What comes to mind when you hear "ERP" (Enterprise Resource Planning)? The most likely are production, inventory, and order processing. ERP can do a great deal more. It would help if you learned how ERP can streamline and simplify your financial processes.
Enterprise Resource Planning software (ERP) is necessary for modern business. ERP software provides functionalities to manage inventory, quality, productivity and business processes. How does ERP benefit accounting and financial management departments in organizations?
If you use spreadsheets to track your accounts payable and receivable, upgrading to an ERP system is probably time. This is since updating Excel sheets requires much time and effort but only provides some of the information you need.
ERP modules will help you better manage your working capital and spending. You can also quickly generate critical financial documents like accounting records and cash flow statements.
What is ERP now? What are the ERP Finance Modules that can help you understand financial data better? This blog will teach you everything there is to know about ERP, including its benefits. Learn how ERP can help a company remain functional even during crises.
What is Enterprise Resource Planning?
ERP, at its core, is a business application that automates processes, provides insight and controls internally, and draws on a central database that gathers inputs from accounting, manufacturing and supply chain management departments, sales, marketing, and HR.
Each business has to complete tasks that require multiple stakeholders, each with different responsibilities. Making decisions and executing business processes is challenging when information is scattered across disparate systems. Employees need help finding the required data and, in some cases, may not even be able to access it. Accounting and FP&A, for example, could have separate spreadsheets that track different expenses.
It is challenging to maintain a cohesive team when there are so many disparate data sources. This can be a significant obstacle to collaboration and hinders efficiency. The staff wastes time searching for information and may duplicate work because they need help finding a place to get the most up-to-date data on their business tips. Understanding the cause and impact of changes affecting your company is also tricky.
This problem is solved by an ERP system, which compiles information into a central database that gives managers and staff cross-departmental access. This eliminates problems associated with data sources that need to be more consistent and allows users to perform analyses, find process improvements and achieve significant gains in efficiency. This translates into cost savings and improved productivity, as employees spend less time searching for data.
ERP systems tailored to a business's specific needs can pay off in a big way. They're handy for businesses of any size and across all industries. ERP has been used by many of the world's most successful and well-known companies for over a quarter century. This software is now available in various configurations and prices to suit the requirements of any size business. ERP systems help unify an organization's people, technology and core business processes.
The Key Takeaways
- ERP software is a critical piece of business technology that gathers data from different departments into a common database. This allows leaders to have a holistic view of the company.
- ERP systems integrate critical functions such as finance, manufacturing and inventory management, customer communications, sales and marketing and project management. A significant feature of ERP systems is the detailed reporting and analytics on departments.
- ERP systems can save time and money by highlighting inefficient processes.
- ERP software can be deployed in several ways, such as on-premises or cloud, hybrid, and more. Cloud ERP is a popular solution, but the right approach depends on your company's needs.
- Before selecting a software provider, businesses should ensure they are familiar with each vendor's features, capabilities, and integration needs.
What is the Importance of ERP for Businesses?
ERP systems are now a must-have for businesses that want to make the most of their resources. These systems can reallocate financial and human capital or create more efficient business core processes. This allows leaders to save money while maintaining quality.
An ERP also aids in planning and coordination. The ERP allows employees to compare the current inventory, customer orders and supplier orders with forecasted demand. They can adjust if necessary to avoid problems. ERP improves collaboration and communication because employees can also check the status of departments to make their own decisions.
ERP systems are a great source of information. Still, they also provide a variety of analytical reports that could make a big difference for your business. ERP systems can turn a large amount of data into graphs and charts that executives can use to model future results and illustrate trends.
What is an ERP System?
ERP systems are based on a standardized data structure. The information entered in one area is instantly available to all authorized users. The uniformity of the design keeps everyone in sync. Say, for example, that a local chain of food distributors has several locations which often share personnel and stock. When quality, employee and sales data is input into an ERP system from multiple sites, the formatted information indicates which site it came from.
The real-time data will be woven throughout all departments' business workflows and processes. Leaders will see which location does better than another in preventing spoilage. They can determine the reasons for this, while Operations can ensure staffing levels align with traffic patterns. To help executives make consolidation decisions, finance can look at sales and rents.
ERP systems are most valuable when they have modules covering each significant function and allowing for timely, accurate entry. The more people who have access to the system, the better. Integrations can be made to allow data to flow automatically into an ERP system when a business uses multiple approaches. This real-time information can be accessed throughout an ERP system to improve workflow or process.
ERP Modules
ERPs are made up of a variety of modules, which include features that cater to different aspects of business, including the back and front office. It goes beyond essential functions such as financials, supply chain management, and customer communications. The most popular ERP modules are listed below.
Finance: A finance module is the basis of almost every ERP. It manages all financial information and the general ledger. The module tracks all transactions, such as accounts payable and receivable. It also handles financial reporting and reconciliations.
Procurement: The module for procurement manages the purchasing of raw materials and finished products. The module can automate quote requests and order placements, and when connected to demand planning, it minimizes overbuying or underbuying.
Production: Manufacturing is a complex process, and the module can help companies to coordinate each step. This module allows companies to monitor and ensure that production matches demand and can also track the amount of finished and in-process items.
Inventory Management: A module for inventory management shows the current stock levels at the SKU level and displays them in real time. The module also tracks critical metrics related to inventory. This module is essential for any company that sells products. It allows them to maximize their stock by analyzing current and future demand.
Order Management: These app monitors, prioritizes and tracks customer orders as they arrive from any channel and their progress until delivery. A module for order management can improve customer satisfaction by speeding up delivery and fulfillment times.
Management of Warehouses: A module for warehouse management directs activities such as receiving, picking up, packing, and shipping. Identifying better ways to perform these tasks can save time and money in the warehouse.
CRM (Customer Relationship Management): CRM has become a viral module in many industries. This module tracks every communication with clients and helps with lead management. It can also improve customer service and increase sales.
Professional Services Automation: Services companies often use a Professional Services Automation module (PSA), which allows them to track and plan projects. This includes the resources and time spent. This can simplify billing for clients and promote collaboration between staff working on the project.
Workforce Management Module (WFM): WFM modules keep track of hours worked and attendance. Some can even manage payroll. The tool allows you to record absences and productivity for each department, team or individual employee.
HRM: A human capital management or human resources management module is very similar to the workforce management module. The module keeps detailed employee information such as available PTO, performance reviews and workforce trends.
Ecommerce: An Ecommerce Module allows brands and retailers to control their websites' front and back ends. This application will enable them to change their site's look and add or update product pages.
Marketing Automation: This Module manages all marketing efforts on digital channels such as email, web and social media. It allows organizations to personalize and optimize their messages. Marketing automation tools can increase sales, customer loyalty and leads.
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Who uses ERP?
The benefits of ERP have been realized by companies in every sector and with many different business models. ERP solutions are flexible and offer extensive functionality to meet the needs of various organizations.
The following industries rely on ERP for their business operations:
- Digital media advertising
- Clothing, footwear and Accessories
- Campus stores
- You can also consult.
- Educational Institutions
- Energie
- Financial services
- Drinks and food
- Beauty and health
- Health and Life Sciences
- It services
- Manufacturers
- The media and publishing
- Non-profit
- Professional Services
- Hospitality and restaurants
- Buy it Now
- Technology and software
- Transport and Logistics
- Wholesale distribution
Roles & Users
ERP is beneficial to a variety of jobs within these organizations. These include, but are not limited to:
- Accounting/Finance: The first users are often the accounting teams. The group is responsible for tracking and reporting transactions, financial data and information within the system. This includes accounts payable (AP), receivables (AR), and payroll. ERP allows financial planners (FP&A), whether part of an accounting team or a different position, to turn financial data from consolidated sources into reports and forecasts on cash flow, revenue and expenses.
- The Supply Chain: Employees who are focused on Operations, such as purchasing agents, inventories planners, warehouse managers and supply chain senior leaders, depending on the ERP to maintain a continuous and smooth flow of goods between suppliers and customers. The system provides accurate and detailed data that helps them optimize their inventory, prioritize orders, increase on-time deliveries, prevent supply chain interruptions, identify inefficient processes, etc.
- Marketing and Sales: By automating the lead management process and tracking the interactions prospects have had with your business, an ERP system can improve the performance of your sales force and help them achieve better results. Reps can record discussions and update their status as candidates move up the funnel. Marketing can use duplicate records to automate outreach and management across channels, from display ads and social media to email. They can also measure effectiveness and allocate budgets based on these messages.
- HR: In the ERP, HR tracks employee data and trends. The HR department can quickly find every employee's contact details, benefits and compensation information. HR can monitor metrics such as retention rates by department, pay averages by job title, and promotion rate to help line of business managers better allocate their employees.
Why You Need ERP
While ERP software was initially designed for enterprises -- as the name indicates -- today's cloud-based software-as-a-service (SaaS) ERP offerings have lowered barriers to entry and helped countless emerging and midsize companies increase their efficiency and visibility, profitability.
These tips will help you decide if an ERP system is right for your business:
- Ask yourself: Does our current technology help us or hinder us? If outdated systems cause inefficiencies or muddy data, or if they can't accommodate changes the company wants, it is time to find a better solution.
- A new or first ERP system is needed if your data are inaccurate. You can only rely on the data you have if it's reliable. This is a significant problem.
- Do you have a pattern of errors, such as sending the wrong products to customers or not matching your purchase orders with demand? Unified systems can help you organize and streamline your processes, reducing these barriers.
- Another sign that you require ERP is a heavy reliance on spreadsheets and email to collect and share important information. Because spreadsheets are updated manually and frequently, they often need to be updated. Emailing sensitive information can be a security risk and make locating what you are looking for hard.
- A lack of integration between systems can also indicate that you are ready for ERP. By pulling data from crucial functions, the system eliminates manual information transfers and inconsistent links.
Even though ERP software is expensive, the return on investment can be quick. There's also help for anyone looking to create a business plan.
What is an ERP Finance Module?
Let's look at the ERP Financial Component and its benefits now that you understand the ERP program. An ERP finance component can be used to manage accounting and financial tasks. The ERP finance module can handle transactions such as invoicing, tracking expenditures and maintaining typical account information. ERP Finance, also known as ERP Core Finance or ERP Budget Management, is capable of performing sophisticated reporting, such as profitability analysis and revenue tracking.
Do you need an ERP Finance feature for your business? ERP software is designed modularly, allowing data to be exchanged with essential company processes. The finance module can therefore collect and store any activity that impacts accounting, such as inventory or manufacturing. It allows for more accurate accounting and helps to meet financial rules.
Integrated financial data can help you improve your performance. ERP has replaced the single accounting information system (AIS) for global companies. You can perform critical financial tasks with an ERP finance module.
General Ledger: is the foundation of any accounting system. The general ledger can be used to satisfy various needs, including budgeting and receivables management. You can combine the public ledger with other processes and operations, such as cash flow management and purchasing. The general ledger can monitor financial situations and provide a complete picture.
Accounts Receivable and Accounts Payable: You can record and authorize current bills from suppliers and track and monitor incoming invoices simultaneously using the Accounts Payable function. Depending on the invoice type, you can also streamline the approval and production processes. You can keep track of client payments using the account receivable module. For real-time data, you can combine an AR component with a system that monitors credit scores. You can also view account and financial reports with the AR feature.
Asset management: With the asset module, you can manage fixed assets. The AM module allows you to manage expenditures defined by the user, investments, dispositions, fixed assets restructurings and insurance information.
Cash management: The cash management function is handy when managing and analyzing all cash-related operations over a certain period. Cash management and your bank account can be connected for automatic bank reconciliation. It also lets you see your cash flow and helps you understand how far along you are in achieving financial goals.
Read More: What is an ERP Accounting System?
5 Ways an ERP Helps in Financial Management
Profit Tracking: Tracking profits is essential to every business' financial function. You can track profit and get a complete picture of your organization's finances with the help of an ERP Finance module. You can use this to understand your primary sources of revenue, estimate expenses and identify failing areas.
You can automate revenue calculation using planned expenses and account receivables depending on your ERP program. You may also be able to estimate profit using ERP data. You can choose the best strategy for your business by monitoring earnings, even in difficult situations.
Fixed asset Management: This feature allows you to track your capital expenses and budgets. This feature is designed to help you keep track of your tangible assets, calculate the depreciation and comply with regulatory requirements.
Management of Risk: Top business leaders are always looking for ways to minimize risks and ensure their companies' safety. Risk management in ERP finance can help you to anticipate, assess, and handle crises, from financial issues to environmental disasters, from legal obligations and regulatory risks. The training will prepare you to deal with such potential tragedies and keep up-to-date on ever-changing compliance laws. This training will help you assess your business's credit risk and whether it has sufficient cash to pay its bills if customers need more time to pay their bills.
Multicurrency Manage: The multicurrency module allows you to manage your accounts payable and receivable in multiple currencies. With the Multicurrency Management module, you can easily manage accounts receivable and payable in various currencies.
Managing Taxes: Manual tax calculations can take a lot of time, mainly if you operate in regions with other sales tax laws. Tax intelligence built into the tax management module allows you to conduct sales under applicable laws. Using system taxation, you can control tax reporting and tax audits. The tax administration tool will save your employees from time-consuming tasks.
Advantages Of ERP In Financial Management
ERP software is essential for the financial management and accounting of an organization. Companies use ERP systems to gain the advantages of centralized operations management. This is due primarily to the excellent reliability of ERP software applications compared to standalone accounting software. Integration is the most crucial factor that makes these applications popular. It allows firms to gather data from multiple sources and obtain a complete financial picture.
Repetitive Data Entry is Not a Problem
For practical accounting, cloud ERP is a must. By connecting ERP solutions to finance functions, a firm's staff can avoid the long process of data tallying between multiple systems. This helps maintain data consistency and eliminates errors due to double-entry.
Automating Workflow
The use of an automated system is necessary to improve the fundamental operations within a company. ERP financial planning has built-in features and processes that make it easier to automate the accounting process. Automated accounting software makes Accounts Payables and Accounts Receipts entries easier. Cash inflow problems are minimized, and financial management is improved. The ERP finance accounting feature allows for the accessible collection and accurate generation of income statements. These tools make it easy to manage the whole enterprise.
Reduced Human Errors
Humans will make mistakes when manually collecting information about your account. This can be due to a distracted keyboard or incorrect input. Inaccurate data entry is often regarded as a standard accounting error. Still, false accounting can significantly impact the accuracy of financial reports. This will cause problems with accounting and taxes. In this case, it is essential to understand the ERP benefits, as ERP helps identify and eliminate data entry errors. ERP software will ensure that businesses never again produce inaccurate invoices due to faulty data input. ERP software is easy to implement and requires little staff training.
Financial Information Transparency
ERP systems simplify the access to financial information for companies. The goal is to deliver accurate and timely information that organizations can trust. This allows for the best use of assets and integration processes. ERP software can also help companies maintain sound financial policies, encouraging new businesses and boosting profitability.
Reporting Capabilities
Accounting departments must do a lot of work to provide financial reports for shareholders, banks and other stakeholders. ERP is essential for practical accounting and financial management in the manufacturing and retail industries. ERP systems allow for better economic data and reporting. The system has filters built in and can be adjusted to meet the needs of companies.
Security of Financial Data
All financial information must remain private. Phishing for financial data can lead to several fraudulent transactions. To protect financial information, companies can adopt ERP projects. Information is stored securely in modern business resource planning software. Role-based authorization is used to restrict access and prevent security breaches by these software programs.
Increase the Control
An organization must always be in control to maintain good financial accounting and management. A company in complete control can make immediate decisions and see the impact of events on its finances.
GAAP Compliance
Independent accounting systems can only partially adhere to GAAP (Generally Accepted Accounting Principles). However, a fully functional ERP system gives companies ERP benefits because it complies with GAAP. GAAP is a standard accounting process that provides uniformity in documenting transactions and events. ERP programmes promote accurate financial reporting in line with legal accounting requirements.
Management of Variance
The management of variances is a critical aspect of financial management. ERP impacts accounting and financial management. Businesses must understand this to ensure proper financial management. ERP software helps accounting departments define standards, which is a benefit. Organizations can adjust the budget for any project by factoring in production costs. Standard pricing includes overhead costs, direct labor from manufacturing and other indirect labor.
When the difference between the average price and the actual expense is significant, businesses can use different strategies to understand the differences and measure variation. The variance can be substantial when the standard cost exceeds the actual expenditure. With the help of ERP software, companies can quickly detect and correct cost variances compared with budgeted amounts.
Conclusion
An ERP system can be used for financial and accounting management. ERP software helps a financial manager better manage the financial requirements of an organization. Most business owners use accounting software. Still, an ERP system provides a more comprehensive solution with functions for every department, including marketing, finance, manufacturing and quality. The ERP system can offer various features and functions that apply to different industries.
There are many benefits to using ERP systems for financial and accounting management. Finance managers can better manage the accounting and capital needs of an organization. Most business owners use accounting software. Still, an ERP solution offers a comprehensive package with modules for each department, including finance, production and quality, sales, purchasing, etc. Manufacturing ERP financial management systems provide all these capabilities and specific functionality for the manufacturing industry.
