How Does ERP Software Work?
ERP stands for Enterprise Resource Planning. It is a centralized software system that helps a company manage and connect different business departments.
An ERP system may include:
- Sales management
- Purchase management
- Inventory management
- Accounting and finance
- Customer management
- Supplier management
- Human resources
- Payroll
- Production
- Reporting
- User roles and permissions
The main purpose of ERP software is not simply to store business data. Its purpose is to connect related processes.
For example, when an employee creates a sales invoice, the ERP system may automatically:
- Record the sale
- Reduce the available stock
- Update the customer balance
- Create the accounting entry
- Update the sales report
- Update the customer ledger
This connected workflow is what makes an ERP system different from using separate applications for every department.
Businesses with unique approval processes, reports or operational requirements may need custom ERP software in Bangladesh instead of a fixed ready-made system.
How Sales, Purchase, Inventory and Accounts Connect
A practical ERP software demo should show one complete business transaction from beginning to end.
The following example explains how the main ERP modules work together.
Step 1: Create Products, Customers and Suppliers
Before using the system, the business must add its basic information.
This may include:
- Product names
- Product categories
- Units of measurement
- Purchase prices
- Sales prices
- Customers
- Suppliers
- Warehouses
- Branches
- Cash accounts
- Bank accounts
- Opening stock
- Opening balances
- Employees
- System users
This information becomes the foundation of the ERP system.
A good ERP system in Bangladesh should also allow businesses to import existing product, customer, supplier and stock information from Excel.
During the demo, ask the vendor to show how this information can be added, edited and imported.
You should also check which users can change important information such as product prices, opening stock and account balances.
An ERP system may include:
- Sales management
- Purchase management
- Inventory management
- Accounting and finance
- Customer management
- Supplier management
- Human resources
- Payroll
- Production
- Reporting
- User roles and permissions
The main purpose of ERP software is not simply to store business data. Its purpose is to connect related processes.
Step 2: Create a Purchase Order
Suppose your business needs to purchase 100 units of a product from a supplier.
The purchase department creates a purchase order containing:
- Supplier name
- Product name
- Quantity
- Purchase price
- Expected delivery date
- Warehouse
- Payment terms
- Additional costs
- Notes
Depending on the company’s rules, the purchase order may need approval from a manager.
At this stage, the available stock should not increase because the supplier has not delivered the products yet.
A properly configured ERP purchase management system should clearly separate:
- Ordered quantity
- Received quantity
- Pending quantity
- Returned quantity
This helps the business understand which products have been ordered and which products are physically available.
Step 3: Receive Products and Update Inventory
When the supplier delivers the products, the warehouse team records the received quantity.
The ERP inventory management module can then:
- Increase warehouse stock
- Update the received quantity
- Record damaged products
- Record missing products
- Update product cost
- Create the supplier payable
- Save the supplier invoice number
- Update the purchase report
- Update the stock movement report
If the company has several warehouses or branches, the employee must select where the products were received.
Management can then check the available stock of each warehouse from one system.
This connection reduces the risk of stock differences between purchase records and warehouse records.
Manufacturing businesses may require additional features such as raw material tracking, bill of materials, work-in-progress, production costing and wastage management. Learn more about ERP for production and inventory control.
Step 4: Record Supplier Payments
The business may pay the supplier immediately or purchase the products on credit.
When an authorized employee records the payment, the ERP accounting system can update:
- Supplier ledger
- Accounts payable
- Cash balance
- Bank balance
- Payment voucher
- Transaction history
- Supplier due report
The accounts team can then check:
- Total purchases from the supplier
- Total amount paid
- Remaining payable amount
- Payment dates
- Purchase invoice details
Without an integrated system, employees may have to check purchase files, bank statements and accounting sheets separately.
An ERP system keeps these records connected to the original transaction.
Step 5: Create a Sales Invoice
Suppose a customer orders 10 units of the same product.
The sales process may begin with:
- Customer inquiry
- Quotation
- Sales order
- Delivery request
- Sales invoice
When the sales invoice is confirmed, the business ERP software may automatically:
- Record the customer
- Record the sold products
- Apply the approved sales price
- Apply discounts
- Calculate taxes or additional charges
- Reduce inventory
- Record sales revenue
- Create the customer due
- Update the customer ledger
- Update the sales report
- Generate the invoice
The warehouse team can see which products need to be delivered, while the accounts team can see the invoice amount and payment status.
This means sales, inventory and accounting departments are working with the same transaction.
Step 6: Collect Customer Payments
A customer may pay:
- The full invoice amount
- A partial amount
- Through cash
- Through bank transfer
- Through mobile financial service
- At a later date
When the payment is recorded, the ERP system can update:
- Customer balance
- Accounts receivable
- Cash account
- Bank account
- Receipt voucher
- Collection report
- Customer ledger
The accounts team does not need to enter the sales information again.
Management can also review:
- Paid invoices
- Unpaid invoices
- Partially paid invoices
- Overdue invoices
- Customer payment history
- Customer credit limit
This makes customer due management easier and more accurate.
Sales and Purchase Returns
Check how the system handles returned products, damaged products, refunds and adjusted balances.
User Roles and Permissions
Check whether employees can access only the information required for their responsibilities.
For example, a salesperson may create invoices but may not be allowed to change accounting records.
Approval Workflow
Check whether purchases, discounts, expenses and payments can require manager approval.
Audit Logs
Ask whether the system records which user created, edited, approved or cancelled a transaction.
Multiple Branches and Warehouses
Check whether management can view branch-wise sales, expenses, inventory and profit.
Data Import
Ask whether existing Excel data can be imported into the ERP system.
Backup and Security
Ask how the software provider manages data backup, access security and recovery.
Reports
Do not only check whether a report exists. Check whether the report provides the exact information your management team needs.
Ready-Made ERP vs Custom ERP Software
Ready-made ERP software can be suitable when a business follows a standard process and does not require major changes.
It may offer:
- Faster setup
- Lower initial cost
- Standard modules
- Limited customization
- Subscription pricing
Custom ERP software may be suitable when a business has unique workflows.
This may include:
- Multiple approval levels
- Customer-specific pricing
- Special commission rules
- Branch-wise stock control
- Project-based accounting
- Custom invoices
- Industry-specific reports
- Special production processes
- Integration with existing applications
- Custom dashboards
- Unique user permissions
A business should not select custom ERP only because it wants more features.
Customization should solve a real operational problem.
Companies that need a completely workflow-based system can also explore custom business software development for specialized operational requirements.
Sales and Purchase Returns
Check how the system handles returned products, damaged products, refunds and adjusted balances.
User Roles and Permissions
Check whether employees can access only the information required for their responsibilities.
For example, a salesperson may create invoices but may not be allowed to change accounting records.
Approval Workflow
Check whether purchases, discounts, expenses and payments can require manager approval.
Audit Logs
Ask whether the system records which user created, edited, approved or cancelled a transaction.
Multiple Branches and Warehouses
Check whether management can view branch-wise sales, expenses, inventory and profit.
Data Import
Ask whether existing Excel data can be imported into the ERP system.
Backup and Security
Ask how the software provider manages data backup, access security and recovery.
Reports
Do not only check whether a report exists. Check whether the report provides the exact information your management team needs.
Ready-Made ERP vs Custom ERP Software
Ready-made ERP software can be suitable when a business follows a standard process and does not require major changes.
It may offer:
- Faster setup
- Lower initial cost
- Standard modules
- Limited customization
- Subscription pricing
Custom ERP software may be suitable when a business has unique workflows.
This may include:
- Multiple approval levels
- Customer-specific pricing
- Special commission rules
- Branch-wise stock control
- Project-based accounting
- Custom invoices
- Industry-specific reports
- Special production processes
- Integration with existing applications
- Custom dashboards
- Unique user permissions
A business should not select custom ERP only because it wants more features.
Customization should solve a real operational problem.
Companies that need a completely workflow-based system can also explore custom business software development for specialized operational requirements.
Sales and Purchase Returns
Check how the system handles returned products, damaged products, refunds and adjusted balances.
User Roles and Permissions
Check whether employees can access only the information required for their responsibilities.
For example, a salesperson may create invoices but may not be allowed to change accounting records.
Approval Workflow
Check whether purchases, discounts, expenses and payments can require manager approval.
Audit Logs
Ask whether the system records which user created, edited, approved or cancelled a transaction.
Multiple Branches and Warehouses
Check whether management can view branch-wise sales, expenses, inventory and profit.
Data Import
Ask whether existing Excel data can be imported into the ERP system.
Backup and Security
Ask how the software provider manages data backup, access security and recovery.
Reports
Do not only check whether a report exists. Check whether the report provides the exact information your management team needs.
Ready-Made ERP vs Custom ERP Software
Ready-made ERP software can be suitable when a business follows a standard process and does not require major changes.
It may offer:
- Faster setup
- Lower initial cost
- Standard modules
- Limited customization
- Subscription pricing
Custom ERP software may be suitable when a business has unique workflows.
This may include:
- Multiple approval levels
- Customer-specific pricing
- Special commission rules
- Branch-wise stock control
- Project-based accounting
- Custom invoices
- Industry-specific reports
- Special production processes
- Integration with existing applications
- Custom dashboards
- Unique user permissions
A business should not select custom ERP only because it wants more features.
Customization should solve a real operational problem.
Companies that need a completely workflow-based system can also explore custom business software development for specialized operational requirements.
Sales and Purchase Returns
Check how the system handles returned products, damaged products, refunds and adjusted balances.
User Roles and Permissions
Check whether employees can access only the information required for their responsibilities.
For example, a salesperson may create invoices but may not be allowed to change accounting records.
Approval Workflow
Check whether purchases, discounts, expenses and payments can require manager approval.
Audit Logs
Ask whether the system records which user created, edited, approved or cancelled a transaction.
Multiple Branches and Warehouses
Check whether management can view branch-wise sales, expenses, inventory and profit.
Data Import
Ask whether existing Excel data can be imported into the ERP system.
Backup and Security
Ask how the software provider manages data backup, access security and recovery.
Reports
Do not only check whether a report exists. Check whether the report provides the exact information your management team needs.
Ready-Made ERP vs Custom ERP Software
Ready-made ERP software can be suitable when a business follows a standard process and does not require major changes.
It may offer:
- Faster setup
- Lower initial cost
- Standard modules
- Limited customization
- Subscription pricing
Custom ERP software may be suitable when a business has unique workflows.
This may include:
- Multiple approval levels
- Customer-specific pricing
- Special commission rules
- Branch-wise stock control
- Project-based accounting
- Custom invoices
- Industry-specific reports
- Special production processes
- Integration with existing applications
- Custom dashboards
- Unique user permissions
A business should not select custom ERP only because it wants more features.
Customization should solve a real operational problem.
Companies that need a completely workflow-based system can also explore custom business software development for specialized operational requirements.
Sales and Purchase Returns
Check how the system handles returned products, damaged products, refunds and adjusted balances.
User Roles and Permissions
Check whether employees can access only the information required for their responsibilities.
For example, a salesperson may create invoices but may not be allowed to change accounting records.
Approval Workflow
Check whether purchases, discounts, expenses and payments can require manager approval.
Audit Logs
Ask whether the system records which user created, edited, approved or cancelled a transaction.
Multiple Branches and Warehouses
Check whether management can view branch-wise sales, expenses, inventory and profit.
Data Import
Ask whether existing Excel data can be imported into the ERP system.
Backup and Security
Ask how the software provider manages data backup, access security and recovery.
Reports
Do not only check whether a report exists. Check whether the report provides the exact information your management team needs.
Ready-Made ERP vs Custom ERP Software
Ready-made ERP software can be suitable when a business follows a standard process and does not require major changes.
It may offer:
- Faster setup
- Lower initial cost
- Standard modules
- Limited customization
- Subscription pricing
Custom ERP software may be suitable when a business has unique workflows.
This may include:
- Multiple approval levels
- Customer-specific pricing
- Special commission rules
- Branch-wise stock control
- Project-based accounting
- Custom invoices
- Industry-specific reports
- Special production processes
- Integration with existing applications
- Custom dashboards
- Unique user permissions
A business should not select custom ERP only because it wants more features.
Customization should solve a real operational problem.
Companies that need a completely workflow-based system can also explore custom business software development for specialized operational requirements.
Sales and Purchase Returns
Check how the system handles returned products, damaged products, refunds and adjusted balances.
User Roles and Permissions
Check whether employees can access only the information required for their responsibilities.
For example, a salesperson may create invoices but may not be allowed to change accounting records.
Approval Workflow
Check whether purchases, discounts, expenses and payments can require manager approval.
Audit Logs
Ask whether the system records which user created, edited, approved or cancelled a transaction.
Multiple Branches and Warehouses
Check whether management can view branch-wise sales, expenses, inventory and profit.
Data Import
Ask whether existing Excel data can be imported into the ERP system.
Backup and Security
Ask how the software provider manages data backup, access security and recovery.
Reports
Do not only check whether a report exists. Check whether the report provides the exact information your management team needs.
Ready-Made ERP vs Custom ERP Software
Ready-made ERP software can be suitable when a business follows a standard process and does not require major changes.
It may offer:
- Faster setup
- Lower initial cost
- Standard modules
- Limited customization
- Subscription pricing
Custom ERP software may be suitable when a business has unique workflows.
This may include:
- Multiple approval levels
- Customer-specific pricing
- Special commission rules
- Branch-wise stock control
- Project-based accounting
- Custom invoices
- Industry-specific reports
- Special production processes
- Integration with existing applications
- Custom dashboards
- Unique user permissions
A business should not select custom ERP only because it wants more features.
Customization should solve a real operational problem.
Companies that need a completely workflow-based system can also explore custom business software development for specialized operational requirements.
ERP Software vs Accounting Software
Accounting software mainly manages financial transactions such as income, expenses, vouchers, ledgers and financial statements.
ERP software connects accounting with other business processes such as:
- Sales
- Purchases
- Inventory
- Production
- Customer management
- Supplier management
- Human resources
A small business that only needs financial records may not need a complete ERP system.
However, a growing business may require ERP when sales, stock, purchasing and accounts must work together.
Read the detailed comparison of ERP vs accounting software before selecting a system.
What Should You Check During an ERP Demo?
Do not select an ERP system only because its dashboard looks attractive.
Ask the software provider to complete a realistic business workflow.
A useful ERP demo should include the following process:
- Create a supplier.
- Create a purchase order.
- Receive the products.
- Check the updated warehouse stock.
- Record a supplier payment.
- Create a customer.
- Create a sales invoice.
- Record a partial customer payment.
- Check the customer ledger.
- Check the supplier ledger.
- Review the profit report.
- Review the trial balance.
You should also ask the vendor to demonstrate the following situations.
Step 7: Review Inventory and Accounting Reports
Because the purchase, sales, stock and payment records are connected, the ERP system can generate reports from the recorded transactions.
Common reports include:
- Current stock report
- Warehouse-wise stock report
- Stock movement report
- Product purchase report
- Product sales report
- Customer due report
- Supplier payable report
- Cash report
- Bank report
- Product profit report
- Income and expense report
- Account ledger
- Customer ledger
- Supplier ledger
- Trial balance
- Profit and loss statement
- Balance sheet
These reports help management understand the current position of the business without collecting information from different departments.
However, ERP software cannot automatically fix an unclear business process.
Before implementation, the company should define:
- Who can create transactions
- Who can approve transactions
- Who can edit or cancel invoices
- How stock will be received
- How returns will be managed
- How payments will be approved
- Which reports management needs
A clear workflow is necessary for a successful ERP implementation.
Frequently Asked Questions
An ERP demo is a practical presentation that shows how different business processes operate inside an ERP system. A useful demo should show complete transactions instead of only displaying modules and dashboards.
An ERP software demo should include purchase orders, stock receiving, sales invoices, customer payments, supplier payments, inventory reports and accounting reports.
ERP software connects different departments through one central database. When an authorized user records a transaction, related inventory, customer, supplier and accounting records can update from the same information.
Yes. A properly configured ERP system can manage branch-wise sales, purchases, stock, expenses, employees and reports.
Product, customer, supplier, stock and account information can often be imported from Excel. The data should be reviewed and cleaned before migration.
No. A small business may only require accounting, POS or inventory software. ERP is more suitable when several departments and processes need to work together.
Yes. Custom ERP software can include specific workflows, reports, approval levels, invoices, user roles and integrations based on business requirements.
The implementation period depends on the number of modules, customization requirements, data migration, employee training and approval process.
Important reports may include sales, purchases, stock, customer dues, supplier payables, cash, bank, profit and loss, trial balance and balance sheet.
You can contact MM IT SOFT LTD, explain your current business workflow and request a practical demonstration based on your sales, purchase, inventory and accounting requirements.
