What is an ERP? A plain-English guide for growing companies

The short answer

ERP stands for enterprise resource planning. The name is older and grander than the idea. In plain terms, an ERP is business software where your sales, purchasing, stock, HR, payroll and accounting share one database.

That last part is what matters. Plenty of companies use good tools for each of those jobs. The difference with an ERP is that a customer, an item or an employee exists once, and every part of the business works from that same record.

Here is what that looks like for a single sale:

1. Your salesperson creates a quotation for a customer.
2. The customer accepts, and the quotation becomes a sales order.
3. The warehouse picks and delivers the goods, and stock goes down.
4. The order becomes an invoice, and the invoice posts to the general ledger.
5. The customer pays, and the payment is matched to the invoice.

In an ERP, nobody re-types anything between those steps. Each document is created from the one before it, and the accounting entries happen as a result of the work, not as a separate job at month end.

What an ERP usually covers

ERPs are sold as a set of modules. You do not have to use all of them, and you can usually start with a few and add more later. The common ones are:

• Accounting. General ledger, receivables, payables, bank accounts and reconciliations, tax codes and financial reports.
• Sales. Customers, quotations, sales orders, invoices, credit notes and collections.
• Purchasing. Suppliers, purchase requests and approvals, purchase orders, goods receipts and supplier bills.
• Inventory. Items, warehouses, stock movements, transfers and stock counts.
• HR. Employee records, leave, attendance and expense claims.
• Payroll. Pay runs and payslips, posted to the ledger. Statutory rules vary by country, so check what each system supports where you employ people.

Some ERPs add manufacturing, projects, fixed assets, point of sale or a customer portal. To see how a full set of modules fits together, browse the Nyra modules as one example.

ERP versus accounting software

Accounting software and an ERP overlap, which is why the line between them is confusing. The simplest way to see the difference is to ask what each one is the record of.

Neither is better in general. For a small company with simple needs, accounting software is often the right choice. An ERP earns its place when the work around the books becomes harder than the bookkeeping. For a side-by-side view, see how ERPs compare with accounting software.

Why one database matters

"One database" sounds technical, so here is what it changes day to day.

You stop re-keying. Say a customer in Ho Chi Minh City orders 200 units. In a set of separate tools, that order might be typed into a sales app, then an invoicing tool, then a stock spreadsheet. In an ERP, it is entered once.

Numbers agree with each other. When the stock report and the balance sheet come from the same transactions, they cannot drift apart without a reason you can trace.

Reports stop being projects. Questions like "what is our margin on this product line?" become a filter on a report, not an afternoon of exports.

Access is more precise. Because everything is in one system, you can give each person access to what their role needs. A warehouse supervisor can see stock without seeing payroll.

Your audit trail is in one place. Who raised the purchase, who approved it, which goods arrived and which bill was paid: one chain of documents rather than four systems and an inbox.

Signs you might need one

You probably do not need an ERP if you have one company, one currency, no stock and a small team. Good accounting software and a few tidy spreadsheets can carry you a long way.

You probably do need one when several of these are true:

• The same information is typed into more than one system.
• Stock, sales and the books disagree, and finding out why takes days.
• You trade in more than one currency, or run more than one company.
• Purchases are approved in chat or email with no record.
• Every management report starts with an export.

We go through ten of these signs, with a simple scoring sheet, in signs you've outgrown your accounting software. If you run more than one legal entity, our guide to multi-company accounting covers what changes.

Common misconceptions

"ERPs are only for big companies." Some are built for large organisations. Others are built for companies of tens of people rather than thousands. Judge a system by whether it fits your size, not by the label.

"We would have to use every module." No. You can start with the modules that fix today's problem, such as accounting, sales and stock, and switch on others later.

"It means a long, risky project." The size of the project depends on how many processes you move at once, how clean your data is and how much you customise. Ask any vendor for a plan with dates for a company of your size, and ask what you have to do yourselves.

"Our data will be locked in." Ask before you sign. A good system lets you export your records in a standard format such as CSV or spreadsheet files.

"It is too expensive." Sometimes it is. But compare it with the full cost of what you run today, including subscriptions, connectors and staff time. Our guide to ERP pricing and total cost shows how to work that out.

Questions to ask before you choose

When you look at systems, these questions tell you more than a feature list:

1. Which modules would we start with, and what would it take to add one later?
2. Does it handle every currency and country we trade in, and how are exchange differences recorded?
3. Can we run more than one company, each with its own books and tax settings?
4. How do we get our customers, suppliers, items and opening balances in, and who does the work?
5. How do we get our data out if we leave?
6. Where is our data stored, and is it kept separate from other customers' data?
7. Which languages does the interface support for our team?
8. What is included in the price, and what is an add-on?

Ask each vendor to show these answers in the product, with your own example, rather than in slides.

Where Nyra fits

Nyra is an ERP for companies of up to 100 people. Accounting, sales, stock, HR and payroll share one database, and invoices, credit memos, goods receipts and payroll runs post their own journal entries. It handles documents in any currency, with FX revaluation and one total in your main currency, and lets you run several companies in one workspace, each with its own legal details and tax registrations, and every invoice, bill and journal tagged to its company. Each customer runs on its own instance and database. You can use it on the web, on desktop and on mobile, in English, Bahasa Indonesia, Vietnamese or Chinese. Book a demo to see how it would run your own sales-to-ledger flow.