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ERP helps SME’s face biggest challenges
10 of the most common challenges SME’s face in the UK (and how to beat them with good ERP)
If you’re struggling with business growth, here are some helpful solutions to put into practice
Firstly, we need to agree what constitutes an SME challenge?
Let’s agree that it is any problem which arises and affects your profitability. Overcoming these kinds of problems will usually tie up management time which is a drain on the day to day operational resource pool.
Worse than effecting the ‘day to day’ of the management structure there is a broader more detrimental affect which is having less time to view wider business challenges.
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Managing overheads
Overheads can be like a hungry child that just wants a little bit more. This can take the form of an increase on an existing overhead or the acceptance of a new one. Often – small increases and additions are accepted and become part of the ball and chain that is the collective business overhead because there is simple not the time to sit back and consider what additional costs return to your business and what the alternatives might be.
Example
Whether it is a failure to regularly review your service providers and compare what you are getting against the rest of the market place or merely purchasing a PC from your usual source because it is ‘easier’ small businesses are regularly making a series of small (and sometimes larger) decision based on a lack of information because there isn’t time to sit back, review and make a considered decision.
The solution:
Look at your spending and review what you are getting for you money. Small decisions such as accounting software expenses – usually made by a business accounts department can prove to be expensive ones.
Qi have experienced the following scenario:
The Operations Director opts to take their telephone support for Sage Manufacturing and Sage Accounts with their business partner as queries that affect the business operationally can originate in either application. The Ops Director wants a one stop shop for support to ensure his team get the help they need quickly and with a single phone call.
The Financial Controller has made the decision to upgrade Accounts 50 Professional to get MTD in Sage Accounts which has automatically moved the business to a subscription model with Sage UK. The Financial Controller has always made the decision to upgrade accounts and has been advised that they can install their update digitally.
Historically their business partner has visited site to install Accounts upgrade to their server ensuring that the correct service pack is installed to keep the solutions working with each other. It is often the case that the finance department and the operational teamwork in silos and thus remain unaware of the ‘bigger picture’.
The upgrade is installed as Sage 50 Cloud. Sage Manufacturing is no longer compatible with accounts. MRP fails to run.
The cost to the business is not just that half a day has been lost until the upgrade can be installed to the server and the compatibility patch applied but that the business is now paying for support with Sage UK for Sage Accounts AND support to their Sage Business Partner. This fact could go undetected for some time as the focus for the business is to get up and running again on its Sage applications. Even when detected the business will likely opt to keep the status quo with their business partner for operational purposes but the business has just increased their Sage Accounts annual overhead by £1600.
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Monitoring performance
How do you measure performance? And, how do potential indicators illustrate that your team is performing to its fullest? If certain members of your team aren’t working as well as they should, your business could suffer as a result.
Example
A member of your staff’s poor performance is starting to affect the rest of the team’s morale, which has impacted their own productivity as a result.
The solution:
Detail a set of performance indicators that show how well your team and your business is performing. Rather than using simplistic finance indicators, it can be highly beneficial to identify, clarify and agree upon the expectations of respective teams. Identify how the results will be measured, monitor the progress made and evaluate performances at the end of the management cycle.
This sort of evaluation takes time and the better information you have available the more efficient analysis will be.
As an example, if you run a sales team either internally or externally how do you monitor the level of customer activity?
If you have a CRM that forms part of your core solution you will easily be able to report on individual activity and measure that against customer service delivery and new sales.
Often manufacturers need to know actual times against projected times for a job. SME’s need to make sure they have a system that provides a good timesheet system and the ability to capture operations times automatically.
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Listening to feedback
In the modern business world, your image and reputation can easily be affected by negative reviews online. Likewise, customers expect quick, effective customer service. It’s up to businesses to listen to the feedback they receive, so they can put themselves in a position to deliver satisfactory service to their core audience.
Example
There has been a complaint regarding customer service on a faulty product and this has resulted in a poor online review. SME’s unique point of difference is often that customer service is more personal and effective than the larger more ‘faceless’ competitors.
The solution:
If you do not have one already consider investing in an ERP that provides both CRM and Service Management. You can then easily monitor and measure the performance of a team and the performance of an individual. You can assess the facts of the incident easily and respond to the complaint confidently and appropriately.
As a business owner you can then use this information to review why the complaint was raised in the first place reviewing the incident with staff in a constructive way to agree and implement improvements.
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Responding to competition
Once again – it is about promoting your unique points of difference. Often, your competitors will offer a very similar product or service and if you are tendering against a much larger business there will be scope for them to offer a keener price not only to retain their customers but to try to take yours.
The solution:
SME owners need to make the time to constantly monitor their competitors. Understanding the competition enables you to:
- Be more innovative or creative with your product offer
- Identify their weak areas and excel where they do not
- In optimising your customer service in areas that you know your customers value the most your increase your chances of retaining them and attracting new ones. Price is always a factor, but it is rarely the only factor.
Adopting new technologies which automate repetitive and mundane processes frees up time in your and your team’s day to focus on the important matters of product development and delivery and customer communications and service. The right use of a good ERP will ensure that your MRP is accurate, your stock levels are right, and your approvals, proofs and controls are reliable and do not require high levels of human intervention.
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Regulation and compliance
Regulation and compliance can be a major issue if not dealt with properly. As markets and technologies evolve, they bring with them a new set of rules and regulations. Unfortunately, businesses are often unaware of, or don’t understand, what’s being asked of them. At this point, fines and penalties come into play, and something that could easily have been resolved becomes a problem.
Example
The recent adoption of GDPR, which was enforced in May 2018.
Solution:
For the majority of SME’s int the UK GDPR compliance is achieved by using the right ERP system that protects your customer’s data using the correct security and access rights.
Take a look at this example relating to Dynamics 365 Business Central
Dynamics 365 Business Central helps you comply with GDPR regulations to:
- Obtain explicit consent from customers to process their data by providing integration and customization capabilities to create notifications to inform customers about how their data will be used.
- Respect data subject rights by supporting correction, erasure, or access of your customers’ personal data.
- Enable portability of your customers’ personal data in a commonly used and machine-readable format.
- Incorporate privacy-by-design and privacy-by-default methodologies into the design of your systems.
- Increase data security by providing you with the ability to grant or restrict access to personal data at multiple levels and encrypting personal data in transit and at rest in Microsoft data centres.
- Enable audit trails to help document compliance with GDPR regulations
- Uncertainty
You never know exactly what is going to happen in the future, but you can prepare for customer and market trends with some canny forward planning. Most businesses will have some sort of goal for the future mapped out, but it’s surprising how many fail to plan for periods of uncertainty.
Example
A prime instance is Brexit. Many businesses have continued to grow since the 2016 referendum, but some have delayed implementing systems to support this growth fearing that any decisions they make in the systems that drive their business might not be the right ones based on the outcomes of the Brexit vote.
The solution:
Whilst uncertainty might be at the helm, businesses need to appreciate that good information is ever more important. A balance can be struck between ensuring your ERP system provides you with the best information whilst keeping on-going ERP costs scalable. Software as a Service offers the distinct advantage of being flexible. User numbers can be increased and decreased dependent on your staff numbers. Gone are the days when you must second guess how many users you need, purchase too many or miss a discount opportunity by purchasing too few. Work with an ERP solution that you keep on scaling to meet your business needs.
FACT
Dynamics 365 Business Central users can be added or removed changed from full to team or vice versa in a couple of days with your payment adjustment made on your next subscription payment.
- Cyber risks
Rather than merely an IT issue, cyber security is increasingly a risk for all businesses. If cyber security isn’t properly managed, businesses leave themselves exposed to an increasing number of threats which can lead to data theft, hacks and other attacks.
Example
A business with an on-premise server and perpetual licensing is hit by ransomware that takes their system out for a working week completely and leaves them with severe data corruption.
The solution:
Some businesses may have a full time, on site IT team who have a large financial resource at their disposal to invest in a security arsenal to protect their data. Most SME’s do not. By using a Microsoft ERP such as Business Central your business is benefiting from best in class corporate security. Whilst all data CAN be compromised you are reducing the risk of a data breach as far as possible.
- Finding the right staff
As the company grows and you see successes increase, you’ll hopefully get more of an idea of the kind of person who’s the right fit for your business. In a small business, skill and personality tend to be favoured over other qualities, but not everyone is going to be the right person for a given company.
Example
You’ve committed to a long hiring process, only to find you’ve hired someone who isn’t the right fit for the business.
The solution:
Before, during and after the hiring process, it’s important to tailor your management style to the varying personalities in the office. Look to what works best for each individual; some enjoy working in groups, others are more content to carry out tasks on their own.
Introduce candidates to your team if possible, to determine how the dynamics may work. This may take the form of inviting the candidate’s would-be line manager into the interview process.
Create an environment where your staff can thrive. Be transparent with their expectations, concerns and successes, and create a work/life balance that ensures comfort and happiness throughout the team.
Deploy efficient solutions for your staff to use. Not only does this increase the productivity of the staff you have it enables you as a business owner to ensure that tasks than can be automated, are automated. This results in not only the re-deployment of time to benefit the business but a body of staff who are greatly more fulfilled in their day to day and feel more valued as a result.
- Retaining customers
It is generally accepted that finding new customers carries an increased cost of sales over retaining existing ones. More than ever, customer satisfaction is key and the key to customer satisfaction is best in class customer service.
Example
Most businesses accept that their product is not completely unique. Often a product is one of a number available to customers in the marketplace. So how can you keep your customers – yours?
The solution:
By using a great ERP that connects the dots between sales conversations and actual sales, drilling into products sold and sales patterns you can reach out to customers in a relevant way with your marketing material, ensuring that the right customer knows about the right offer for them at the right time.
A great ERP system like Dynamics 365 Business Central – will enable your staff to provide accurate answers when your customer gets in contact. It will also provide you with an efficient process for dealing with customer complaints and returned orders.
- Cash flow
Whether it’s outstanding bills, unexpected outgoings, or pending payments, money problems can be a major issue. With so much to balance, maintaining a healthy cash flow is key to surviving as a business.
Example
The business completes a job and gets paid after a month. However, you’ve got infrastructure costs, employee salary and your personal expenses to consider too…
The solution:
A SaaS based ERP will provide the management team with the best information possible. Dynamics 365 Business Central provides the following ‘out of the box’ and businesses can augment the standard set up to specify thinks like how often to update the forecast, the accounts to base it on and information about when you pay taxes.
- Cash Cycle
- Income & Expense
- Cash Flow
- Cash Flow Forecasts
Thought For the Day
Regardless of general elections, Brexit and the global economy if a business wants to thrive it needs good information to base its decisions on. You only get good information from a good ERP.
Call Qi Ltd to discuss how moving from your existing accounting and/or MRP package will help your business grow.