What is ERP? A complete guide to enterprise resource planning
Nicolas Straut
Business Finance Writer, Business Account and Money Transfer
Key takeaways
Small and midsize businesses can typically deploy a cloud ERP in 3 to 9 months.1
An ERP is business software that runs a company's accounting, inventory, purchasing, payroll, and order management from a shared database.
Airwallex connects multi-currency accounts, corporate cards, and expense management to ERP software, including NetSuite, Sage Intacct, Dynamics 365 Business Central, and Odoo. This automation keeps the ERP's books up to date without manual statement imports.
Enterprise resource planning (ERP) software runs a company's accounting, inventory, purchasing, payroll, and order management from one shared database and general ledger. Founders and controllers usually start looking for an ERP system when matching QuickBooks records against their spreadsheets at month-end becomes a regular problem. This guide explains how ERP systems work, the main types and examples, and how to choose ERP software that connects to modern payment and spend tools.
What is ERP?
Enterprise resource planning is business software made of parts called modules. Each module does one job, such as accounting or inventory, and all of them share one database. This shared database uses one chart of accounts, which is the list of every account the business records money in.
In 1964, Black & Decker ran the first material requirements planning (MRP) system, the system that came before ERP, to plan production and order parts. Analysts created the term ERP in 1990 to describe systems that had grown beyond planning factory materials to cover accounting, purchasing, sales, and HR for the whole company.2 In a modern ERP, a single sale deducts inventory, calculates the cost of goods sold, bills the customer, and posts the accounting entry in one step.
How is ERP different from CRM?
A customer relationship management (CRM) system tracks customer relationships before and after a sale. An ERP records the money and inventory needed to deliver what was sold. Oracle calls CRM front-office software for sales and service, and ERP back-office software for finance and HR.3 Many ERPs include a basic CRM module, but a CRM does not hold accounting records. This means many growing companies need both tools working together.
Feature | CRM | ERP |
|---|---|---|
Focus | Front office: sales, marketing, and customer service | Back office: accounting, operations, supply chain, and HR |
Core functions | Lead tracking, pipeline forecasting, and support tickets | General ledger, inventory, procurement, and payroll |
Main users | Sales reps, marketers, and customer success teams | Controllers, accountants, and procurement and warehouse leads |
Key metrics | Lead velocity, customer acquisition cost, and win rate | Gross margin, inventory turnover, and days sales outstanding (how long customers take to pay) |
Data role | Customer contact history | System of record for financial transactions |
How does an ERP system work?
An ERP system keeps every department's records in one central database. For example, when accounts payable records a vendor bill, the system logs the amount owed, assigns it to the right expense or inventory account, and updates the cash forecast automatically.
The general ledger is the master record of every account, and detailed records for bills, invoices, payroll, and fixed assets feed into it. Modern ERPs also offer APIs, which are connections that let other software share data with the ERP automatically. An ERP integration with payment tools and bank accounts uses these connections to send each transaction straight into the ERP's accounting records.
What are the types of ERP?
ERP systems come in three types: cloud, on-premises, and hybrid. The right type for a business depends on company size, in-house IT staff, rules about where data must be stored, and whether the business prefers a subscription or a one-time purchase.
Cloud ERP
Cloud ERP runs on servers the ERP vendor hosts and maintains, and finance teams log into the ERP software through a browser. The vendor handles security updates, backups, and upgrades, and the business pays a yearly fee per user, plus additional fees for extra modules. Small and midsize businesses can typically go live with a cloud ERP in 3 to 9 months, compared with 6 to 18 months for larger enterprises.
On-premises ERP
On-premises ERP is installed on servers the business owns and runs in its own data center or a rented server facility. The company buys a permanent license upfront, runs its own hardware and backups, and upgrades the ERP to the latest version every 5 to 10 years. Defense contractors, government agencies, and businesses that must keep data on their own premises by law are the main buyers of this ERP type.
Hybrid ERP
Hybrid ERP, also called a two-tier model, keeps an on-premises ERP at headquarters for group-wide financial reporting and runs cloud ERP at subsidiaries or newly acquired companies. Regional teams record transactions locally without waiting for a multi-year corporate IT rollout. Integrations then send each unit’s records back to the headquarters system on a set schedule, such as nightly or at month-end. The finance team can then combine them into one set of group accounts.
Parameter | Cloud ERP | On-premises ERP | Hybrid ERP |
|---|---|---|---|
Hosting | Vendor-managed cloud | Company data center | Both, split by business unit |
Cost model | Recurring subscription | Upfront license plus ongoing IT costs | Mix of licenses and infrastructure |
Typical implementation | 3 to 9 months for small and midsize businesses | Longest of the three | Phased by tier |
Maintenance | Vendor | Internal IT | Shared |
Upgrades | Automatic and continuous | Manual migration projects | Two upgrade schedules to maintain |
What are some examples of ERP?
ERP software ranges from cloud platforms built for scaling mid-market businesses to enterprise systems built for global companies. The five ERPs below are commonly used by US finance teams.
1. Oracle NetSuite
Oracle NetSuite is a cloud ERP used widely by venture-backed and mid-market companies. It reports across many subsidiaries and handles many currencies. It also supports US revenue recognition rules (ASC 606).
2. Microsoft Dynamics 365 Business Central
Microsoft Dynamics 365 Business Central is a modular cloud ERP for mid-sized companies that already use Microsoft products. Its manufacturing and supply chain modules connect to Excel and Power BI.
3. SAP S/4HANA
SAP S/4HANA is a large platform built for global companies. It handles complex shipping, heavy manufacturing work, and groups with many legal entities.
4. Sage Intacct
Sage Intacct is a cloud ERP built for finance teams first. It supports US accounting standards (GAAP) and multi-entity reporting for service firms, nonprofits, and software companies.
5. Odoo
Odoo is an open-source ERP made of separate apps. Firms can add accounting, warehouse, and point-of-sale apps one at a time.
ERP examples by industry
The table below shows what ERPs do in each industry.
Industry | Operational focus | What the ERP does |
|---|---|---|
Manufacturing | Factory scheduling and materials | Manages bills of materials (the parts list for each product), routes work orders, and recalculates finished goods costs |
Wholesale and eCommerce | Landed cost (the full cost of goods including freight and duties) and multi-channel fulfillment | Adds freight and duties to each product's cost and reserves inventory across sales channels |
Professional services | Staff scheduling and contract billing | Logs billable hours against project milestones and records revenue as it is earned |
Life sciences and healthcare | Regulatory compliance and batch tracking | Supports FDA electronic signature rules (21 CFR Part 11) and tracks batch expiration dates |
What are the benefits of ERP?
The main benefit of ERP is keeping one set of numbers that every department agrees on. When sales, inventory, and accounts payable live in separate spreadsheets, the figures stop matching, and finance spends the first two weeks of the month reconciling them. An ERP routes every transaction to a single ledger, which cuts the monthly close from weeks to days.
ERPs also give executives real-time visibility into working capital, including inventory turnover, overdue receivables, and cash across entities instead of waiting for a quarterly report. Modern ERPs add role-based permissions, segregation of duties (no one person can both approve and pay), and audit trails that can’t be edited. These safeguards support SOC audits, which are independent reviews of a company's controls, and Sarbanes-Oxley (SOX) rules.
What are the challenges of implementing ERP?
ERP implementation is one of the most expensive projects a growing business takes on. The three common failure points are bad data, staff resistance to the new software, and too much customization. Over the years, old systems collect duplicate customers, discontinued products, and inconsistent account codes. Importing this bad data can hurt the new ERP from day one.
Department heads often resist the approval steps an ERP enforces, meaning projects need an executive sponsor and training for each team. Over-customization is a costly mistake. Oracle's own ERP team warns that customizations need thorough testing after each quarterly update and that the vendor's new features can make them unnecessary.4 Experienced controllers configure standard workflows instead of rewriting the software to match old spreadsheets.
4 signs a business needs an ERP system
Businesses rarely replace their outgrown accounting software and spreadsheets with an ERP until late reports or an overworked finance team make the change necessary. Four signs usually point to the need for an ERP system.
Manual tasks take up too much of the week
When accounts payable teams spend hours each week typing invoice details into a spreadsheet and requesting approvals by email, the current tools are no longer enough. When the same manual work spreads to purchasing, billing, inventory, and payroll, the business needs an ERP.
Critical business data is hard to get
If finance needs three days of spreadsheet work to report cost per unit or cash by region, the accounting, inventory, sales, and banking tools probably don’t share a database. As a result, leadership may be making decisions on costs, margins, and cash balances that are already out of date. An ERP updates its dashboards as each transaction posts, which removes that delay.
Each department runs the same process differently
Without one system enforcing the rules, sales gives custom credit terms without checking limits, purchasing orders goods without approval, and the warehouse tracks stock on a clipboard. Each of these differences creates gaps in the data and accounting risk. An ERP standardizes approval steps across the company.
The same data gets entered into several tools
A sales representative enters an order into the order system, the warehouse re-enters it into a shipping portal, and accounting logs it a third time in desktop bookkeeping software. Every handoff risks a typo or a duplicate invoice. An ERP captures the order once, where it starts, and pushes it to inventory, logistics, and the ledger.
How to choose an ERP system
Choosing an ERP is a multi-year commitment. A four-step process keeps the scope from growing out of control. These steps run in order because each one narrows the list of options.
1. Define the processes the ERP has to run
Before any vendor demo, finance and operations leaders should write down the must-have processes the ERP has to run. That list usually includes the rules for combining the books of several entities and the US rules for when revenue is recorded (ASC 606). The list should also say how the business tracks and values inventory: by serial number, by batch, or at average cost.
2. Match the system to company size, industry, and deployment model
An 80-person company does not need the custom work and multimillion-dollar scope of SAP S/4HANA. At the other end, an online brand with three overseas warehouses will outgrow entry-level tools fast. Selection teams should favor ERP platforms with pre-built setups for their industry and cloud hosting that cuts long-term IT costs.
3. Check integrations with existing finance tools
An ERP doesn’t run in isolation. It needs live connections to payment gateways, corporate cards, billing software, and bank accounts. Finance leads should confirm the shortlisted platforms have ready-made connectors for the tools they already use. A connector that only imports CSV files will recreate the manual work the ERP was meant to remove.
4. Shortlist vendors and ask for references
Selection committees should narrow the field to two or three ERP vendors and give each a demo script based on real scenarios. A good script asks the vendor to process a multi-currency supplier invoice, match a bill to a purchase order, and produce a trial balance, which is a summary of every account balance across entities. Controllers should then call finance leads at similar firms that use the same ERP and ask whether the project ran over budget and how responsive the vendor’s support has been since go-live.
How Airwallex works alongside an ERP system
An ERP is the system of record, but a business still needs a way to receive and send money. The Airwallex Business Account does that with Multi-Currency Accounts, global transfers, Bill Pay, and Corporate Cards, while accounting integrations sync each transaction into the ERP. Airwallex also sends most transfers over local bank networks instead of SWIFT, which keeps fees lower. Currency conversion costs 0.5% to 1% above the interbank rate (versus the 2% to 4% banks typically add).
Airwallex is a financial platform, not a bank. It is regulated as a money services business, holds US customer funds with FDIC-insured partner banks, and delivers 92% of Airwallex Global Transfers within the same day.5
ERP and accounting software integrations
Airwallex accounting integrations cover NetSuite, QuickBooks, Xero, Sage, Microsoft Dynamics 365 Business Central, and Odoo, and the NetSuite connector shows how deep an ERP connection can go. This guide on how the NetSuite integration with Airwallex works explains that the connection is set up without sharing passwords and copies the chart of accounts, departments, locations, classes, and subsidiaries from NetSuite into Airwallex at setup. The NetSuite integration is included in the Grow plan (US$12 per active Spend user per month). It automates the four workflows below.
Hourly bank feeds
Each currency balance on Airwallex gets its own bank feed in NetSuite. The first sync pulls 24 hours of history, and every later sync runs hourly.
Purchase order matching
Airwallex pulls purchase orders and delivery receipts from the ERP and checks each incoming vendor bill against both, which helps prevent overbilling and duplicate payments.
Coded card expenses
When an employee photographs a receipt in the Airwallex app, Airwallex matches it to the corporate card transaction automatically. The matched expense then posts to NetSuite coded to the right account, with a link to the receipt attached.
Receivables reconciliation
When a customer pays an invoice, the Airwallex NetSuite integration marks it Paid in Full in NetSuite and records the cash receipt.
Multi-entity payments and spend in 20+ currencies
Airwallex Multi-Currency Accounts enable businesses to collect from 70+ countries and hold separate balances in 20+ currencies. When a business needs to convert money, Airwallex charges just 0.5% above the interbank rate on major currencies and 1% on all others. Local transfers reach 120+ countries, and SWIFT transfers cost US$15 to US$25 each.6
Frequently asked questions about ERP
Is QuickBooks an ERP system?
No, QuickBooks is accounting software, not a full ERP system. QuickBooks Online handles invoicing, bill payments, and bank feeds well. QuickBooks Enterprise adds advanced inventory and assembly builds, but neither one offers the supply chain planning or multi-entity consolidation of a full ERP. Businesses typically outgrow it when they add subsidiaries, operate in several currencies at scale, or need complex inventory tracking.
Can Excel work as an ERP system?
No, Excel can’t work as a true ERP system. Spreadsheets aren’t relational databases. Excel offers co-authoring and version history, but it lacks role-based permissions, approval workflows, and a tamper-proof audit trail. Large shared workbooks are prone to broken formulas, duplicate data, and errors that are hard to trace. Excel remains useful for analysis on top of an ERP, but it can’t serve as the system of record.
How much does an ERP system cost?
An ERP system costs anywhere from the low five figures for a small company to millions of dollars for a large enterprise, depending on user count, modules, and deployment model. NetSuite suggests planning for roughly 1% of a company's operating budget to cover the cost of an ERP system.7 Consultants, data cleanup, and integration work add large fees on top of the software subscription.
What is the difference between ERP and MRP?
The difference between ERP and MRP is scope, meaning how much of the business each system covers. Material requirements planning (MRP) is software that tells a factory what to make, which parts to order, and when, based on expected sales and stock on hand. Enterprise resource planning (ERP) runs the whole business from one database, covering accounting, purchasing, inventory, HR, and sales as well as production, and most factory ERPs now include MRP as one module.
Who uses ERP systems?
Nearly every department uses an ERP system, though finance runs it. Controllers and accountants close the books and reconcile bank feeds, while warehouse and procurement teams receive purchase orders and reorder inventory when it runs low. HR sends payroll costs to the ledger, and executives read the dashboards. The CFO typically owns the system and its chart of accounts.
Sources
1. https://www.netsuite.com/portal/resource/articles/erp/erp-statistics.shtml
2. https://www.oracle.com/erp/what-is-erp/
3. https://www.oracle.com/erp/erp-vs-crm/
4. https://blogs.oracle.com/erp-ace/post/customization-vs-configuration
5. https://www.airwallex.com/en-us/business-account
6. https://www.airwallex.com/en-us/pricing
7. https://www.netsuite.com/portal/resource/articles/erp/erp-implementation-cost.shtml
The material presented here is for informational purposes only and does not constitute legal, regulatory, taxation, or investment advice. Readers should engage their own advisors or counsel for advice unique to their circumstances.
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