Invest in ERP to Raise Productivity

PM Lee in his May Day message calls for Singaporeans to raise productivity. Indeed this is the only way to sustain better wages for Singaporeans.

As long as we can get cheap labour easily, I don’t think we will think about raising productivity. Our government therefore is right to cut back on foreign labour. This will make business owners and managers put on their “thinking” cap again. They must now make bold decisions to invest in modern technologies, adopt new business processes, and automate and computerize their businesses.

For example, small businesses that have outgrown their accounting only applications can consider investing in an ERP solution. Many benefits [1] are attributed to ERP, such as:

  • Reduction in operating cost
  • Reduction in administrative cost
  • Reduction in inventory cost
  • Reduction or redeployment headcount
  • Growth enabled without additional headcount
  • Better utilization of resources
  • Reduction in waste
  • Increased revenue
  • Increased profit margins
  • Better responsiveness to customers
  • Increased value delivered to customers
  • Increased production and productivity
  • Improved visibility and reduced risk of decisions.

Companies that adopted ERP have achieved impressive results, like:

  • 21% decrease in operating costs
  • 19% lower administrative costs
  • 17% improvement in complete and on-time delivery
  • 17% reduction in inventory

SAP Business One is a single ERP software that let you see your whole business. It is designed to best fit small and midsize enterprises.

Maybe you have been told that:

  • Now is not the right time for a change,
  • Your company is too small for ERP,
  • SAP Business One is too much for your company.

Well, you should instead be asking “Can your small business afford to operate without ERP?” Your company is never too small for ERP. The goal of ERP is often cost savings, but you initially need to spend money (and time and effort) in order to save money. SAP Business One is affordable, easy to use, and quick to implement. SAP Business One is therefore right for your company.

Today about 520,000 people at more than 33,000 customers use SAP Business One. A small business that uses SAP Business One typically has fewer than 100 employees, and as low as 3 professional users. The total cost of investment can be as low as less than $50,000 (include Software, Hardware, Implementation and Support).

When you invest in SAP Business One, you may want to leverage on the Productivity and Innovation Credit, a tax incentive offered by the government. Enterprise Resource Planning (ERP) software and associated hardware are listed in the PIC Automation Equipment List.

With this incentive, you can convert your software/hardware expenditure into a non-taxable cash payout equivalent to 60% of up to $100,000 of expenditure per year. If you choose this Cash Payout option, you can receive $30,000 in cash payout for your $50,000 investment in SAP Business One (i.e. 60% x $50,000).

Alternatively, you can select the 400% Tax Deduction/Allowance option in which your company can enjoy deduction/allowances at 400% of up to $400,000 of your expenditure per annum on each of the six qualifying activities. So when you spend $50,000 in SAP Business One, you can enjoy up to $200,000 tax deduction (i.e. 400% x $50,000). Please consult IRAS with any queries and for full terms and conditions of this PIC incentive.

Small businesses often struggle with their decision to make the investment in SAP Business One, despite knowing that it makes sense from business and operational perspectives. Are you finding it hard to justify such an upfront cost when the results are often intangible for some time? If so, you may want to consider financing assistance and choose to make monthly payment to the financing provider.

I wish all a Joyous May Day !


[1] Can Your Small Business Afford ERP? Mint Jutras, April 2011

One thought on “Invest in ERP to Raise Productivity

  1. A really comprehensive guide for an enterprise considering a transition from Excel sheets or ‘islands of automation’ to a an efficient integrated platform for productivity & growth. Thanks!


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