5 Cost-Effective ERPs for SMEs That Navigate Small Budgets

For SMEs, the leading cause of hesitation to ERP adoption is budget limitations. However, there are several ERP solutions that are both affordable and perfectly suited to meet business needs.

This article will show you how cost-effective ERPs can cater to your small business and suggest the top five options that are potential for investment.

What ERPs Can Do For Small Businesses

Managing the entire operations becomes harder with limited resources and tight budgets. Accordingly, there are seven typical obstacles that ERPs can handle for SME owners:

1. Manual Data Entry and Inconsistency: One of the most significant challenges is manual work dependency which further leads to data inconsistency. More than 40% of employees interviewed said they devote at least 25% of their workweek to manual, repetitive jobs (Automation in the Workplace report by Smartsheet). Specifically, the most tedious ones were data entry, email, and data collection. Manual work does not only cause lower productivity but also increases the risk of data errors and fragments across departments.

Via a single source of truth, ERPs consolidate cross-department data by automating repetitive and manual procedures. This way, these systems enable different stakeholders to access accurate, up-to-date information and reduce the need and time spent on manual entry tasks.

2. Lack of Visibility into Operations: Without a centralised system, a lack of transparency in operations is another common challenge for SMEs. Managing KPIs, controlling inventory, and making well-informed decisions become a more tedious task for stakeholders.

Within an ERP, you can access real-time dashboards and leverage reporting features that provide a complete view of their entire operations. The system integrates data from multiple departments, furnishes a holistic business view, assists decision-making, and identifies areas for improvement.

3. Communication & Collaboration Issues: Developing efficient communication is essential for any business, but it can pose a great challenge for SMEs with separate systems and disconnected departments. As a result, inefficient collaboration among stakeholders causes lower productivity, missed opportunities, and lower-quality service.

To create a seamless communication experience across departments, ERPs offer a centralised data hub to manage multiple data and tasks. The single source of truth within an ERP makes sure that every stakeholder works with consistent data and promotes better internal and external collaboration.

4. Inefficient Inventory Management: Optimising inventory management becomes a huge challenge for SMEs with limited resources. Stock-outs, overstocking, profit loss, or customer dissatisfaction - these are just a few of all the consequences of inefficient inventory management.

Almost every ERP offers real-time inventory tracking and forecasting functions. These features help you to maintain balanced inventory levels and avoid excess stock. Specifically, ERPs have robust integration features with sales and purchasing. This not only delivers a more strategic perspective on inventory requirements but also improves inventory planning and decision-making.

5. Tedious Sales Management: Any firm needs to have a strong sales management process in place because it has a significant effect on three key areas: revenue generation, operational efficiency, and customer satisfaction. Since it involves manual work with separate systems, managing sales orders becomes more costly and challenging for SMEs.

ERP systems streamline sales order processing, customer engagement, and integration with inventory and shipping solutions. This way, you can optimise the entire sales cycle from placing orders to invoicing and payment within a centralised platform. With the help of ERPs, businesses can maintain a healthier relationship with customers and speed up fulfilment procedures.

6. Limited Financial Control: Due to fragmented data and manual operations, SMEs often face difficulties in managing their financial performance. These challenges result in inaccurate financial reporting, inefficient cash flow management and a lack of well-informed financial decisions.

To help businesses get a holistic view of their financial performance, ERPs offer integrated finance-related modules that sync data across departments from sales to inventory. The best part about this integration capability is that it shows how ERPs navigate to improve cash flow management, reporting, and decision-making in the long term.

7. Difficulty Scaling: When the business grows, SMEs often encounter obstacles that hinder the operation scalability. Manual processes and separate systems are the main causes of this problem.

Cloud-based ERPs are scalable solutions if you are in this situation. These cloud systems allow businesses to easily adjust the number of users, add more resources, and integrate with other solutions as they grow. This adaptability proves that SMEs can scale their operations seamlessly without having to spend a huge amount of investment initially in hardware or IT infrastructure.

How ERPs Cater To SMEs’ Tight Budget

Although ERPs offer a lot of benefits, there is one big financial hurdle that exists among SMEs - the cost of the ERP setup and maintenance. However, a lot of ERP vendors have acknowledged this specific demand of small businesses. They have designed cost-effective solutions to extend the possibility of adoption that meet limited budget plans.

1. Cloud ERPs with lower upfront costs

76% of companies have either started or already transferred their on-premise ERP to cloud-based systems to improve operational efficiency (Opkey).  Cloud-based ERPs are more economical alternatives. With these systems, SMEs won’t have to worry about expensive on-premises hardware and IT infrastructure. The vendors develop a subscription-based pricing model for their cloud ERPs, and this allows SMEs to only pay for what they need (monthly or annually depending on the budget status).

2. The modular design for SME

Several ERPs have a modular design that specifically caters to businesses that only need essential modules at first. SMEs can start with basic modules like accounting, inventory, or sales management, then add more when the business expands. This modular approach helps small businesses to exclude unnecessary upfront costs, lowering the initial investment, and aligning the system with unique demands.

3. ERP packages for entry-level

A number of ERP vendors design entry-level pricing packages specifically for SMEs. These packages provide essential features and modules at a good price so that small businesses can navigate their limited budget. For example, Odoo ERP has a Free Plan that allows you to use one app for free. However, if the app you choose requires the installation of other related apps (i.e. the E-commerce app needs the Website and Invoicing apps), you will get all these interconnected apps for free. These basic packages offer a solid foundation for SMEs to embrace the advantages of a fully integrated ERP system.

4. The long-term ROI of using ERPs

It is important to assess the long-term ROI of ERP implementation for small businesses. 85% of the companies participating in an ERP survey had a forecasted ROI timeline, and among these, 82% realised ROI in the expected period (Ultra Consultants). By improving operational productivity and optimising manual procedures, ERPs help businesses have more time to take a closer look at their performance, reduce costs and grow revenue over time. These results have validated the initial investment in ERP systems.

5 Most Cost-Effective ERPs For SMEs

1. Odoo

Odoo is a suite of fully integrated business apps that are·designed to automate and optimise multiple procedures within your company. These applications stand for various business operations, including inventory, manufacturing, purchasing, POS, CRM, sales, accounting, and HRM. Odoo's affordability is a major benefit for small and medium-sized businesses.

The software operates on a subscription basis, with a free plan (with only 1 app) and paid plans based on the number of paying users (for all apps). Odoo is a cost-effective option because of its modular nature, allowing SMEs to start off with the most basic modules and gradually expand in the long term. To cater to specific business requirements, Odoo has recently rolled out more localised features for Australian businesses, making it a great option for those operating in the location. These can be Australian Accounting, Starshipit integration, BAS report improvements, Customer statements & Remittance advice, and more. 

2. Sage Intacct

Sage Intacct is a cloud-based financial management and accounting system that is also aimed at small and medium-sized organisations. While not offering the entire spectrum of ERP operations, Sage Intacct does provide powerful financial tools such as general ledger, accounts payable/receivable, cash management, and reporting. Its subscription-based pricing makes it an affordable alternative for SMEs wishing to improve their financing practices.

3. Zoho ERP

Zoho ERP is another outstanding cloud-based ERP that includes modules such as inventory, sales and procurement, accounting management, and CRM. One of the core benefits of Zoho ERP for SMEs is its pay-per-user pricing approach. This allows SMEs to scale their usage and prices later as they grow. Zoho ERP also smoothly connects with other Zoho apps, creating an integrated system for any company.

4. MYOB

Similar to Odoo, MYOB is a leading ERP system provider in Australia that focuses on the needs of businesses of all sizes. MYOB provides software solutions for a range of business functions, from accounting and payroll to inventory management and CRM. The ERP also provides localised support and pricing for the Australian markets.

5. SAP Business One

As an acknowledged expert in corporate software worldwide, SAP now provides SAP Business One, a product designed especially for small and medium businesses. It offers a solid and adaptable structure to handle all essential business operations from accounting and customer relationship management to inventory and manufacturing. Although the price point might be higher than others, SAP Business One is an ideal choice if you have ambitious growth goals.

Choosing An ERP For SMEs

There are four key factors that you need to consider when choosing an ERP for SMEs: industry-specific requirements, pricing and licensing, scalability, and implementation support. Among the top five ERPs listed, Odoo provides both a completely free Community edition, a One-app free plan in the Enterprise edition, and cost-effective paid options.

While this open-source solution needs more technical knowledge, we believe it is a reasonable selection for SMEs with in-house IT expertise. Nonetheless, you can always take advice from our ERP-certified expert team to discuss your specific case and develop a solid plan for the implementation.

References:

• Smartsheet (2017). Automation in the Workplace 2017
• Opkey (2024). 2024 State of ERP Testing Report
• Ultra Consultants. ERP Survey: The Real Facts about ERP Implementation