Pros and Cons of Using an ERP and How to Choose

For many organisations, there is a compelling business case for an enterprise resource planning (ERP) system. In this article, we explore why that is, looking at ERP benefits alongside the challenges and considerations for those looking to make the investment.

What Is Enterprise Resource Planning (ERP)?

Modern finance teams depend on fast, reliable access to information from systems such as the general ledger, payroll and accounts payable/receivable. When routine financial and operational tasks are automated, audits become easier to manage and the risk of mistakes or fraud is reduced. Organisations also need clear visibility into areas like inventory, orders and the wider supply chain, along with support for procurement, production, distribution and fulfilment.

ERP software brings all this insight together in real time. It gathers data from different parts of the business into one shared database, allowing information to move freely between functions. By connecting processes such as finance, operations, manufacturing and sales, ERP improves efficiency through automation and consistent reporting. (See our detailed breakdown of ERP components here.) Cloud-based ERP systems, which are hosted online rather than maintained on local servers, are a particularly strong fit for distributed businesses and small or midsize companies looking to scale.

ERP Pros

Today, successful companies see ERP systems as essential tools to stay competitive. Their key advantages can be divided into two categories: organisation-wide and functional.

Organisation-wide ERP advantages

Overall, ERP systems make it possible for an organisation to look at its entire financial reality in real time and operate more efficiently as they grow. They do this through:

• Data consolidation: Bringing together data from across the organisation to create a ‘single version of the truth’.
• Universal access: Employees can access information whenever they need it and wherever they are.
• Scalability: ERP systems can grow and expand to meet changing needs.
• Automation: Replacing manual process to reduce error and fraud, improve compliance and reduce the burden on finance teams.
• Cost-efficiency: Removing the need to manage separate non-integrated technology stacks.
• Team collaboration: Connecting people across functions and standardising workflows to increase knowledge-sharing and efficiency.
• AI readiness: Unified data gives full context for AI applications to deliver maximum value.

Functional ERP advantages

As well as these broad benefits, ERP systems also provide powerful advantages for core functions within an organisation:

• Accounting and finance: ERP brings together all data related to company finances and automates core accounting tasks, reducing human error and cutting the time required for complex work. It manages essential processes by turning the general ledger, accounts receivable and accounts payable into dynamic tools that actively support the business. This improves accuracy, shortens the month-end close and automates financial reporting.
  ERP systems also simplify tax compliance across countries, states and business units, handling local taxes, cross-border sales and multiple currencies. They tackle advanced accounting needs such as revenue recognition and the management of fixed assets, cash and payments. By analysing financial patterns, ERPs highlight trends in areas like profit and loss, revenue and sales, helping leaders make informed decisions and forecast more effectively.
• Sales and marketing: An ERP system can link the work of sales, marketing and customer service teams, enabling more personalised customer experiences and stronger customer relationship management. It gives sales teams real-time visibility into the pipeline, highlights effective tactics for closing deals and automates both sales processes and compensation.
  Marketing teams can run coordinated campaigns across multiple channels, stay aligned with sales targets and shorten the sales cycle with more precise audience targeting. Customer service teams benefit from complete customer records that track every interaction, recommend next steps and automate follow-up, all of which play a major role in improving retention.
• Human resources: Expanded ERP systems equip HR teams with the tools they need to support and retain employees. A centralised platform improves the experience for both HR staff and the wider workforce by enabling clear, two-way communication with leadership. Core HR tasks are automated, including payroll for employees or contractors across different cities, states or countries, while real-time general ledger postings give immediate visibility into payroll costs through reports and dashboards. ERPs also handle timesheets and time-off requests in one place, reducing admin and improving accuracy.
• Manufacturing: An ERP system supports the full manufacturing lifecycle, from sourcing raw materials through production, shipping and final order fulfilment. When paired with an integrated CRM module, it also helps manufacturers manage customer relationships, sales orders and the entire lead-to-cash process. In addition, it provides tools for product data management, resource procurement, production control, inventory oversight, quality management and material requirements planning (MRP).

ERP Challenges

To maximise the value of an ERP system, organisations need to balance these advantages with two potential challenges:

• Costs: One of the biggest barriers to adopting an ERP system are the costs like ongoing fees for subscriptions and licences and upfront integration. The costs of purchasing, implementing and maintaining an ERP platform can be significant for many companies, with on-premises systems also requiring investment in IT support and infrastructure, including server hardware. As businesses grow and their processes become more complex, additional modules or add-on services may be needed, adding further cost over time.
• Implementation issues: Implementing an ERP system requires a meaningful investment of time, budget and internal effort, even with a clear rollout plan. Businesses need staff to evaluate and select the right system, a process that often needs finance, operations, IT and sometimes sales, marketing and HR leaders to be involved in. Organisations are like to face a long data-migration phase, potentially requiring outside integration support if they rely on paper records or scattered spreadsheets. Without strong leadership backing, teams may resist new processes and technology. These challenges, especially incomplete data migration and low user adoption, can make it harder to realise a solid return on an ERP investment.

ERP Purchase Considerations

Once you make the decision to invest in ERP, the next step is choosing the best ERP system for your organisation’s current and future needs. The following steps will help guide your selection process:

• Clarify requirements: Confirm why the business needs ERP and identify the key drivers, such as improving accounting, customer service or manufacturing. Factor in any industry-specific demands and decide whether you’ll need customisation, third-party access or specialised security or compliance features.
• Prioritise ease of use: A system that’s hard to navigate slows adoption and increases resistance. Examine case studies, speak with peers about usability and run demos before narrowing your choices.
• Carry out vendor due diligence: Match your business drivers against what each vendor offers. Assess functionality, the pros and cons of cloud versus on-premises, data migration and integration capabilities, vendor reputation and experience in your industry.
• Assess cost: Compare the total ownership cost over three to five years, for example, one system may cost more to configure but prove cheaper to maintain. Ensure you can support ongoing costs and understand the expected ROI timeline.
• Consider support and training: Good training is essential for getting full value from your ERP system. Check whether vendor or partner education covers your organisation’s needs, including virtual options. Confirm that your IT team can support the system or factor in the cost of external assistance.
• Check expandability: Make sure the system can grow with your business. Look at available modules, for example for CRM or HR, and review the vendor’s product roadmap.

How NetSuite ERP Benefits Businesses

More than organisations chose NetSuite as their cloud ERP system – and we help them run smart and faster than ever before. NetSuite ERP unifies accounting, inventory, order processing, production, supply chain and warehouse operations in one integrated suite, delivering real-time visibility across financial, operational and transactional data.

Built to scale globally, NetSuite ERP offers customisable dashboards, reports and visual analytics to help teams make better decisions, automate manual work and free resources to focus on customer and growth. NetSuite’s ERP operates in 200+ countries with support for 27+ languages and 190 currencies, while also providing the clarity and control to adapt, innovate and stay competitive. See how a single source of truth can streamline your business today.