What is an ERP System? What are the advantages and disadvantages?

Simon Bijlsma
Simon Bijlsma
Business Consultant

As your organisation begins to grow and as you dive more into the business you will notice that things are starting to get out of control. Your accounting and sales department are not in sync with each other, information is scattered around and it seems like teams are working separately and slowly. This is when an ERP system comes in handy by automating all your business processes. In this article we’ll share what is an ERP system, what are the advantages and disadvantages of implementing one.

What is an ERP system?

An ERP (Enterprise Resource Planning) system is a software solution that manages and automates various business processes. A well developed ERP system integrates all aspects of your business processes and functions into one whole single system to work on. It helps to streamline and automate all systems related to finance, Human Resources, Customer Relationship Management (CRM), Invoicing, Project Management and more. Continue reading to uncover benefits and drawbacks of an ERP system.

Advantages and disadvantages of an ERP in short


  • Increased productivity
  • Improved efficiency
  • Cost savings
  • Scalability
  • Data management
  • Better document management
  • Accurate forecasting


  • Initial investment
  • Long implementation hours
  • Complexity
  • Migration of data to a new system
  • Limited customization
  • No guarantee of success

Advantages of an ERP system

Increased productivity

We all know that simple tasks like moving customer data, sending quotes and invoices, etc. can be very time consuming. Implantation of an ERP system allows your team members to focus more on complex tasks while simple daily tasks are being taken care of by the system itself and this leads to a tremendous increase in productivity.

Improved efficiency

You probably believe in “Working smarter not harder”. Let’s admit to the fact that we all would want to be able to complete more tasks effectively by spending the least amount of time and effort. An ERP system can help you tick off more tasks by atomizing daily business operations and this would result in increased efficiency in your organisation.

Cost savings

By Integrating a wide range of business processes such as sales, accounting, finance, CRM, etc. an ERP system gives you the possibility to work on one single system. This helps your organisation to save money by reducing your IT and software licensing costs and create long term value and return on investment. Another benefit is having an overview of all your costs without having to calculate them based on different invoices which will further simplify your accounting process.


ERP systems are easily scalable and are able to change and grow together with your organisation. This means having a new functionality added to the system is always possible within minutes rather than hours.

Data management

It is not surprising as a company not to have a real-time overview of your activities and performance when you are working on different systems which are not even linked with one another. Working on one single system means every aspect of your business is in sync with the rest. This will further allow you to make use of dashboards and know where your organisation stands and is going at all times.

Furthermore you won’t have to deal with information being spread across different databases as all your information will be stored in one single location

Better document management

Organisations using an all-in-one software system benefit from a centralised document management system that can be accessed from anywhere. You can find documents faster, secure and merge them more easily. As a result, all data is always together, in the right place and you will never lose files again.

Accurate forecasting

ERP systems can help users, especially the managers to give more accurate forecasts by providing them with the needed tools which will result in making well informed business decisions.

Disadvantages of an ERP system

Initial investment

Implementing a new ERP system can cost you a lot of money especially if you are a small to midsize company. This doesn't only include the cost for software licences but also staff training, consultancy, customization, integration, maintenance and support.

Long implementation hours

One of the downsides of implementing a new ERP system is that it can take weeks or even months depending on how big or small your business is.

Besides, your employees will have to learn how to use the software, which depending on the package, can also be a time-consuming project. Therefore, you might want to check carefully beforehand whether the ERP system you are considering is easy to use and user-friendly or not.


ERP systems can be quite complex to understand and work with, especially for those team members who are not very good with grasping new technology. This can lead to resistance and frustration from employees which results in a slower implementation process.

Migration of data to a new system

This is a challenge that every business has to go through when implementing a new ERP system. Every system you have been working on up to now has its own way of storing the data. This is quite a project to integrate them all into one single system and in most cases a part of the data migration has to be done manually.

We suggest you map out previously which data you are going to need in the future that are crucial. This allows you to transfer all your data in one go and you will have less risk of forgetting something.

Limited customization

Although most ERP systems offer some level of customization, they may not be able to adapt to all company's needs. This can result in additional costs for custom development.

No guaranty of success

However great the benefits of an ERP package are for your organisation, this does not mean that it will be a successful project. The strength of an ERP is that all processes can be captured in one system, and if some of the employees do not embrace the system, this can greatly reduce the chances of success.

We highly recommend you to spend an afternoon giving your staff proper training to make sure that key aspects of the ERP system are being understood by your team members.


As we mentioned before in this article, implementing an ERP system can make a huge contribution towards streamlining your business which further gives you a better overview of your organisation. The primary setbacks of an ERP system often surface during the implementation phase. However once this phase is carefully navigated, you can benefit from the perks an ERP system has to offer to you. If you are considering implementing an ERP system and are curious to know more in detail about the primary business benefits of an ERP system read our article here.

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