What is Project-Based ERP: Definition, Benefits, and Importance

Project managers deal with ever-changing requirements, negotiate with external stakeholders, and ensure productivity while working within schedule and budget constraints. At the same time, they need to document project progress, assess risks, and assure quality assurance. Sounds exhausting, doesn’t it?

On top of it, 54% of companies do not have access to real-time project KPIs, with 33% spending one or more days manually collating projects. In addition, the same report indicates that 25% of businesses don’t have the right technology to collaborate on informal projects.

The good news is that with a project-based ERP, you can streamline the project management process. It is designed to meet the evolving project requirements and improve outcomes. In fact, 35% of companies use ERP only to increase efficiency. 

But what is project-based ERP? And how does it help improve project performance? Let’s understand that. 

What Is Project-Based ERP?

Project-based ERP (enterprise resource planning) is an enterprise software that provides a holistic view of each project, including key metrics. Designed to help businesses manage projects, it integrates a company’s financials, supply chain, and operations. This gives stakeholders the necessary information they need to ensure project success. 

Project-based ERP can collect and analyze data across departments to provide in-depth insights into labor costs, profitability, and inventory levels. This empowers companies to plan projects better, assess progress, and collaborate with stakeholders. 

A project-based ERP is different from a traditional ERP. Here’s how. 

• Traditional ERP: They encompass everything from manufacturing, accounting, customer relationship management, and inventory management. 
• Project-based ERP: They are built to help companies manage the entire project lifecycle and integrate the business processes of a project-based company into one solution.
  

Let’s understand it with an example. 

In a traditional ERP, the dashboard shows metrics and timelines that reflect the company’s overall performance. Although the dashboard is customizable, it could prove challenging when you manage multiple projects. 

On the other hand, a project-based ERP designed to help businesses better manage their projects will show the progress of each project in the dashboard. You can click on them to get a detailed view of the project’s performance, including schedule, budget, expenses, resources working on it, etc. 

For instance, when you choose the best ERP in the UAE for project management, like FirstBIT, you get in-depth insights into each project. You can track every project’s cash flow, revenue vs. estimates, and financial and operational indicators. 

Project-based ERP also lets you track your BOQs and sales receipts in one place. This makes monitoring profitability at all project stages easier and ensures you complete it within the budget. 

What Are the Benefits of Using ERP Software?

Project-based ERP enables you to manage all the aspects of a project and enhance the overall quality of your deliverables. Here are some ways a project-based ERP software can help your business. 

1. Better Forecasting and Project Accounting

Traditional ERPs offer financial details of your overall business processes. However, a project-based ERP allows you to dig deeper into each project’s finances. This way, you can break down your expenses and identify areas where you can cut costs. 

Project-based ERP also eliminates the need to quantify the financial standing of your business as it helps create real-time, near-accurate reports. You can also create forecasts to analyze a project’s profitability. 

The accounting module enables you to manage fixed and dynamic assets. You can create period-end closing reports in compliance with local laws. You can generate expense reports, allocate additional budgets, and monitor the project’s financial position.

2. Improves Resource Management

Resource management includes planning, scheduling, budgeting, and allocating people and technology to a project. In other words, it is about deciding the factors that help maximize company value. 

The success of a project depends mainly on the resources you use. Be it construction, IT, or manufacturing. You need the best resources for your project. 

The various capabilities of a project-based ERP can help you understand how you should allocate your resources based on the project type to maximize economic value. It also allows you to forecast the profitability of a project so you can make a more informed decision on how to move forward. 

3. Offers Project-Based KPIs

Key performance indicators (KPIs) allow you to monitor a project’s status and obtain quantitative information. If your project-based ERP has an in-built business intelligence feature, you can identify improvement opportunities and fix potential roadblocks earlier. 

For starters, you can track the following KPIs in a project-based ERP. 

• Planned and actual expenses: It allows you to compare the planned costs against the expenses you have incurred.  
• Planned vs. actual hours: The amount of time you spend on a project can directly affect its costs. For example, if the number of hours worked is higher than the number of hours scheduled, it implies the project is moving slower than planned. 
• Employee churn rate: The rate at which employees quit their job can significantly affect the project’s timelines. A high turnover rate could require you to redesign the project as you’ll have fewer resources to complete the task. 
• On-time completion percentage: It highlights the proportion of tasks completed on time. A high ratio indicates that the team is working as efficiently as possible. 
• Customer satisfaction: It shows the number of satisfied customers and complaints so you can better optimize the team’s performance. 
  

4. Enhances Human Resource Management

A project-based ERP supports most HR duties. It helps them identify skill gaps in the existing workforce, create job descriptions, onboard employees, and streamline recruitment. They can also analyze employee compensation, leaves, and more.

Furthermore, HR managers can leverage analytics and reports to monitor employee performance, benefits, and bonuses & incentives. Additionally, they can help project managers in workload designation to better establish a timeline for each project based on available resources. 

5. Boosts Visibility and Transparency

Complex projects often involve multiple departments throughout the project’s lifecycle. Taking updates from each department is time-consuming and doesn’t provide a complete overview of the project status. 

That’s why having a centralized system like an ERP that offers insights into what each team is doing at any given time is beneficial for project-based companies. For example, stakeholders can get insights into where a project is by analyzing the dashboard. 

This level of transparency allows managers to identify issues beforehand and make data-backed decisions. They can also keep clients informed about the real-time status of their projects. 

6. Improves Project-based Communication

Communication is one of the most critical contributors to successful project completion. Project-based ERP ensures you don’t work in silos by facilitating communication with your team and clients. 

For example, you can create custom alerts for projects, so everyone involved gets notified about the latest change. In addition, you can leverage the approvals feature to get instant approvals from the stakeholders (e.g., placing orders for raw materials). 

Since everything happens in one system, it helps centralize project-related communication and keeps everyone on the same page. 

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What Are the Key Features of the Project-Based ERP System?

Since ERP features and benefits are correlated, you must choose a system based on your business requirements. For instance, if you’re looking to enhance project reporting abilities, an ERP with business intelligence is what you need. 

Let’s now have a look at the key features a project-based ERP must have. 

• Project management: It helps centralize and integrate multiple processes. They allow you to analyze the budget, define required resources, and communicate project timelines. In addition, it lets you manage time and expense, invoicing, billing, proposals, and contracts to optimize the project.
• Human resource management: HRM includes hiring, training, and resource planning and management. Project managers can delegate workloads, monitor attrition rates, and manage timesheets. 
• Accounting: It reports cash flow, project expenses, and profits. This enables you to identify when a project is going over budget or if it is under-resourced.
• Compliance: ERP takes the guesswork out of compliance by enabling you to stay compliant with local and international laws. It makes it easier for auditors to assess and validate compliance.
• Procurement: Get approvals, purchase materials, and track shipments from one place. You can reconcile the orders in ERP and monitor project expenses. 
• Supply chain management: It provides a holistic view of inventory throughout a project’s lifecycle. You can also use it to forecast requirements for future projects. 
• Project-based manufacturing: Get in-depth insights into financials and compliance and link them to shop floor activities. Use it to feed project status and cost information into the ERP automatically. 
• Business intelligence: Convert raw data into actionable information to make data-backed decisions. For example, you can tie your dashboard to metrics that matter the most, such as revenue, cash flow, projects at risk, etc. 
• Customer relationship management: Access previous conversations, pitches, and purchase history. Use it to build long-lasting relationships and drive more conversions. 
  

How is a Project-based ERP Deployed?

When choosing a project-based ERP, you must also decide how to deploy it. There are two ways to do it: on-premise and on the cloud. 

Large companies with an already established IT infrastructure can use on-premise ERP software. It gives you complete control over the system, including its security and data storage. However, businesses that want the flexibility to use the software and access real-time data from anywhere should go for cloud-based ERP software.

Let’s understand the difference between on-premise and cloud models in detail. 

Cloud-based ERP offers more benefits than an on-premise system, including improved flexibility and scalability. In addition, you can set it up quickly and without a huge upfront investment. 

Another advantage of cloud-based ERP is that most vendors offer a mobile app. You can use it to manage your operations from anywhere seamlessly. 

Which Types of Businesses Get the Most Out of Project-Based ERP?

Businesses from different industries utilize project-based ERP to generate the desired revenue. It includes construction, manufacturing, education, hospitality, healthcare, and retail, to name a few. 

1. Construction

A construction project involves several complex processes, such as asset management, scheduling, bidding, project management, and contractor management. Thus, you will need accurate, real-time reporting and job costing to complete a construction project successfully. 

With the help of ERP for construction industries, you can integrate these tasks into one complete solution. It helps with accurate project planning and analysis, cost estimation, and profit analysis. This will allow you to manage a project’s lifecycle from one place. 

2. Manufacturing

Project-based ERP software offers a wide range of advantages in the manufacturing industry, including reducing total operating expenses for manufacturing firms. In addition, it enhances decision-making by providing extensive insights and visibility into every division. 

Besides, a project-based ERP system improves a company’s competency, increases production, and aids them in maintaining positive client relationships. 

Manufacturing firms that adopt project-based systems also benefit from precise production planning and enhanced inventory management. These benefits, coupled with optimized process scheduling and well-coordinated distribution networks, help increase product on-time delivery. It also simplifies communication between departments, including accounting and finance, procurement, production, and operations.

3. Education

Academic and research institutes will find a project-based ERP software system to be a useful resource. It helps minimize paperwork, digitizes administrative tasks, automates repetitive jobs, and unifies the facility. This makes it easier for institutions to make data-backed decisions. Besides, the project-based ERP system can manage enormous data volumes and create bulk reports. 

In addition, it helps manage internal and external resources and control operations like payment of fees, libraries, student registration and administration, courses and curriculum, examinations and results, and more. All contribute to enhanced productivity and improved performance.

4. Hospitality

A project-based ERP system can assist businesses in establishing a comprehensive management system. As a result, they can streamline and automate various tedious processes. Examples include managing inventory, planning employee schedules, and scheduling client appointments. This makes operating the front desk more efficient. 

The hospitality industry can also use ERP software to maintain critical information in one place, reduce duplication and avoid errors like double-booked rooms. In addition, real-time monitoring of all activities and services is possible with project-based ERP systems.

If you operate in multiple locations, an ERP can help you manage them all from one place. This means you can manage inventory and services for each area while staying compliant with local laws. 

5. Healthcare

The healthcare business has evolved rapidly over the years. And project-based ERP has been a key contributor to that growth. Project-based ERP solutions have helped reduce costs and meet regulatory requirements. A project-based ERP system integrates data from different departments to build a single database. This enables medical professionals to make prompt choices. 

With the help of this system, healthcare institutions can efficiently manage their financials and purchase necessary equipment. They can also save on inventory and administrative expenses using a project-based ERP software solution. It even makes it easier to comply with HIPAA regulations while giving your patients the best possible experience. 

6. Retail

Retail ERP helps businesses integrate their processes and streamline front-end and back-office operations. The real-time information capabilities of ERP allow retailers to optimize their stock better even when they sell on different channels. 

Furthermore, you can use its in-built business intelligence feature to forecast demands, identify high-value customers, and analyze risk. A robust ERP allows you to define procurement rules, set up suppliers based on area, and set purchase approvals for different levels. 

Moreover, its financial module gives retailers a birds-eye view of your business’s financial health so they can take necessary action. 

Final Thoughts

Project-based ERP helps break silos and integrates all your business processes. It provides real-time information on your project’s status, performance, and profitability. You can also enhance communication across departments and keep everyone on the same page. The bottom line is that project-based ERP provides managers with tools to manage projects from start to finish!

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