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How to choose ERP software for SMEs, and other systems that fit
Choosing business software is one of the bigger decisions an SME makes. The right system saves time for years. The wrong one can cost more to live with than it did to buy. This guide explains how to choose ERP software for SMEs, what the main types of system do, how to compare the options, and which mistakes to avoid.
The short answer
What “fit” means.
The right business software is the system that fits how your business works, that your staff will actually use, and that connects with your other systems. It is not necessarily the one with the most features.
Most software selection guides agree on the basic method. Define your requirements first, compare a shortlist against them, test the options with real scenarios, and check the total cost over several years rather than the price alone.
In our view, the most common mistake SMEs make is choosing software before they have agreed how their processes should work. When that happens, the business ends up working the way the software’s default settings assume. Where those settings do not fit, staff create workarounds.
Choosing well also prepares the business for AI. Systems that record data cleanly and share it with each other produce the reliable data that AI tools depend on. Many systems now include AI features, but those features work well only when the processes and data behind them are sound.
The main types
What the main types of system do.
These are the systems SMEs ask about most often. Many products combine several of these functions, so the labels overlap.
| System | What it does | Usually suits |
|---|---|---|
| Accounting software | Records sales, purchases, payments and tax, and produces financial statements. | Every business. It is usually the first system an SME adopts. |
| CRM (customer relationship management) | Keeps customer details, sales opportunities, quotes and follow-ups in one place. | Businesses with a sales team or many business customers. |
| POS (point of sale) | Records sales at the counter or table, takes payment, and often tracks stock at each outlet. | Retail and F&B businesses with physical outlets. |
| Inventory or warehouse management | Tracks stock levels, locations and movements as goods are received, stored and dispatched. | Distributors, traders and manufacturers that hold significant stock. For Indonesia, see our guide in Bahasa Indonesia. |
| ERP (enterprise resource planning) | Combines finance, purchasing, inventory, sales and often production in one system with a shared database. | Larger SMEs with several departments or complex operations. Often more than a small business needs. |
| HR and payroll | Manages staff records, leave, claims and payroll. | Any business with employees. Usually worth adopting early. |
Product categories vary between vendors. Always check what a specific product includes.
How to choose
How to choose, in six steps.
This method works for any type of system, from a POS for one outlet to an ERP for a group of companies.
- 01
Map the processes the system will support.
Write down how the relevant work flows today and how you want it to work. This becomes the basis for your requirements. Our guide to process mapping explains how to do it.
- 02
List your requirements, and rank them.
Separate what the system must do from what would be nice to have. A short list of must-haves makes it much easier to compare options fairly.
- 03
Check how it connects.
List the other systems it must exchange data with, such as accounting, e-commerce or payment providers. Ask each vendor exactly how the connection works and what it costs. In Malaysia, include LHDN's MyInvois system in that list. Our e-Invoicing guide explains what the connection needs.
- 04
Shortlist two or three options.
Look at products used by businesses of a similar size and industry. Ask each vendor for customer references in your industry, and speak to those customers.
- 05
Test with your own scenarios.
Ask each vendor to demonstrate your real processes, using your own examples, instead of their standard presentation. Involve the staff who will use the system every day.
- 06
Compare the total cost over several years.
Include subscription or licence fees, setup, moving your data, training, connections to other systems, and support. A cheaper product that needs heavy customisation often costs more in the end.
Common mistakes
Five mistakes to avoid.
| Mistake | Why it causes problems |
|---|---|
| Buying before defining the process | The software's default way of working replaces yours, even where it does not suit the business. |
| Choosing on features rather than fit | Extra features add cost and complexity, and most of them are never used. |
| Ignoring how systems connect | Systems that do not connect force staff to re-enter data by hand. |
| Customising too heavily | Heavy changes make upgrades difficult and expensive, and tie you to one vendor or developer. |
| Underestimating training | If staff are not trained and supported, they return to their old spreadsheets and the system is only partly used. |
Common questions
Questions about choosing business software.
Do we need an ERP?
Not necessarily. Many SMEs are well served by separate accounting, CRM, inventory and POS systems that are connected to each other. An ERP becomes worth considering when several departments need to share the same data in real time, and when keeping separate systems connected is becoming hard to manage.
Should we choose cloud or on-premise software?
Most SMEs now choose cloud software, because it avoids the cost of running your own servers and is updated automatically. On-premise software, which runs on your own computers, may still suit businesses with specific security, connectivity or customisation needs.
Are there grants for business software in Singapore?
Some digital solutions may be supported under the EDGE grant, which includes digitalisation among its business areas. Eligibility and support levels depend on the solution and the business, so check the current terms on the BizSG portal before committing.
How do we avoid being locked in to one vendor?
Check that you can export all of your data in a standard format, understand the contract terms for leaving, and avoid customisation that only the vendor can maintain.
What about the AI features vendors now offer?
Treat them as a bonus rather than the main reason to choose a system. AI features depend on the quality of your processes and data. A system that fits your business well gives its AI features a much better chance of being useful.
Find out where you stand
See how ready your foundations are.
The free Readiness Snapshot takes about five minutes. It emails you a PDF report showing where your processes, systems and data stand on the path to AI, and which gap to close first.