Choosing an ERP for a small business: a practical buyer’s guide

An ERP (enterprise resource planning) system runs finance, inventory, purchasing, sales and often more in one place. For a business that has outgrown its accounting software and a web of spreadsheets, it can be transformative. It can also be the most expensive mistake the business makes that year.

Most ERP projects that go wrong were decided wrongly in the first month. This guide is about getting that month right.

First: do you actually need one?

Before choosing an ERP, make sure the problem is one an ERP solves. Many businesses that think they have outgrown their accounting system have really outgrown how their tools are set up and connected. Our guide to outgrowing Xero walks through the cheaper options first, and Xero, MYOB or an ERP compares the three side by side. An ERP makes most sense when several areas, such as stock, purchasing and production, have outgrown the current setup at the same time.

1. Start with requirements, not products

Write down how work actually moves today: from quote to cash, from purchase to payment, from stock arriving to stock leaving. Then list what has to change and why. Rank every requirement as must-have, important or nice to have.

This document is the most valuable thing in the whole project. Without it, every demo looks good, and the decision comes down to the best salesperson.

2. Understand the real total cost

Licence fees are usually the smallest part. Budget for:

• Implementation: configuration, setup and project management.
• Data migration: cleaning and moving customers, suppliers, items and balances.
• Integration with the systems that stay, such as the website, payroll or banking.
• Training, and the productivity dip while people learn.
• Ongoing support and upgrades.
• Customisation, which costs twice: once to build and again at every upgrade.

3. Know the kinds of option

• Open-source ERP, such as Odoo’s community edition or Dolibarr: no or low licence cost, flexible, but you rely more on whoever sets it up and supports it.
• Cloud ERP built for smaller businesses: subscription pricing, faster to start, less flexible.
• Mid-market ERP: more capability and more cost, usually delivered through an implementation partner.

None is right for everyone. The right one is the cheapest option that meets your must-haves.

4. Get independent advice

Many ERP implementers are also resellers who earn a margin on the licences they sell. That does not make their advice wrong, but it does give them a reason to recommend what they sell. Get at least one opinion from someone who earns nothing from the choice.

5. Plan the rollout

• Phase it. Finance and inventory first, then the rest, rather than everything on one weekend.
• Clean the data before you move it. Messy item lists and duplicate customers become permanent in a new system.
• Resist customisation. Change the process to fit the system wherever the process is not what makes your business different.
• Run in parallel for a period, or at least check the first month-end closely against the old system.

The most common mistakes

• Choosing from demos instead of requirements.
• Underestimating data migration.
• Customising the system to reproduce old workarounds.
• Leaving the people who do the work out of the decision.
• No one inside the business owning the project.

How we help

Our business systems and integration work covers the whole path: requirements, an independent options comparison, setup and data migration, and connecting the systems that stay. Because we do not resell any software, our recommendation is whatever fits, including “you do not need an ERP yet”. The diagnostic is often the best first step, because it shows which problems a new system would actually solve before you commit.