ERP systems bring together a variety of business processes and facilitate the movement of data between them, and finances are the core of those business processes. An ERP finance module supplies all of the other modules with the data required to carry their jobs out.
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Without financial information in your ERP system, your program would operate within a vacuum. After all, how can you effectively conduct more advanced processes, such as automatic reordering points, when you don’t know how much money you have available to spend on materials?
ERP financial systems work with every department in your company, allowing you to make sound decisions and increase productivity.
Table of Contents
- What is ERP Finance?
- Key Features
- Benefits
- Examples
What is ERP Finance?
Generally, an ERP financial module is a software program that gathers financial data and then generates reports. It allows you to communicate financial information more clearly to external partners such as vendors and your customers when needed. You can accomplish this through functions such as accounts payable, accounts receivable, general ledger, budgeting and more.
What is Accounting Software?
It’s easy to confuse accounting and ERP financial software, but they have distinct characteristics. In essence, finance ERP focuses on the future with tools that emphasize budgeting, forecasting and planning. Oppositely, accounting zeros in on current and historical data like general ledger balancing, reporting, expense management, tax management, etc. You may also find these features in finance modules to streamline the bookkeeping process.
Read on to learn about some of the most basic and popular aspects of ERP financial management software that you might consider in your ERP solution.
Key Features
1. Profit Tracking
A primary function of ERP financial management modules is profit tracking. The profit tracker will help provide a bird’s-eye view of the business’s overall financial health and financial resource leveraging. Tracking your profits will show you where more profits are coming from and determine the return on investment for any buy.
The tracker uses the incurred costs and receivables to calculate how much your organization profits from your efforts. Some programs will forecast future profit based on historical expense and sales data.
On the other side of the coin, ERP financial management software can also help companies track costs. This capability involves evaluating individual cost centers, looking at procurement from the top and evaluating how the business is spending money.
The desired result of these tools is to make changes that will increase profits for a business. Think of financial management software as providing a road map for business leaders who understand the best moves in their current business environments.
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2. Ledger Management
Ledger management is another fundamental function of ERP financial systems. A general ledger provides a thorough record of all financial transactions. It integrates with all of your other ERP modules, such as inventory management or customer relationship management.
Entries are typically made directly into the general ledger (GL), but your system may allow you to make entries anywhere within the application. Either way, you’ll be able to view your entries in one central location. You can keep track of a variety of things; for example, assets, liabilities, capital accounts, income and expenses.
An example of a general ledger.
Having all of your financial data in one place can make filing tax returns more manageable and help you maintain spending. You can quickly identify any odd transactions or fraud, and some ERP financial systems will automatically notify you of these instances.
The GL provides excellent visibility in your financial department and shows you the bigger picture. It’s the starting point for creating financial statements that are integral to evaluating your financial health.
3. Accounts Payable
Accounts payable will manage all of the funds your company owes to your vendors and other creditors. An accounts payable feature integrates your expense data with your purchasing system so you can take control of your cash flows.
Automating accounts payable will save you money and time on labor hours as well as avoid human errors. The system can quickly process large amounts of invoices and other financial transactions between your company and vendors. Some applications offer document capture, also known as imaging features, which converts paper invoices into electronic documents.
In short, an accounts payable system will let the user know how much they owe and when it’s due, so you’ll never be late on a payment again. Sounds nice, right?
4. Accounts Receivable
Accounts receivable allows your business to manage all of the funds customers owe them. It will track customer payments as well as manage invoices and cash.
Some ERP financial systems offer a portal for your customers where they can make payments or access invoices. You can automate tasks such as sending payment reminders or account statements and generating recurring invoices.
AR automation speeds up the collection process and will boost customer relationships because ease of payment makes your organization more accessible. Effortless transactions produce happy, returning customers.
5. Fixed Asset Management
This solution tracks and manages all of your company’s tangible assets, such as manufacturing equipment, computers, company cars and office space. It will take into account depreciation calculations, compliance requirements and tax implications.
Asset management gives your organization better visibility in terms of utilization, costs and maintenance. For example, keeping track of the depreciation of your assets can help you forecast expenditures and create budgets. If you know that your equipment is aging and may need maintenance soon, you can plan accordingly for those payments.
Tracking your assets will prevent you from paying taxes on items you have eliminated or replaced, which is an easy mistake to make while maintaining your records. The tool will also pick up on opportunities for sales tax savings — some jurisdictions give tax breaks, or exemptions, to specific industries.
6. Risk Management
A great deal of business is ultimately about risk, and business leaders want to know that their organization is protected. Risk management tools can predict, analyze and manage crises.
These situations can range anywhere from financial issues to even natural disasters. Other potential calamities to manage with risk management solutions could be related to security, legal liabilities, compliance or reputational risks.
A preview of a risk management tool.
Compliance regulations can be challenging to keep track of because they are ever-changing. In a food and beverage manufacturing setting, the risk management tool could notify you in the event of contamination or any other issues in the process. From a financial point of view, it will be monitoring any money flowing in and out of your business. Your risk management tool can ensure that you have enough cash reserves to cover accounts payable if a customer misses a payment; this manages credit risk.
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7. Reporting
Analytics provide real-time access to financial data, which is crucial for maintaining your finances. The visibility helps you make data-driven predictions and decisions concerning your company’s finances.
SAP Cloud Analytics dashboard.
On a basic level, reporting and analytics will show you where you’re generating revenue. But the dashboard can do so much more, such as display your sales, expected sales, expenses and many other financial components. Typically, the dashboard is customizable, so you can choose which categories you would like to see. Review real-time data in graph formats so you may quickly understand your organization’s financial health.
8. Multi-Currency Management
If you have global clients, the ability to manage multiple currencies is critical. Multi-currency management automates the process of both buying and selling in foreign currencies. Currency conversion capabilities allow you to complete transactions in numerous currencies.
9. Tax Management
Tax management solutions store system taxation settings and provide tax audit and tax reporting functions. Leverage these settings across the system to provide a consistent collection of sales and VAT taxes.
Perhaps your tax management feature will complete the tedious task of determining sales tax jurisdictions of ship-to addresses or use prebuilt tax intelligence to process sales transactions in compliance with proper regulations. The capabilities of this accessory depend on which ERP financial system you purchase and the needs of your company. Either way, employing tax management within your organization is a great way to avoid spending time on mundane tasks.
Primary Benefits
The finance module is the heart of your ERP financial software system. Read on for a list of benefits.
- Improves Productivity: Productivity will immediately increase once you automate mundane and time-wasting tasks.
- Complete Financial Transparency: The analytics dashboard and GL will provide authorized users with everything they need to know about your organization’s financials.
- Thorough Planning and Budgeting: The analytics and reporting function will allow you to forecast costs and potential revenue, then design your budgets accordingly.
- Real-Time Financial Monitoring: From a strange transaction to a spike in sales, you’ll always know what is going on within your financial sector at that exact moment.
- Minimizes Human Error: Accounting mistakes such as data entry errors are common but can be detected and avoided with the help of ERP financial software.
- Organizes and Tracks Invoices and Documents: The digital format prevents misplacing or losing documents, and they will automatically be fill into the proper place.
- Mobility: If you select a cloud-based financial ERP system, you’ll be able to access your financial tool anywhere, anytime.
- No Missed Payments: Accounts payable will notify you of upcoming payments, or you could choose to have them taken out automatically.
- Integration: Financial ERP modules integrate with other business systems, such as CRM, which will provide sales numbers and marketing budgets.
- Centralization: The GL is the central hub; you can access all of your company’s financial information in one place.
Examples
What better way to highlight finance ERP than to list a few examples? Our top-rated systems ensure prospective and historical tools needed to streamline your accounting practices.
QuickBooks Online
This ERP financials solution serves numerous industries, from nonprofits and product selling to professional and field services. It’s a cloud solution dedicated to small businesses.
An example of QuickBooks Online.
Benefits
- Reduces Errors: Alter and allocate swift reminders to gain better cashflows.
- Revive Information: Back up all changes and enhance activity monitoring with version histories and time logs.
- Establishes Permissions: Supervise those who have access to sensitive data and set tailored access for expense reports, sales, transactions and deposits.
- Automate Workflows: Upload, edit and distribute invoices, expenses, checks and bills in fewer clicks. You may also cut and paste Excel information directly into QuickBooks.
Features
- Income and Expense Tracking: Input bank, credit card, PayPal and other transactions easily. Organize purchases according to their suitable tax categories.
- Invoicing: Oversee invoice statuses, allocate payment reminders, match payments, accept credit cards and finish free bank transfers.
- Estimations: Convert estimates into bills, confirm e-signatures, supervise progress and revise estimates to meet your business needs.
- Reporting: Craft multiple files, including profit and loss, expense, balance sheet, inventory, profitability and more. Review numerous financial metrics on one dashboard.
- Inventory Tracking: Avoid stockouts with inventory notifications, product supervision and prices. Assess popular merchandise, craft purchase orders and watch vendors.
Acumatica
Acumatica centralizes real-time purchases and financial statuses. It’s dedicated to small and mid-sized businesses and is available for cloud and on-premise deployments.
A preview of Acumatica.
Benefits
- Boosts Efficiency: Automate tax filing reports, gain and loss calculations and tax ciphering to save time and increase productivity.
- Consolidates Data: Work with customizable dashboards and real-time process transparency to diminish errors.
- Manages Numerous Currencies: Implement numerous currencies to simplify international deals and partnerships.
- Offers Multi-Site Management: Merge several worksites into one system to review statuses and other KPIs in one space.
- Adheres to Compliances: Maintain numerous tax management standards from sales and use to withholding and more.
Features
- General Ledger: Track every purchase and draft statements like income and balance sheets. Organize accounts and subaccounts easily.
- Accounts Receivable: Generate and deliver owed-payment invoices. Link this system to bank processing centers via plugins.
- Accounts Payable: Superintend requests, invoice prepayment allocations and calculate VAT taxes.
- Cash Management: Amalgamate general ledgers, ARs and APs into one platform. Renovate balances and customer and vendor purchases.
- Currency Management: Assess foreign currency gains and losses, fix missed profits and losses and adhere to FASB-52 standards.
- Deferred Revenue Accounting: Implement user-defined schedules to determine deferred revenue automatically. Create brand new or template-based plans.
Zoho Books
Lastly, Zoho Books is a small-business, cloud-based financial ERP application that manages finances and company protocols.
An example of Zoho Books.
Benefits
- Monitor All Project Aspects: Manage and create numerous projects, assign new tasks and delegate jobs to specific employees to increase workflow productivity.
- Perform Accurate Estimates: Send quotes and garner client confirmations in real time. Include contact information, product data and saved prices.
- Smoother Client Communications: Permit customers to sign estimates, make bulk payments and conversate via the client portal tool for smoother interactions.
- Maintain Bills: Establish repetitive billing, and attach landing fees to statements for hassle-free value calculating.
- Govern Inventory: Organize goods according to SKUs, images, vendor data, expenses and availability to know where things are and find items quickly.
Features
- Mobility: Distribute invoices, statements and other documents to customers, take receipt photos and add them to expenses via the iOS and Android apps.
- Sales Order: Customize sales orders with business logos, fonts, colors and other attributes. Convert estimates into sales orders and invoices effortlessly.
- Purchase Orders: Follow purchase items and shared vendor prices, share purchase orders through emails to better collaborate with customers, partners and stakeholders.
- Online Payments: Choose Stripe, PayPal, Worldpay or other payment portals to obtain client transactions. Initiate automatic, repetitive purchases for yearly, weekly, monthly or annual intervals.
- Documents: Record file information and move it to invoices, expenses, bills, sales orders or purchase orders. Match documents to bank feeds or preceding transactions for commerce proof.
Wrap Up
Without a financial module, an ERP system wouldn’t work correctly. The features outlined in this article are the standard and popular ones; you can always add more advanced capabilities if you prefer. Remember that the key to finding the right financial ERP system is determining what your organization needs and aligning them with the features of your software system.
Download our free Requirements Template to help determine which ERP finance features your company needs. For more in-depth information, request access to our ERP Research and Reports.
Did we miss an ERP financials feature that you think is essential? Let us know in the comments below.