How Financial Management Benefits from ERP
Updated: Mar 15
As more ERP systems are integrating into the cloud, companies are gaining increased value in overall enterprise management systems. ERPs allow your company to coordinate and integrate with a variety of enterprise cloud applications, analytics, inventory, and warehouse management tools. Additionally, ERPs have proven invaluable in gathering and transmitting data between enterprise cloud applications to manage critical business processes via KPIs and dashboards. As technology transforms to meet the needs of modern businesses, ERP systems continuously develop to offer valuable business data, especially for financial teams and workflow management.
Forecasting financial data is an important process because it allows management to review an organization’s current financial state by comparing actual and projected financial figures. Financial planning gathers information on a current fiscal year’s actual data and analyzes various outcomes and forecasts. Using ERP ensures your collected data is accurate, which is important as a financial forecast is only as reliable as the data gathered.
Traditionally, gathering actual data and analyzing variances is a burdensome task that shifts focus away from financial planning’s primary role of forecasting. Using an ERP system allows your company to streamline these processes, ultimately saving your financial team time. ERP software can be designed to forecast and record data, configure the actuals into financial planning models, and provide financial planning training for variance explanations.
One of the most important factors in a successful business is its ability to successfully and accurately manage its financial data. ERP financial management software helps to streamline your processes, increase accuracy, and reduce costs. When financial processes are automated, analytics offers valued insight and management decisions efficiently made.
Additionally, ERP systems are used to prevent errors in accounts and observe company activity.
ERP systems concentrate overall business and financial data, allowing users to gain a comprehensive view of their business and provide insights that would have otherwise been missed.
Presently, financial teams rely on ERP systems to ensure compliance with government regulations concerning data, operations, and transparency. Qualitative ERP systems are entirely integrated with a company’s important back-end information including units of sales, order management, shipping, receiving, and manufacturing. ERPs are able to ensure various safety and financial regulations are met. Through customization, companies can be alerted of vendor recalls and unusual financial spending activities. Being able to monitor data in real time allows financial professionals to ensure efficiency from anywhere in the world, as a benefit of a cloud integration.
Additionally, a full ERP system is also Generally Accepted Accounting Principles (GAAP) and Generally Accepted Auditing Standards (GAAS) compliant. GAAP is a common set of accounting rules and standards that dictate how financial statements are prepared. Public companies, nonprofit organizations, and government entities are required to prepare financial statements in accordance with GAAP. GAAS is a set of systematic guidelines used by auditors when conducting audits on companies' financial records. GAAS helps to ensure the accuracy, consistency, and verifiability of auditors' actions and reports. It is important a company maintains these strict guidelines throughout their business practices to ensure financial wellness and legitimacy.
ERP systems allow for transactional information to be made available for immediate review via real-time dashboards. Because of increased capabilities, financial teams are able to have complete financial visibility over a company’s receivables and payables. Additionally, they are able to gain a comprehensive overview of sales forecasts, inventory levels, and bookkeeping functions to help ensure profitability.
Companies can ensure that they’re achieving maximum efficiency, accountability, and productivity which in turn, gives a maximum return of investment. Information can be supplied to ledgers, employee journals, financial statements, and expense reports as transactions occur. The process continues to report comprehensive financial statements that give a complete overview of the company’s standing at any time in the reporting period. The result? Sales, growth trends and measurable data that facilitates improvement.
ERP systems provide the ability for better visibility to asset management. These assets can take the form of buildings, machinery, electronic equipment, office furnishings, and assets you build. Customized tracking and reporting is valuable when considering purchase value, quantity and other relevant information. You obtain improved asset accountability and reduced risk of loss because you now have more timely and efficient inventorying methods eliminating hidden costs and inefficiencies. Better visibility and more control of assets helps you avoid wasting money on unnecessary capital expenditures for resources that you already own and that can be reallocated. In addition, tracking assets that have reached the limit of their utility and tracking where you have high inventory with low usage can provide companies with immediate savings.
An automated system with consolidated data gets cash in the door faster to support the expenses that you need to pay. The ERP system will allow you to automate cash payments and receipts by using electronic withdrawal and automatic deposit. This decreases the need for paper invoices and checks and helps track collections over time, keeping tabs on account receivables and allowing you to be more proactive with slow payers. This streamlined supply chain process keeps inventory levels minimized with just-in-time practices, helping to reduce the cash tied up in excess stock. By using the consolidated data delivered by an ERP system, you can monitor all cash flow. By understanding the cash position over time, you can then make smart decisions across all levels of your business: marketing, inventory, customer credit limits, discounts, and payment terms.
Another great feature to an ERP system is that it collects the production and operational data of the business. Analytical models and reports can be built and used to provide detailed, real-time insight about finances and operations across the entire enterprise. This visibility feature allows departments and teams to quickly gather all pertinent data and respond quickly to possible changes. Budget and forecasting tools are also convenient when tracking inventory and looking at records from previous sales. Using the ERP features to build and share reports delivers insight directly to your teams, rather than relying on integrations with third-party analytical tools to provide the answers. Internal reporting helps financial decision-makers when collaborating and developing plans of action based on the same, shared perspective.
ERP systems allow instant visibility into data for accounting, budgeting, financial reporting, sales, order management, and billing, all of which can be used by all levels of management to make better decisions.