· 3 min read
Four things for your ERP system to work
So many companies can't get their ERP system to work. Yet only four things are necessary.
Many companies call me after about five years in business. They are growing, yet they know they need to understand more about their business. Usually this means they want to know which products are the most profitable and how much money they need to execute their business plan. Or maybe they need to raise money and they know they aren’t ready to talk to investors because they haven’t the foggiest idea how profitable they are, or even if they are profitable.
Usually they have signed up for an inventory system or ERP system, but they haven’t gotten it working. Because they don’t know how to get it to work.
As the model in the picture points out, you only need to do four things to get your ERP system to work, regardless of the ERP system:
Receive your inventory. On the Purchase Order screen, enter an item receipt when the inventory comes into your ownership. This increases the amount of your inventory. If you do not do this, you will not be able to ship any orders, since you can’t ship something you don’t have.
Enter the vendor bill On the Purchase Order screen, enter the vendor’s bill for those same good you received. This increases the value of those goods you just received.
Enter a shipment to the customer On the Sales Order screen, enter a shipment to the customer. This reduces the value of your inventory and charges your company for the cost of goods you have shipped.
Send an invoice to your customer On the Sales Order screen, create an customer invoice. This produces income which hopefully exceeds the cost of goods you shipped to your customer. The difference is the profit on that sales transaction.
The first two have to do with purchasing the goods you are selling, the last two with the sales transaction. Which is why the model has divided it up on two hands.
This is not complex. And yet I have seen many fairly large, successful companies not be able to do this. They will struggle for well over a year with these simple activities. And until they can do these things, I can’t really help with the big picture of their business. I can create dashboards showing their sales, but that only gets you so far. All companies need to understand their profitability, inventory, and cash requirements.
Don’t be that company. Make yourself a promise that you will do these four things starting now. It isn’t hard.
