ERP definition

Enterprise resource planning (ERP) is a system of integrated software applications that standardizes,
streamlines and integrates business processes across finance, human resources, procurement,
distribution, and other departments. Typically, ERP systems operate on an integrated software platform
using common data definitions operating on a single database.

ERPs were originally designed for manufacturing companies but have since expanded to service
industries, higher education, hospitality, health care, financial services, and government. Each industry
has its own ERP peculiarities. For example, government ERP uses contract lifecycle management (CLM)
rather than traditional purchasing and follows government accounting rules rather than GAAP. Banks
have back-office settlement processes to reconcile checks, credit cards, debit cards, and other
instruments.

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The benefits of an ERP system

ERP systems improve enterprise efficiency and effectiveness in a number of ways. By integrating
financial information in a single system, ERP systems unify an organization’s financial reporting. They
also integrate order management, making order taking, manufacturing, inventory, accounting, and
distribution a much simpler and less error-prone process. Most ERPs also include customer relationship
management (CRM) tools to track customer interactions, thereby providing deeper insights about
customer behavior and needs. They can also standardize and automate manufacturing and supporting
processes, and unifying procurement across an organization’s disparate business units. An ERP system
can also provide a standardized HR platform for time reporting, expense tracking, training, skills
matching, and the like, and greatly enhance an organization's ability to file the necessary reporting for
government regulations, across finance, HR and the supply chain.

Properly operating ERP systems enable enterprises to reduce the time required to complete virtually
every business process. They also promote collaboration through shared data organized around
common data definitions, resulting in better decision-making. The standardization and simplification
that ERP systems offer result in fewer rigid structures, thereby creating a more agile enterprise that can
adapt quickly while increasing the potential for collaboration. An ERP systems centralized database,
while being a bigger target, is easier to secure than data scattered across hundreds of systems.