What is ERP Software, and Does My Construction Company Need It?

April 11, 2023

As your business grows, you are likely going to start hearing about ERP Software. Throwing around phrases like ERP Systems (or even better: Enterprise Resource Planning Systems), might make you sound sophisticated and techy, but what exactly is ERP Software, and does your business need it? I’ve done some research on what ERP Software is and how it might apply to construction businesses, and will hopefully be able to shed some light on these questions.

What is ERP Software?

ERP stands for Enterprise Resource Planning, which is a cool name that really clears up nothing, but if we were to condense everything ERP software is supposed to be into a single phrase, it might be “One System to Rule Them All”. The goal of an ERP system is to have a single source of truth for all of the information that flows through your business.

ERP systems are broken into modules, and a typical ERP system will have some combination of the following modules

• Accounting ( Accounts Payable, etc)
• Finance (related to accounting, but more focused on reports, job costing, etc)
• CRM (customer relationships management)
• Sales
• HR (human resources: payroll, etc)
• Inventory management
• Supply chain
• And more

These modules are set up to integrate with each other so all the information flowing through your business only has to be entered once.

Let’s say we are running a roofing company, and we get a call from a potential customer. If we look at the lifecycle of doing a reroof project for that customer it might look something like this:

• Save contact info for potential customer (CRM)
• Schedule a meeting with potential customer (CRM)
• Meet with the potential customer and create an estimate to replace their aging roof. (CRM/Sales)
• Secure approval from the customer and send a contract for signature (CRM/Sales)
• Put the reroof project on the schedule and assign one of our crews to it (Operations/Project Management/HR)
• Order materials for the new roof (Inventory Management)
• Ensure the ordered materials are received (Inventory Management)
• Reroof the customer’s home (Operations/Project Management)
• Send the invoice and collect payment (Sales/Accounting)
• Follow up on any warranty items (CRM)
• Analysis how we did on reroofing projects at the end of the year (Finance)

In a perfect world, this entire process is efficiently logged into the ERP system within the various modules so there is no duplicate data entry, and so it can all be accessed on demand by whoever might need to access it.

What is the advantage of ERP Software?

The key advantage to using ERP Software is having a “single source of truth.” If it is set up correctly, all your business processes will happen efficiently within the ERP system, and you’ll be able to analyze and make decisions based on the data collected while performing these processes.

What are some disadvantages to using ERP Software?

While ERP Software sounds incredible, there are some significant drawbacks that should be considered when looking into moving to an ERP Software System.

• Cost: ERP Software is very expensive, and is often priced per user and per module, which adds up quickly
• Setup: ERP Software does not come working just the way you need it to out of the box. You’ll need to configure the different modules to meet your needs and to connect them together in a way that works for your business. You may even need to write some custom code to achieve functionality that is not included in the ERP system.
• Incomplete: Because the main ERP Software solutions are designed to fit the needs of as many businesses as possible, they’ll often be missing key functionality to work with your needs, and you’ll need to find a way to plug other solutions into your ERP system.

Does my Company Need ERP Software?

Large costs, involved setup and the fact that you’ll probably need to use other solutions to make ERP Software work for your business make using an ERP software impractical for many construction companies. This does not mean you shouldn’t have an ERP system, however.

Having a single point of data entry for all the information that flows through your company will streamline your operations and give you the ability to analyze and make decisions based on real data. In today’s cloud based world, you have the ability to choose the best accounting software for your business, the best HR software, the best inventory management software, etc (or even build your own custom software tailored to your individual needs!), and make them all integrate with each other. This is referred to as a “Best of Breed” approach to ERP Systems, and I believe it will be the optimal solution for most construction companies.

Hopefully I’ve been able to shed a little light on what exactly ERP Software is, and if you should be looking into it for your construction company! Don’t hesitate to reach out if you have any questions about ERP Software or other software solutions, custom or otherwise!