What comes to mind first when you hear the term “ERP” or “Enterprise Resource Planning”?
Manufacturing, inventory management or order management are the best guesses. However, it is capable of more significant accomplishments. And the time has come to learn how ERP systems can assist you in streamlining and simplifying your organization’s financial processes. Suppose you’re still tracking accounts payable (AP) and accounts receivable (AR) with a jumble of spreadsheets.
In that case, it’s time to upgrade to an enterprise resource planning (ERP) system. Because maintaining excel sheets is time-consuming and fails to provide insights that could put your business in a financial bind.
You can also get a better comprehension of your spending and cash flow with ERP finance modules.
You can also use artificial intelligence to generate critical financial documents like cash flow statements, balance sheets, and more, reducing the risk of errors. This is why ERP adoption is supported by 23% of finance and accounting staff at various organizations.
What is ERP?
An ERP software system allows you to manage all aspects of your business by connecting many business processes such as manufacturing, financial management, supply chain management, and human resource management.
It also allows for the automation of individual activities across departments within an organization. With the system of integrated software applications, you can also manage end-to-end processes. Your ERP program will use shared data definitions and start operating on a single database once it implements.
The finance module can collect financial data and generate a variety of reports, such as financial statements, ledgers, and balance sheets, according to ERP system examples.
Each module of ERP software uses the central database to pull and push data. Single Source of Truth (SSOT) for various business functions will benefit all departments within your organization.
Through enhanced intelligence and process automation, ERP systems can also assist leaders in evaluating business performance and financial health.
What is an ERP Finance Module?
Accounting and financial management functions can manage more with an ERP finance module. It can process transactions like expense reporting and invoices also to standard account records.
The ERP finance module can perform advanced reporting functions such as profitability analysis and revenue management, also known as ERP core finance or ERP financial management.
Let’s see some of the key features of an ERP finance module:
General Ledger (GL)
This is the core of your accounting system. Using the General Ledger module, your business can meet budgeting, financial management, and accrual processing requirements.
It can also integrate with sub-ledger accounting, cash flow management, and procurement. GL is a central node that allows you to have a 360-degree view your finances and run real-time supervision.
Accounts Payable (AP) and Accounts Receivable (AR)
With the AP module, you can register existing supplier invoices and authorize/track incoming invoices. With some invoices, you can even automate the invoice generation and approval process. The AR module tracks customer payments.
You can use an AR module and a credit score management system to get real-time insights. The AR module also provides access to financial analysis and statement reports.
Asset Management (AM)
The Asset Management module plays a crucial role in helping you manage fixed assets. Using the AM module, you can take care of user-defined depreciation, fixed asset revaluations, disposal, investment, and insurance information.
Cash Management (CM)
The Cash Management module is functional when you need to process and analyze all cash transactions over time. To reconcile bank statements, the Cash Management module can integrate. It also helps you visualize cash flow and understand your financial goals.
How ERP Helps in Financial Management?
Profit tracking is an essential business finance process. Having an ERP finance module allows you to track profit and thus get a better idea of the company’s financial health. This helps you understand significant profit and cost sources, as well as underperforming areas.
Profit calculation may be automated using receivables and incurred costs depending on your ERP software.
Some ERP systems also allow you to project profit based on historical data. Profit tracking helps you determine the best course of action for your company in today’s uncertain market.
You don’t have time as a business owner to visit many platforms to view specific financial transactions. Ledger management comes in handy here. With ledger management, you can track all transactions, capital accounts, liabilities, assets, income, and expenses.
These transactions can be rolled up or consolidated using different accounting methods and currencies as required.
How does this help?
Unified financial data allows for better decision-making and business goal achievement.
Controlling cash flows is one of the most significant advantages of ERP for finance. This is where the Accounts Payable module comes in. It helps you track invoices, vendor payments, and other financial transactions.
You can avoid human errors, save money and increase productivity by integrating payable data with the purchasing system. Your ERP software may have an imaging feature to convert invoices into electronic documents.
Moreover, using automated payment functionality that integrates with global banks ensures that your business will never process payments late.
This module requires for customer-facing businesses. It helps you track invoices, customer payments, and cash. You can also integrate a payment gateway to let your customers view invoices and pay in seconds.
With AR automation, your business benefits from faster collections and repeat customers who appreciate the seamless process.
Fixed Asset Management
Want to budget for capital expenses?
Fixed Asset Management comes in handy here. It helps you calculate depreciation, track assets, and follow regulations.
This module is required to calculate the depreciation value of manufacturing equipment and other company assets such as cars and office space.
Rather than entering the cost as an expense immediately, this module allows you to depreciate the cost over the asset’s life and reduce taxes. Manually doing these calculations in spreadsheets may not be accurate enough.
Top business leaders always want to cut risks and protect their companies. Risk management tools in an ERP financing module manage financial issues, natural disasters, legal liabilities, and compliance risks.
This module also prepares you for ever-changing compliance regulations. As well as credit risks, you can check if your business has enough cash reserves to pay accounts payable if customers default.
Real-time financial data is essential for data-driven decision making. The reporting capabilities of an ERP finance module help you plan and manage finances.
This module will help you understand significant sales and expenses, revenue sources, and more. The customizable dashboard feature gives you instant access to your business’s financial and operational health.
Benefits ERP in Accounting and Finances
Here is the list of benefits of ERP in Accounting and Finances
Increased Productivity: Manually managing financial processes and producing reports can be a daunting task for your business. You can automate time-consuming tasks and save time with a finance ERP module.
Enhanced Transparency: Your business may continue to suffer due to a lack of financial transparency. The General Ledger module and the analytics dashboard give you a bird’s eye view of your company’s finances.
Easy Budgeting: Financial ERP systems make it easier to visualize actual costs and, as a result, create a plan and budget that is tailored to your business size.
Financial Monitoring: ERP for finance and accounting allows you to have a solid understanding of what is happening in your business’s finance. And it detects operational anomalies, whether it is sudden sales spikes or fraudulent transactions.
Reduced Errors: ERP reduces the chances of human error in your business’s accounting and finances by automating tasks and processes such as data entry.
No More Lost Documents: With all the finance-related documents updated in your ERP system in real-time, your business stops suffering from losing documents.
You’re already aware of how ERP systems can help you automate repetitive tasks, increase operational efficiency, save time, and increase revenue. You can use the ERP finance module to streamline financial management while also providing excellent customer service.