent errors and miscommunication, a cloud-based ERP system completely removes these tasks.
- Strategic level decisions are suffering. An effective ERP system allows for forecasting and scenario planning. If you feel like the big directional decisions you are making are not motivated by evidence, an ERP system can provide the insight you require.