The Ultimate Guide to Choosing ERP Software for Small Businesses

When each order counts and even a single penny matters, inefficiencies can silently drain SMEs. Whether it may be a misplaced invoice, out-of-stock item, or shipment delay, they might seem minor, but over a period of time, these tiny mistakes will add up and lead to the downfall of growth. SMEs worldwide are struggling with these challenges.

A report by McKinsey says that an advanced ERP based stock algorithm helped a company reduce the inventory levels by 42%, cutting costs by 6%. Similarly, a study by the European Commission shows that by implementing the use of electronic invoices (e-invoices), you can reduce your costs up to 54.5% while sending business invoices and save 71.8% while receiving them.

ERP is software that helps you run your entire business in one place. It connects different parts of your business — like sales, inventory, finance, and customer management — so you can track all operations, avoid mistakes, and make better decisions. Think of it as a digital assistant that organizes and simplifies your business operations.

Why is ERP the Need of the Hour for SMEs?

1. Centralized Data Management: It ensures that all your business data is centralized, helps minimize errors, and allows for informed decisions.
2. Automating process: It reduces your manual tasks such as creating invoices for the orders, working on payroll, and reporting, thus helping in improving accuracy and productivity.
3. Insights in Real Time: It offers you a real-time report on finance, sales, and inventory and supports active strategies by generating dashboards.
4. Improved Collaboration: It is mainly to improve your communication within the teams and have better efficiency with workflow.

9 Steps to Choosing ERP for Your SME

Choosing the right ERP system for SMEs is not easy. There are countless options available, but you need to focus on finding the best solution that aligns with your specific goals, eliminates inefficiencies, and helps you grow in the long term.

Here is what you need to focus on:

1. Define Your Business Needs

• You need to identify the pain points, such as inventory management, tracking order, mismanagement in finance, etc
• You need to list important features like online invoicing, real-time inventory, and CRM
• You need to make sure you choose ERP that provides automation and real-time tracking to reduce your manual task
• A rich ERP feature will not help you unless if it does not solve your business challenge

2. Select ERP that Aligns with Your Industry

• You should try to avoid generic solutions; instead, choose only one that will help you with your workflow, for example, batch tracking for manufacturers and warehouse management for the retailers.
• If you don’t customize your need, it will cost you more and create inefficiencies

3. Come up with a Plan for Growth

• By implementing ERP, your business should expand, increase orders, and overall lead to future growth.
• If you don’t plan things, ERP will cost you more than your business

4. Ensure Seamless Integration with Existing Tools

• Many ERPs claim that they are all-in-one solution, but you should know that whether they can integrate with your existing tools or not
• If you are already using tools like QuickBooks, Shopify or CRM, your ERP should automatically integrate with these tools
• If you don’t do proper integration, you will suffer working manually, and a lot of back and forth will take place.

5. Focus on Real-Time Insights

• Your ERP should provide you live updates on finance, accounts, data, inventory and sales so that it will be better and faster for decision-making
• If you still have to rely on spreadsheets after using ERP, it is time you analyze whether you have chosen the right ERP solution or not.

6. Evaluate Implementation Risks and Downtime

• You need to have patience while choosing ERP because it is not something that you will get instant results from, because some takes weeks while others may take months, depending on the requirements
• You need to be proper and careful while implementing and planning, or else you will face project failure, wastage of time, and high costs after fixation.

7. Calculate the Total ERP Cost

• Many of you failed to understand that the price of ERP is not only a subscription fee. There are so many hidden costs like customization, automating process, long-term maintenance, etc.
• When you choose any ERP, first understand the total cost, and if required, go for the basics that are needed according to business specifications instead of taking the entire solution, which will be of no use to you.
• You can also go for cloud-based ERP, which solely works on subscriptions, but it is beneficial for SMEs.

8. Select a Vendor for Long-Term Growth

• Choosing the right vendor is very important because it is for a long-term plan.
• You have to check reviews, research, and read case studies before committing to any ERP solution provider

9. Ensure Compliance and Security

• You have to make sure that data is encrypted, user access control is in place, and compliance with the GDPR or PCI-DSS is maintained.
• If you do not secure your system, it may lead to data breaches and regulatory fine

7 Essential ERP Features for SMEs

Let us now discuss in detail the top features of ERP and how it can be beneficial for small firms.

1. Inventory and Supply Chain Management

Inventory control is one of the most important functions for small businesses because they completely rely on this. It helps them to deal with controlling stock, managing suppliers, and processing logistics. Many businesses often struggle by not including these functions and facing delays due to mismanagement, which overall leads to a loss of revenue.

How ERP Helps:

• By implementing ERP, you can have real-time inventory tracking, which helps you keep track of inventory levels and stay up-to-date.
• It makes sure that you don’t face financial losses and keeps the stock available when in need.
• You can also automate your purchasing through the ERP system by automatic restocking when the stock level goes down. This feature helps reduce human errors and manual work.
• In this system, you can also store your supplier data, bargain price rate, and track delivery performance as well.
• 📌 Neytt (carpet manufacturer) centralized inventory across 10 locations and eliminated manual stock tracking.

2. Order management

When you handle small businesses and you have to deal with multiple channels and teams, you consume a lot of time working manually without realizing it. In this manner, you do make many mistakes, delays in delivering, and complaints from the customers. So, if you implement ERP software, the entire order management process will be in the system; you will not have to go through this painful process every day.

How ERP Helps:

• It will automate your process online instead of offline. All the sales and purchases will be instantly recorded without any error and save you time.
• You can also track each sale individually to ensure everything is okay.
• You can replenish supplies to ensure that there are no disruptions in supply chain
• It reduces your cost and helps in any discrepancies.
• 📌 Artisanté (food manufacturer) simplified purchasing. The purchasing manager can now view sales estimates, calculate raw material needs, and create purchase orders — all from a single screen.

3. Customer Relationship Management

Your customers should be your first priority, whether they are existing ones or new ones. When you have a CRM module within an ERP system, it makes it easy for the businesses to understand customer behavior, manage leads, keep a history of communication, and create automatic interaction. This leads to getting a high conversion rate and bringing repeat sales.

How ERP helps:

• By implementing ERP in CRM, it helps store the history of orders, customer details, and communication logs all in one system.
• You can also automate the process by putting reminders, customer engagement strategies and marketing campaigns
• You can also improve your sales pipeline by tracking lead progress and identifying loopholes so that you can devote time to customer inquiries and solve their issues.
• 📌 Hey Baby (apparel brand) used analytical reports and dashboards to forecast demand and optimize collections.

4. Production and Manufacturing Management

When you run a small manufacturing business, it is important to track raw materials, schedule the production, and lower the production bottleneck. Therefore, ERP plays a crucial role in simplifying these processes by enhancing material planning and aiding in the development of production timelines.

How ERP Helps:

• You can track the use of raw materials, reduce waste, and make sure that the scheduled production meets their timelines.
• You can also easily automate your production operations so that you don’t make any human errors and track the progress.
• You can easily optimize your timeline and track all the delays. This timeline management helps in adjusting any delay in work so that you deliver everything on time.
• 📌 Jtronix (engineering R&D company) streamlined manufacturing by automating BOM creation, raw material tracking, and production order management. This reduced manual errors and improved decision-making.

5. Financial and Accounting Management

When you have small businesses, it is difficult to keep track of everything like payroll, invoices, cash flow, or tax compliance. The old method of keeping track is very difficult because working manually often leads to making mistakes.

How ERP Helps:

• By implementing ERP, you can automate the payroll process and correct tax rates.
• You can also generate data in real time and make informed decision
• You can also manage your expenses and control costs by monitoring so that you can manage the budget in a better way.
• 📌 Metako (steel doors manufacturer) used financial reports to detect a $15,700 shortage and prevent theft. They also track net income per employee and transaction, helping them review salaries effectively.

6. Project and Workflow Management

When your business is service-based, project management tools are very important for the business to run. It ensures efficiency and helps to deliver client projects on time. ERP provides this management tool so that it enhances positive collaboration in cross-functional teams.

How ERP Helps:

• It helps you in creating task automation and assignment to the team members and prepare a complete progress detail in the system
• It helps in updating work progress quickly and helps with on-time delivery without delay.

7. Human Resource Management

If you implement an ERP-integrated HR module, it will become easier to manage everything from tracking employees attendance to processing payroll and any legal compliance, thus overall improving employee management.

How ERP Helps:

• It will help you in tracking the attendance of the employees, their leaves, shift timing and performance tracking.
• You can also easily manage the payroll, tax deductions, and salary calculation and help you in compliance management.
• You can monitor employees’ performance reviews, training programs, onboarding process, etc.

4 Key ERP Benefits for Small Businesses

Running a small business primarily focuses on short-term planning, often neglecting to strategize for future opportunities, and that is why you need ERP.

1. ERPs help to reduce the risk of compliance, financial downfall, etc. In this way, it makes your system safer and risk-free.
2. ERPs help to reduce repetitive tasks and focus on more important tasks rather than spending the whole time on one task.
3. ERP software for small businesses offers limited customization to ensure quick implementation and simple use.
4. Cloud ERP for small businesses is very beneficial. You can easily afford it with their subscription models.

Why is Choosing the Right ERP for Your Small Business Important?

Choosing the right ERP software for your business is a difficult decision because it impacts many things for business growth. The ERP solution itself is a very vast module because it offers various catered solutions.

• Small businesses should invest in ERP to achieve more and spend less.
• ERP offers separate solutions for different business industries, so you should carefully analyze and choose which will align with your business goal.
• Lastly, you have cloud ERP along with on-premise and hybrid options. You get real-time access, flexibility, and very affordable prices. If you are looking to scale your business without heavy upfront costs, this service is perfect for you.

The unique selling point of cloud ERPs is their ability to provide both quality and quantity. They mostly work on subscription; this way, it helps small businesses to understand and explore which solutions fit best for them.

How ERP Solves Common Challenges for the Businesses

Here is a table below for you to understand how small businesses face challenges if they neglect ERP solutions and if your business is one of them, it is time for you to consider ERP.

10 Best ERP Solutions for Small-Sized Businesses Globally

Let’s examine affordable and customizable software — the right fit for SMEs.

1. Kladana

We automate all business processes, from warehousing and purchasing to production and omnichannel sales. Unlike complex ERP systems designed for large enterprises, Kladana is easy-to-use and affordable — perfect for SMEs with limited resources. You don’t need an IT team to manage it.

Kladana cloud ERP helps businesses automate key operations from a single platform:

✅ Inventory & Warehouse Management — Track stock levels in real time, prevent overstock & stockouts

✅ Purchase & Sales Order Processing — Manage B2B & B2C orders smoothly

✅ Production Control — Plan raw materials’ consumption, calculate costs, and track progress

✅ Financial Tracking & Reports — Monitor cash flow, costs, and profits

SMEs don’t need to break the bank for automation. As your business grows, Kladana scales effortlessly without high upfront costs. Kladana offers:

✔ Flexible pricing plans tailored for small businesses

✔ No hidden fees —pay only for what you use

✔ Free trial to explore features before committing

Kladana integrates with popular platforms like WooCommerce, Shopify, Xero, etc. Plus, it’s quick to set up with no technical expertise required. Kladana offers 1–3 onboarding sessions and ongoing support.

2. Acumatica

It is a cloud-based ERP solution provider. They provide solutions for various industries such as distribution, manufacturing, and construction. It has unlimited license users and is perfect for small businesses to plan for their long-term growth.

3. Odoo

They are known for their open-source ERP. Odoo lets their clients customize the features according to their needs. This helps the client in saving money by not purchasing the entire product and only reaping the benefits that they actually need.

4. Priority ERP

Many of the ERPs focus on manufacturing, retail, and service-based. But priority ERP-based focuses only on health care, consulting, and professional services. They offer tracking of their clients’ contracts, and they try to automate their billing tools so that it becomes easy for them to calculate.

5. SYSPRO

It focuses on manufacturing and managing end-to-end production. SYSPRO helps in optimizing operations of the supply chain and automating Bill of Materials Management (BOM). They also use AI-powered forecast demand to help in making cost-effective decisions.

6. Dolibarr

It is an open-source that has both ERP and CRM integrated. By offering CRM tools to small businesses, they are making their work lighter and faster. It also helps in reducing HR’s workload. Dolibarr’s user interface is so simple that you won’t require an IT team for installation.

7. Brightpearl

It mostly focuses on sales and retailing. They deal with order management, tracking inventory, and multiple sales channels so that the small business can increase their sales.

Their built-in automatic inventory restocking and finance reporting allows their clients to keep track of the entire sales channel in one system

8. ERPNext

This is another open-source ERP solution provider. Their focus is on HR, CRM, finance, inventory, etc.

Their USP is that, unlike the paid versions, they support small businesses through a community model. It makes more affordable options for small businesses or just a beginner start who cannot afford a big ERP enterprise.

9. Xentral

It is mostly designed for e-commerce, logistics, and digital startups, basically for tech-savvy companies.

They automate their shipment management and order processing. For example, platforms like Amazon can integrate it to better service their customers.

10. Deskera

Its focus is mostly on finance and accounting. Deskera tries to automate their finance and payroll bookkeeping.

They also simplify the process of employee time tracking, which makes it easier for the small teams to track. It is ideally very useful for small businesses struggling to take care of finance or HR management.

To Sum Up

Therefore, investing in ERP will not be your loss; instead, your small business will grow gradually. You will not only gain profit, but once you use this solution, you will understand the big U-turn in your business that will only bring prosperity and success without facing any issues in your journey.

FAQs

Choosing the right ERP system is tricky sometimes, and many SMEs have similar concerns. Here are some common questions to help you and make your decision clear and easier.

Which ERP Software Is the Best for Small Businesses?

The best ones are Kladanna, Odoo, Dolibarr, etc. It is not always the big ERP provider that will help you out but you can always choose according to your business needs.

What Is the Basic Cost of ERP Software for Small Businesses?

Starts at $20, but prices vary by feature, and there are subscription bases.

Is Cloud ERP Benefitting Small Businesses?

Yes, it is. Cloud ERP provides you with flexibility, cost-cutting, ease of use, and storing data in a proper structure.

How Long Is the Process for Implementing an ERP System?

It will usually take you 3–6 months for cloud base and 12–18 months for full customizations.

What Are the Main Challenges while Implementing an ERP System?

The major challenges you face are migrating data and integrating the existing system, plus high costs as well.

List of Resources

1. McKinsey Report — Building a flexible supply chain in low-volume, high-mix industrials
2. European Commission Study — How electronic invoicing helps reduce late payments
3. Accenture Study — Enterprise Resource Planning (ERP) systems to support configure, price and quote tools (CPQ)