Having an ERP strategy in place can help your manufacturing company increase profits by improving sales and reducing costs.
The decision to add an ERP system to a company is often one of the first steps toward an overall digital transformation. Many manufacturers continue to rely on spreadsheets and out-of-the-box accounting software to manage complex financial and customer data. Moving onto an ERP platform simplifies and streamlines many internal processes, including accounting and financial management. The data that your finance department receives from an ERP system can also be used for the overall benefit of the company—including increasing profits.
ERP Strategy as Part of an Overall Finance Digital Transformation
The right ERP system certainly makes data collection easier, but without an ERP strategy in place, using the system may be fragmented. An ERP strategy considers:
- The vision of how the ERP system will be used
- The needs of internal key stakeholders who interact with the system
- A roadmap to enacting the desired capabilities and reports in the system
- A plan to use this information to achieve business goals
This is where an ERP strategy often intersects with digital transformation in the finance department. The finance team may have been an integral part of the ERP selection process and are certainly important stakeholders in the ongoing use and governance of the system. Finance leaders must have a clear vision of how they will use the ERP system and how the information obtained from the system can benefit the company.
Using ERP Data to Reduce Costs
As part of an ERP strategy, the system can be used to increase profits and reduce costs in the following ways.
Improve Customer Retention and Loyalty
Although at first glance this may seem like a marketing benefit, improving customer retention and loyalty is a great financial benefit and one step toward increasing profits and reducing costs. It often costs much more to obtain new customers than to keep current customers happy. Happy customers lead to repeat sales (without much advertising on the part of your company), and loyal customers recommend others to your firm; thus, improving retention and loyalty both increases sales and decreases costs, the recipe for higher profits.
Review ERP data to find dissatisfied customers. Return data may provide a clue about customers who would benefit from a personal call to explore why they returned products. Then, reach out to them to turn their dissatisfaction into satisfaction. Consider adding a loyalty or rebate program to your system as well. Many systems can manage such programs alone or with the addition of rebate modules through a CRM.
Automate Finance Processes to Save Time
Time is money, and more so for a busy finance team. ERP systems often include time-saving tools such as automating routine queries and reports, sending reminders to managers for invoices and sign-offs, and other repetitive tasks. Even taking just a few automation steps can reduce the time your team spends on manual tasks, which then frees them to perform more mission-critical duties.
Look for Revenue Leaks
Examine expense reports from the ERP system and look for “revenue leaks” or places where spending can be cut. One good place to begin is with recurring expenses. Many recurring expenses for software licenses, subscriptions, trade memberships, and such should be examined on an annual basis to ensure your company is still receiving full value from them. Look for other areas where expenses may be cut, too, such as in simple items like office supplies and so on.
Find Your ERP Strategy
Companies derive many benefits from their ERP systems, and no two companies will choose the same ERP strategy. Whether finding ways to reduce costs or increase sales, finance can lead the way to a healthy ERP strategy that embraces automation as part of digital transformation.
Emerald TC provides software and consulting. We can help you choose the right ERP system for your needs. Contact us or call 678-456-6919 for more information.