What Is an ERP System?

Short answer: ERP stands for enterprise resource planning. An ERP system is business software that runs a company's core work, such as accounting, buying, stock, HR, projects and operations, from one shared set of data. Instead of each department keeping its own spreadsheet or app, everyone works from the same records.

What ERP means in plain words

Think of a trading company in Shah Alam. A customer orders 200 cartons. Without an ERP system, sales types the order into one place, the warehouse checks stock in a spreadsheet, and accounts types the same order again to raise the invoice. With an ERP system, the order is entered once: the stock is set aside, the delivery order and invoice come from the same record, and the payment is matched to it when it arrives.

Oracle describes ERP as software organisations use "to manage day-to-day business activities such as accounting, procurement, project management, risk management and compliance, and supply chain operations". Microsoft calls it "business management software that helps organizations integrate core processes" across finance, supply chain, manufacturing, human resources, procurement and project management.

What an ERP system usually covers

An ERP system is made of parts, often called modules. Which ones you use depends on your business. Common ones are:

• Finance and accounting: payables, receivables, billing and reports. Oracle notes that "financials" are a subset of modules within ERP, not the whole of it.
• Procurement: purchase requests, purchase orders and suppliers.
• Inventory and supply chain: stock levels, warehouses and logistics.
• Order management: from the customer's order to delivery.
• Manufacturing: for companies that make products.
• Human resources: staff records and related processes.
• Project management: for businesses that bill by project.

Why one shared database matters

The main point of ERP is that data is entered once and used everywhere. Oracle explains that by collecting a company's shared transactional data from multiple sources, ERP systems "eliminate data duplication and provide data integrity with a single source of truth". In daily work this means fewer numbers typed twice, fewer stock counts that don't match, and reports that use the same figures as the accounts.

ERP vs CRM: what's the difference?

• ERP runs the operational and financial side: orders, stock, buying, accounts.
• CRM (customer relationship management) handles customer relationships, sales, marketing and service.

Microsoft puts it the same way, and adds that many organisations connect the two, so customer, order, inventory, billing and service data work together. A common set-up: a lead is won in the CRM, and the order flows into the ERP for delivery and invoicing.

Is ERP only for big companies?

No. Oracle says ERP systems support functions across the enterprise, mid-sized or small businesses, and Microsoft says modern ERP systems help small businesses and large organisations. ERP can run on your own servers (on-premises) or in the cloud. The real question is whether your current tools are holding you back.

Signs it may be time:

• The same order or invoice is typed into two or three different places.
• Stock in the system and stock on the shelf don't match.
• Closing the month or preparing a report means collecting spreadsheets from several people.
• Your tools don't talk to each other. Microsoft gives the example of new accounting software that is not compatible with an older HR system.

ERP and e-Invoice in Malaysia

If your business issues e-Invoices to the Inland Revenue Board of Malaysia (LHDN), there are two ways to send them. LHDN lists the MyInvois Portal, hosted by LHDN and free for taxpayers, and API, which sends data directly from your own system to MyInvois. LHDN says the API route needs upfront investment and changes to your existing systems, and is ideal for large taxpayers or businesses with many transactions. LHDN's MyInvois developer site describes its APIs as "exposed to taxpayer ERP systems" so they can connect and automate the process. In practice, an ERP system connected to MyInvois can send invoices without anyone retyping them into the portal. Check LHDN's own e-Invoice pages for the rules and dates that apply to your business.

Ready-made or custom ERP?

• Ready-made ERP is quicker to start with. You change your process to fit the software.
• Custom ERP is built around how your business already works and connects to the tools you already use. It takes longer to plan and build.

Many businesses mix the two: a ready-made accounting system, with a custom system for orders, stock or approvals that connects to it.

How we build an ERP system at Leadzap

When a business asks us for an ERP or other custom system, we work in four steps:

1. The deep dive. We study how your operations run today and find the bottlenecks before deciding what to build.
2. Blueprint and prototype. You see and try a working prototype before the full system is built.
3. Build and integrate. We build the system and connect it to the tools you already use, such as your CRM, payment gateway or WhatsApp.
4. Launch and optimise. We launch it, train your team, watch how it performs and keep improving it.

Thinking about an ERP system?

Tell us how your orders, stock and accounts are handled today. See our custom software and ERP service and ask for a quote there, or tap the WhatsApp button on this page.

Sources

• Oracle, What Is ERP? (definition; modules; financials as a subset; single source of truth; business sizes; on-premises or cloud).
• Microsoft Dynamics 365, What is ERP? A guide to enterprise resource planning systems (definition; ERP vs CRM; business sizes; signs of disconnected systems).
• Inland Revenue Board of Malaysia (LHDN), Overview of the e-Invoice Model (MyInvois Portal and API).
• LHDN, MyInvois System Software Development Kit (APIs for taxpayer ERP systems).