What comes to your mind when you hear the term "ERP" (Enterprise Resource Planning)? Most likely production, order processing, or inventories. But ERP is capable of a lot more. It's high time you learned how your company's financial procedures could be streamlined and simplified with ERP systems.
It's time to switch to ERP if you track accounts payable (AP) and accounts receivable (AR) using spreadsheets. It is because updating excel sheets takes a lot of effort and doesn't provide you with the insights you need, which might eventually put your company's finances in danger.
Using ERP financial modules, you will be able to regulate spending and working capital better. Additionally, you can quickly create important financial papers like cash flow statements, accounting records, etc.
Now, what is ERP? How might ERP finance modules assist you in gaining an understanding of the financial data? Learn everything about ERP in this blog, from its definition to its financial rewards. Also, learn how it can be utilised to ensure the company keeps functioning even during periods of economic crisis.
Did you know?
23% of finance and accounting employees at various organisations vote in favour of moving towards ERP.
What is ERP?
The ERP software application connects several business activities, including manufacturing, supply chain, finance, and human resource management. It enables you to control every part of your company. Additionally, it can automate particular tasks across several organisational departments. End-to-end operations may also be managed with ease owing to the system of integrated software programmes. Your ERP platform can use common data standards and run on a single database once implemented to standardise and streamline procedures.
Gartner first used the term "Enterprise Resource Planning" in 1990, and it has since come to symbolise commercial success worldwide. Each component in an ERP system generally handles a particular set of business demands.
Let's look at an illustration of an ERP system. The finance module may collect financial data and generate various reports, such as income statements, general ledger, balance sheets, etc. Similarly, each module of ERP software uses the central database to pull and push data. Because of this, every division in your organisation may benefit from a Single Source of Truth (SSOT) for various business sectors. Leaders may assess corporate performance and financial sustainability using improved intelligence and workflow automation of ERP systems.
What is an ERP Finance Module?
Now that you have a fundamental understanding of the ERP software program, let's examine the ERP financial component and its advantages. You may easily manage financial and accounting tasks using an ERP finance element. It can process transactions like expenditure tracking and invoicing and maintain normal account data. The ERP finance module, sometimes referred to as ERP core finance or ERP budget management, can carry out sophisticated reporting tasks, including profitability analysis and revenue management.
But are you wondering if your company needs an ERP finance feature? ERP software enables data exchange with key company processes because it is modular in design. Therefore, the finance module would be able to collect and record any business activity that influences accounting, such as manufacturing, inventory, or procurement. This clears the way for accurate accounting, aids in meeting financial rules, and produces a variety of financial analyses.
You can boost your business performance thanks to the integrated financial data. ERP is taking the place of solo accounting information systems (AISs) in global firms. With an ERP finance module, you can manage some important tasks like maintaining the following:
General Ledger: The basis of your whole accounting system must be built on this. Your company may simply satisfy various needs for financial administration, budgeting, and receivables processing by using the general ledger feature. Additionally, you may combine it with other operations and procedures, including cash flow management, purchasing, and sub-ledger accountancy. You may execute real-time monitoring and easily get a 360-degree picture of the financial situation, thanks to the general ledger’s function as a central hub.
Accounts Payable and Accounts Receivable: You may record current supplier bills and authorise and track incoming invoices using the accounts payable function simultaneously. You may also simplify invoice production and approval processes depending on the type of invoices you issue. The account receivable (AR) module can help you keep tabs on client payments. You may combine the AR element with a credit score monitoring system for real-time information. The AR feature also enables you to view financial analysis and account reports.
Asset Management: You may govern fixed assets with the help of the asset management module. With the AM module, you may easily manage user-defined expenditures, investments, disposals, fixed asset restructurings, and insurance details.
Cash Management: When you need to handle and evaluate all the cash-related operations for a predetermined time, the cash management feature is quite helpful. Your bank account and the cash management feature may simply be linked for automated bank statement reconciliation. Additionally, it lets you see the cash flow and aids in understanding your progress toward accomplishing financial objectives.
Five Ways an ERP Helps in Financial Management
Profit Tracking: One of the essential financial functions for every organisation is profit tracking. With the aid of an ERP finance module, you may track profits and obtain a comprehensive picture of the organisation's financial situation. This lets you understand the main revenue sources, calculate expenses, and spot failing areas.
Using account receivables and planned expenditures, you might be able to automate the revenue computation depending on the ERP programme you're using. Additionally, you may be able to estimate profits using past data with ERP systems. Monitoring earnings enables you to choose your company's best course of action, even in a challenging scenario.
Fixed Asset Management: The asset management feature helps track capital expenditures and create budgets. It is intended to make it easier for you to keep track of tangible assets, calculate depreciation, and adhere to regulatory obligations.
Risk Management: Top business executives always seek to reduce risks and guarantee that their company is kept safe. You may anticipate, evaluate, and manage crises ranging from environmental catastrophes to financial problems and from legal obligations to regulatory risks using risk management features in an ERP financing segment. This training equips you to handle such possible tragedies and prepares you for constantly evolving compliance laws. You will also be able to assess credit risks, including if your company has enough cash on hand to fulfil its bills when consumers don't pay on time.
Multi-currency Management: With the help of the multi-currency management module, you may easily manage accounts receivable and payable in several currencies. You'll be able to deal with sellers from across the globe and sell your goods internationally.
Managing Taxes: Manual tax calculation can be time-consuming, especially if your company operates in multiple regions with various sales tax laws. The tax management module's inbuilt tax intelligence enables you to carry out sales transactions under the applicable laws. You may control both tax reporting and tax audit using system taxation rules. Naturally, the tax administration tool spares your staff from doing time-consuming activities.
Also read: How to use GST in Tally ERP 9?
Top Benefits of Implementing an ERP Software
An illustration depicting the top benefits of implementing ERP software
Advantages Of ERP In Financial Management
Advanced software like ERP is required for an organisation's financial administration and accounting. Companies are shifting to ERP systems to experience the benefits of centralised operations management. It is primarily due to the reliability of these software applications compared to standalone accounting software. Most significantly, integration makes these software applications so in demand, allowing firms to collect data from many sources and get the whole financial picture.
No Challenges of Repetitive Data Entry
Cloud ERP solutions must be utilised for effective business management accounting. A firm's workforce might avoid the lengthy process of information tallying between several systems by connecting ERP software solutions with finance features. It aids in preserving data consistency and eliminates double entry mistakes.
It is essential to continuously improve fundamental company operations, which makes it necessary to use an automated system. The built-in processes and time-saving features of ERP for financial planning ensure that the accounting process is more automated and assists in easing data entry. Accounting software that automates workflow makes it easier to complete Accounts Payable and Accounts Receivable entries. It improves financial management and minimises problems with cash inflows. ERP's finance accounting and management feature facilitates the collection of financial information from several departments and the generation of accurate income statements. With these tools, managing the entire enterprise becomes easy.
Less Human Errors
Manually collecting account information will inevitably result in mistakes made by humans. It may occur due to distracted typing or inaccurate keyboard input, etc. Data entry inaccuracies are often considered common accounting flaws, yet inaccurate accounting data can significantly affect the authenticity of a company's financial reports. It will create difficulties with taxes in addition to accounting. Understanding the ERP advantages in this situation is crucial since ERP aids in identifying and eliminating data input errors. With ERP software, businesses won't ever again generate inaccurate bills that might result from faulty data entry. Besides, implementing ERP software requires minimal staff training.
Financial Information Transparency
ERP systems make it simple for businesses to access financial data. They aim to provide accurate, timely, and trustworthy information to organisations. Doing so may maintain well-integrated processes and use their assets best. ERP software may also aid companies in maintaining sound financial policies that will promote new companies’ efforts and increase profitability.
Perfect Reporting Capabilities
Every type of business requires a significant amount of work from the accounting department to produce financial statements in various forms for banks, shareholders, other stakeholders, etc. Installing ERP in the retail and manufacturing industries is essential since effective financial monitoring and accounting are required in every industry. ERP systems provide better control over financial reporting and data. It has built-in and adjustable filters that companies may use as needed to produce accurate financial reports quickly.
Security of Financial Data
Financial information for any firm must be kept private at all costs. Financial data phishing can result in several fraudulent transactions. However, firms may use the adoption of ERP projects to protect their financial data. Modern business resource planning systems provide information storage with multi-layer security. These software programmes only allow users who have been permitted to prevent security compromises role-based authorisation.
Also read: How to Create A Ledger in Tally.ERP 9?
More Amount of Control
For good financial management and accounting, any organisation has to maintain control at all times. When a company is completely in charge, it can see how events affect the finances and make decisions immediately.
Independent accounting systems can never fully adhere to GAAP(Generally Accepted Accounting Principles). However, a fully working ERP system gives firms ERP advantages since it complies with GAAP. The accounting standard known as GAAP provides a uniform process for documenting events and transactions. ERP software programmes encourage accurate financial reporting that closely sticks to various accounting standards requirements.
Variance management is one of the most important financial management topics. Businesses need to understand the benefits of ERP in this area for proper financial management and accounting. Accounting departments benefit from ERP software solutions because it helps define standards. By factoring in production costs, organisations may assess and modify the budget of any project to meet objectives. Overhead costs and direct labour from manufacturing are included in standard pricing. Businesses may use various strategies to measure the variation and understand how the actual cost varies from standard cost when the standard and actual costs differ. The variance will be huge when the standard price is lower than the actual expense. Companies will be able to quickly identify and rectify cost variations compared to the budgeted amount with the use of an ERP software application.
There are several advantages to utilising an ERP system for accounting and financial management. A financial manager can better understand the organisation's financial needs and handle them more effectively with ERP software. While the majority of business owners use accounting software, an ERP system offers a comprehensive approach with features for each department, including finance, manufacturing, quality, marketing, sourcing, and more. These functions offered by an ERP financial management system, together with features, can be used for different sectors.
You can use the Biz Analyst application to manage your business effectively. It syncs with Tally data making it easy to access even if you’re offline or on the go. You can manage the accounts, create ledger entries, access business reports, and more to keep your business on the right track.