Why MSMEs Should Consider Cloud ERP Solutions

Micro, Small, and Medium Enterprises (MSMEs) are crucial to the economy, generating substantial employment opportunities and contributing 33% to India’s GDP. Among them, medium-sized enterprises constitute just 1%, while micro firms make up around 4.5%, and small businesses account for over 90%. In many small and micro businesses, the decision-makers are usually the owners, who dedicate considerable time to operational tasks. Medium-sized businesses often have operations managers to manage inventory, though the owners still drive most operational decisions.

How do we classify these MSMEs? The simple answer is by the number of people they employ. In the Indian economy, small businesses are the second-largest providers of employment. Micro-enterprises employ fewer than 10 people, small businesses employ between 10 and 49 people, and medium-sized businesses employ between 50 and 249 people. Large enterprises employ more than 250 individuals.

Spreadsheets vs. Cloud ERP

Micro, Small, and Medium Enterprises (MSMEs) often lack the extensive teams and bandwidth required to ensure accurate data management using traditional spreadsheets. While spreadsheets have been beneficial for many businesses, they can eventually become a hindrance to growth and efficiency. Cloud-based ERP (Enterprise Resource Planning) solutions offer a practical way to overcome these limitations, providing a centralized and streamlined approach to data management. Unlike fragmented spreadsheets, cloud ERP systems consolidate data, reduce errors, and enhance collaboration. 

Additionally, a significant 68% of MSMEs in the country recognized the positive impact of digital technology on their businesses and personal lives, according to the report titled MSME Digital Index by PayNearBy. In this context, the shift to cloud ERP can be crucial for MSMEs looking to scale operations, improve data accuracy, and make informed decisions, ultimately driving growth and efficiency. However, modern technology can initiate a change for MSMEs willing to use advanced tools that can streamline inventory control, allowing them to achieve optimal results.

Here are 5 key indicators suggesting that MSMEs should contemplate transitioning to a cloud ERP system from Spreadsheets for effective data management:

• Challenges with Managing Data

Spreadsheet sprawl poses significant challenges for many businesses. Picture financial data confined to one spreadsheet, marketing data in another, and sales data spread across five more. This fragmentation makes it exceedingly difficult to gain a comprehensive view and make informed decisions. Critical information is compartmentalized across various spreadsheets, creating obstacles to achieving a unified perspective. With numerous copies circulating, it’s incredibly challenging to ensure that everyone is using the most current data. Manually entering data across spreadsheets heightens the risk of errors and inconsistencies. Additionally, spreadsheets lack features for seamless collaboration, posing challenges for teams to work together effectively.

Maintaining inventory records is a daily challenge. It takes a staggering amount of time to accurately record all transactions and freshly produced commodities. Tracking who made a certain entry, when it was made, and why (e.g., new shipment, received invoice, routine inventory count) becomes difficult.  Excel or record books frequently hold incorrect data, such as values that do not add up, incomplete entries, or repeated records. This absence of systematic documentation results in a mess of imprecise data rather than precise oversight of inventory.

There is a common discrepancy between real stock on hand and recorded data. During inventory counts, staff frequently discover major disparities. For example, the records may show that there are 100 T-shirts in store, but a manual count reveals only 67. This disparity indicates that 33 T-shirts were sold or wiped off without a record, highlighting the instability of the current system.

To ensure smooth operations, invest in a robust inventory management system that effectively tracks stock levels, monitors sales performance, and provides real-time reporting. Maintaining vigilant oversight of your inventory can prevent stockouts. Implement a system to manage and uphold minimum quantities for each item type, ensuring consistent availability.

• Time Constraints

Employees spending time manually entering and manipulating data in spreadsheets is a significant drain on resources. Numerous spreadsheet tasks consist of repetitive data entry, copying, and pasting, which not only increases the likelihood of errors but also demotivates employees due to the monotonous nature of the work.

Manual data entry is prone to errors, resulting in employees spending considerable time identifying and rectifying these mistakes. Spreadsheets are not designed for complex data analysis, often compelling employees to depend on manual calculations and manipulations, which are time-consuming and inefficient.

Creating reports from spreadsheets can be a frustrating and error-prone process. Reports frequently necessitate data from multiple spreadsheets, a task that involves tedious and time-consuming manual gathering and consolidation of information.

After gathering the data, formatting the report to achieve a visually appealing and professional appearance can pose another challenge. Developing complex formulas to calculate specific metrics or filter data can be challenging and error-prone. A single incorrect formula can disrupt the entire report.

• Scalability Constraint

Spreadsheets excel with small datasets and basic tasks, but they struggle to keep up as your business expands. Large spreadsheets can become slow, taking considerable time to open, calculate, and update. This slowdown can significantly hamper productivity for everyone dependent on that data. Handling complex formulas and manipulating data in extensive spreadsheets increases the likelihood of errors. Resolving these errors can become a time-consuming challenge.

Spreadsheets lack the capabilities needed for complex data analysis and automation tasks, which are essential for managing extensive datasets and workflows. As your business grows, the complexity of your data increases. Spreadsheets often struggle to keep up, becoming a barrier to both growth and informed decision-making. This is why many businesses choose to switch to database and business intelligence tools that can handle large data volumes and perform advanced data analysis. Spreadsheets have limited automation capabilities, which can hinder efficiency and productivity.

• Concerns towards Security

Spreadsheets are vulnerable to several flaws that could cause data loss or compromise. Concerns about the security and backup of inventory records are common. Questions such as "What if I lose my notebook?", "What if the spreadsheet is corrupted?", "What if someone accidentally deletes all data?" and "Is there a backup? Can I restore all of my data?" are always on your mind. The recognition increases that business-critical data and activities must be stored securely, with dependable backup options in place, such as those provided by a cloud ERP system. 

A cloud-based enterprise resource planning (ERP) system has the power to revolutionize how businesses operate. A centralized platform for managing all company data, including project management, CRM, accounting, and inventory, is offered by cloud ERP. Higher data accuracy, improved reporting, increased automation, and increased security are possible outcomes of this.

Many MSMEs experience substantial security risks when they do not use ERP systems. Without centralized and integrated solutions, these companies are more vulnerable to data breaches, unauthorized access, and data loss.

• Analytics and Accessibility

The lack of an appropriate analytical method or failure to analyze various data sources can be troublesome. Gathering data, evaluating sales, projecting demand, and calculating profit and loss become overwhelming. This absence of effective analytics causes problems such as understocking or overstocking, missed sales, and low profit. Making informed business choices is practically impossible without strong analytical tools, which leads to an array of operational issues.

Storing spreadsheets locally on devices or servers introduces a new set of challenges related to accessibility and collaboration. When a spreadsheet is stored on an individual’s computer, accessing it requires everyone to be in the same physical location. This constraint renders remote work or collaboration across different time zones almost impractical. Having local copies increases the likelihood of multiple versions circulating, causing confusion and wasted time determining which version contains the most up-to-date data. Keeping data locally also introduces security risks; if a device is misplaced or stolen, sensitive information could be compromised.

To sum it up, switching from spreadsheets to contemporary, cloud-based ERP solutions is critical for MSMEs looking to improve operational efficiency and data management skills. Spreadsheets, while initially advantageous, can become a barrier to growth due to their limits in dealing with complicated data, susceptibility to errors, and time-consuming manual procedures. Cloud ERP systems provide a centralized, scalable, and secure solution that helps MSMEs automate inventory management, decrease errors, and improve cooperation. MSMEs that use cloud ERP could boost data accuracy, make educated decisions, and drive business growth, setting themselves for long-term success in a competitive market.