What is ERP software? A plain guide for small businesses

What does ERP software do?

ERP software keeps every part of a business in one system with one set of records, so a sale, a purchase or a salary is entered once and every report sees it. Instead of a billing app, a stock register, an accounting package and a payroll spreadsheet that each hold their own copy of the truth, an ERP holds one customer list, one product list and one ledger.

The practical result is fewer re-entries and fewer mismatches. When the store keeper, the accountant and the owner look at the same stock figure, they see the same number, because there is only one.

What does ERP stand for?

ERP stands for enterprise resource planning: planning and recording how a business uses its resources, which are stock, money, people and time. The name came from large manufacturers in the 1990s who joined material planning with finance and HR. The name stuck even as the software reached much smaller businesses.

For a small business the word that matters is not "enterprise" but "one". One system, one login, one set of numbers.

Which modules does an ERP include?

An ERP is a set of modules that share the same data, and each module covers one job the business does every day. The table shows the modules most small businesses use and what each one updates elsewhere.

How does one invoice move through an ERP?

In an ERP, saving one invoice updates stock, the customer's balance, the ledger and the tax in the same step. Here is an example from Harbour Steel Furniture, the fictional business we use across this site, with amounts in US dollars.

Harbour Steel bills Riverside Stores for 2 steel racks at $499 each. Both are registered for tax, and the rate on steel racks is 20%, so the invoice carries $199.60 of tax.

When the invoice is saved, five things happen together. Stock of steel racks in the Main warehouse drops from 42 to 40. Riverside Stores now owes $1,197.60. The journal records sales of $998 and output tax of $199.60. The cost of the two racks, $624 at the average cost of $312 each, moves from stock to cost of goods sold. The dashboard's sales figure goes up.

Without an ERP, those five updates are five separate entries in up to four tools, usually by different people on different days. That gap is where stock mismatches, missed tax and unpaid invoices come from.

Is ERP software only for large companies?

No: ERP software is now built for businesses of five to fifty people, and it runs in a browser with no server to install. Older ERP systems needed consultants, months of setup and a dedicated IT team. Cloud ERP for small businesses starts with a sign-up and a business name, and it hides the parts a small business does not need yet.

What changes with size is not whether you need one set of records but how many people touch them. Once a second person bills, buys or counts stock, a shared system starts saving real time.

What are the signs a small business needs an ERP?

A business needs an ERP when the same information is typed into more than one place and the copies disagree. These are the common signs:

• Stock in the register does not match stock on the shelf, and nobody knows which is right
• Invoices are made in one app and the accountant re-enters them into another at month end
• Tax figures are pulled together from several sources before every return
• You cannot say today how much customers owe you without asking someone
• Salaries are worked out in a spreadsheet and posted to the books by hand
• More than one person bills, buys or counts stock, and each keeps their own list
• You run a second shop, branch or warehouse and track it separately

Two or more ticks usually mean the cost of mismatches is already higher than the cost of moving to one system. If you are unsure which kind of tool you need, read ERP vs accounting software.

What does ERP software not do?

An ERP records and organises the work; it does not replace your accountant, your judgement or your tax authority's online services. Be clear on the edges before you buy:

• It does not file VAT, GST or sales tax returns for you. A good ERP prepares the registers and summaries your accountant files from.
• It does not decide your tax treatment. It applies the tax rates and rules you set up.
• It does not fix a broken process. If nobody records goods received, no software will show the right stock.
• It is not automatically complete. Each product covers different modules, so check the ones you need.

How is SimpleERP different from a traditional ERP?

SimpleERP is an ERP built to be simple by default and complete underneath. A one-location business sees invoices, customers and stock on day one; branches, warehouses and the chart of accounts appear only when you need them.

• Fast to start. Sign up in a minute, with no card. Setup takes one screen, with your country's tax rates, currency and numbering filled in.
• Your country's rules. VAT, GST or sales tax on every line, your tax number with its local label, your currency and date format, and numbering by your financial year.
• Correct by construction. The database refuses an unbalanced journal, freezes posted documents and keeps stock at weighted average cost.
• Room for the whole team. A login for everyone, with seven built-in roles and custom roles you copy from them.

See the full list of modules on the features page, or read how to choose ERP for a small business before you compare tools.