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First things first - what is ERP? ERP stands for Enterprise Resource Planning. This is the process of integrating each part of a business as a way of improving it and making it more profitable and aligned. An ERP system digitalises this process.
So what lies beneath the interface of an ERP platform to make it the robust, centralised business tool that it is? There are five main components of ERP in a typical system. We've looked at each one below and explain what it is they do.
What are the 5 Main ERP Components?
1. Financial Management
3. Project Management
4. Time and Expense
Now let's explore each one in more detail...
1. Financial Management
Probably the most well-known feature of an ERP system is its ability to store and retrieve a firm's financial data, such as accounts payable and receivable, costs, budgets and forecasting figures. The system takes complex transactional data and turns it into meaningful profit information and insights for the user. Some firms - especially those that operate in the professional services fields such as consultants, accountants and marketing agencies - need even more functionality from their system. They need a three dimensional view that integrates project data into the picture as well as client accounts and organisational data. By integrating and processing data on all three of these levels, a project-based ERP system will make the financial viability of each area a known fact.
Project-based ERP for dummies
Different payment terms, different rates and different billing formats between clients can present an administrative nightmare for businesses across all sectors. The invoicing component of ERP systems helps overcome headaches by storing numerous templates, formats and invoicing styles. The platform then pulls in data from clients and financial records so they are created to each specification.
3. Project Management
Visibility and control is everything when it comes to project management. Today's ERP systems work broadly enough and deeply enough to process and deliver timely information about every aspect of a project, regardless how many are running at once. A single ERP system replaces the need for separate and disparate platforms, which are limited in that they can only give a partial view of a project at any given time. The project management component of an ERP system integrates resource, finance and timescale data so that responsive and profit-related decisions can be made at any stage of the project lifecycle.
4. Time And Expense
For any service or people-based company, accurate time and expense tracking is of utmost importance. Yet capturing it can be challenging. ERP systems are designed to track and record employee time and expense data easily and in a timely fashion. This component not only feeds directly into invoicing so that a firm gets paid faster, it also plays an integral part in monitoring the resources allocated to a project on an ongoing basis, giving the project manager greater control.
The requirement for firms to create and store documents, procedures and processes means ERP technology is especially useful for managing compliance and best practice. The digital trail created by an ERP system means traceability and transparency are a given. The ease in which an ERP system organises and retrieves information makes it an ideal tool for passing audits, appraisals and assessments easily and without fuss.
Sum Of The Parts
Each component of ERP is a powerful system its own right. But it's a system's ability to integrate and incorporate the data from each of its separate modules that has such a positive impact on a firm's processes and profit. When it comes to ERP most companies and decision makers find the true power lies in the combined sum of the parts rather than the individual components themselves.
Understanding ERP - Introduction Series
- What Is ERP And Why Do Businesses Use It?
- Mastering Project KPIs With Business Intelligence Software
- Project ERP vs Generic ERP - Just What Is The Difference?
- Using A Project ERP System To Plan A Project
- How To Make Time Recording Easier With Project ERP
- 7 ERP Terms Every Project Manager Should Know
- 6 Fundamental Questions Your Project ERP System Can Answer
Want to know more about the individual components of ERP software and how they can be integrated for greater control and insight? Download the free guide 'Project Based ERP for Dummies'.
Project-based ERP for Dummies