7 Key Advantages of Using ERP for Accounting and Financial Management
The management of accounting data, analysis, and transactions is the primary purpose of ERP accounting systems, which are software components integrated into ERP systems. Planning, accounts payable/receivable, management of accounts, and financial reporting are the accounting tasks that these modules automate. Because of its many features for effectively managing, tracking, and analyzing financial transactions, the ERP accounting module is the foundation of an organization’s financial management. Thus, the main characteristics and 7 key advantages of using ERP for Accounting and financial management will be discussed in this article.
Process of ERP software working:
ERP software keeps track of numerous business processes via a central dashboard. It reduces departmental silos within your company and guarantees that data from various departments can be shared and viewed with ease.
Labor is also reduced by using ERP financing and accounting modules as it computerizes many tasks. The most important benefit is that it automates the tasks which reduces the errors that were created by humans. It also assists in managing the inventory and finances of the company. ERP Accounting system can update the information in your business’s accounting records, track your current inventory, and take changing costs into account.
7 Key Advantages of Using ERP for Accounting and Financial Management
The benefits organizations get from an effective ERP system ultimately help them work faster, and provide better data to decision-makers. Additionally, it gives them more confidence in their reporting and analysis.
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Automation:
The most important benefit of this software is that it automates the procedures performed in the business. When the tasks are managed by machines or software there is no chance of human error which increases the effectiveness and efficacy of the tasks. Human error is common in routine tasks; automation like this helps to reduce that problem. Because an ERP system automates processes like payroll, invoice processing, and calculations, it lowers the chance of human error in data entry. For instance, the system can pair invoices with contracts or purchase orders, compare amounts, and search for discrepancies when it comes to invoicing.
This reduces the need for laborious and error-prone human verification. Businesses can boost efficiency, consistency, and compliance by automating critical processes. Particularly for sectors that are subject to stringent regulations and auditing standards, automation guarantees that all tasks are executed under the specified procedures. So, companies can rest assured that their routine processes are being executed accurately and efficiently, allowing them to focus on more strategic tasks.
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Real-time data:
Having the most current information available allows businesses to make decisions based on a complete picture of the organization. An ERP accounting module can continuously combine data from across departments and facilitate access to that data via dashboards. It helps the company operate better as a whole, especially when business conditions change quickly. For example, an ERP system can tap real-time, unified data to do continuous cash forecasting, looking across areas such as sales, customer payments, production, and input costs to spot problems that could crimp cash flow.
Businesses need to have access to real-time data because it allows them to respond quickly to shifts in behavior among customers, marketplace circumstances, or operational efficiency. ERP for accounting and financial management systems enables businesses to monitor their cash flow in real-time by centralizing data about sales, client payments, scheduling of production, and input costs. Using this data, the finance team can build a dashboard that will enable them to forecast cash flow over time and avert shortages before they occur.
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Reporting speed and accuracy:
Much of the responsibility of finance and accounting teams has to do with reporting. Let’s use the example of fixed assets, an important balance sheet component that accountants must track as the company buys new assets and retires others. Another example is consolidating and closing the financial books at the end of a month or quarter. Using the automation and capabilities in an ERP system, finance and accounting teams can give executives and business unit leader’s key information sooner and give analysts throughout the company more time to assess where to make improvements.
Built-In Validations: Use the predefined parameters to prevent incorrect data entries.
Maintain Consistency: Real-time data synchronisation across all modules guarantees consistency.
Tracking Errors: Computer programs can detect inconsistencies and mark them for human inspection.
An example of a construction company that made good use of ERP software to monitor payments and costs works. The system prevented the loss of thousands of pounds by identifying overbilling issues.
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Improved Compliance and Audit Readiness:
Keeping up with changes in the many layers of regulatory requirements is a common challenge for finance and accounting teams. Accounting modules in an ERP system can provide significant assistance in taming that challenge since most can be configured to automatically comply with GAAP or IFRS and some automatically update when those standards change. Additionally, business workflows can be programmed to conform with industry-specific standards, and role-based dashboards can enable managers to monitor adherence to them. Improved compliance helps a company avoid fines and penalties, enhances internal controls, and better prepares the company for external audits. All that, in turn, reduces audit costs, time, and potential for reputational damage.
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Forecasting and analysis:
An ERP accounting module can assist businesses in enhancing their forecasting and analysis skills. To create a unified platform, this module brings together a number of different financial functions, such as payroll, making purchases, accounts payable, receivables, and sales accounting. That complete data picture also supports more in-depth scenario planning and variance analysis and helps leaders align financial goals with strategic objectives.
An ERP accounting module can assist businesses in enhancing their forecasting and analysis skills. Payroll, purchasing, accounts payable, accounts receivable, and sales are all combined into a single platform by this module. By connecting previously separate systems, this integration gives leaders a bird’s-eye view of their financial operations in real-time.
With all the data in one place, businesses can create comprehensive reports that highlight current trends and provide useful insights. These consolidated data sets help businesses make accurate forecasts and plan for the future, allowing them to react quickly to changes in the market.
As an illustration, ERP systems can provide leaders with the most recent information by dynamically adjusting revenue projections in reaction to modifications in sales data. The data-driven approach improves departmental transparency and accountability while guaranteeing that all financial decisions are in line with the organization’s overall objectives.
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Scalability:
One of the top benefit out of the 7 key advantages of ERP for accounting and financial management systems is their ability to let you use the features you need now and add more at a later time. As your teams expand, you can also add more users. A cloud-based ERP system offers the greatest scalability if your company plans to grow quickly. The financial procedures of growing companies are notoriously intricate. Enterprise resource planning (ERP) systems can easily expand to accommodate new users, data, and modules as a company expands.
Being able to change and adjust:
Businesses with global operations must have multi-currency and multi-language support.
Modular Building Blocks: You can add features like international tax compliance, treasury management, or advanced financial analytics as you need them.
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Security of data
Data is the most important for making the best decisions about the business, so nowadays it has become a valuable asset for businesses, and ERP software can help safeguard that asset. The level of protection is increased because all of this data is in one location rather than being dispersed among several systems with differing degrees of security.
Spreadsheets and other documents that are circulated via email and kept on staff desktops are replaced by it. Your data is usually spread across several distant servers when using a cloud ERP accounting system, providing an additional degree of security by preventing a single point of failure and establishing redundancies. This is particularly crucial if your business deals with a lot of sensitive client information.
Features of Accounting Module:
All of the essential components of several separate accounting systems, including the main ledger, accounts payable, accounts, and reporting and analysis, are combined into a single accounting module in an ERP system. Other features marry important operating information into the finance function, such as customer and vendor management, resulting in more meaningful reporting.
Cash Management
Inventory management is usually a separate ERP module, dedicated to tracking and assigning values to inventory, and to ensuring that stock is available to meet demand. Good cash management practices also help businesses maximize collections from customers and optimize earnings opportunities for extra cash. The cash management component, sometimes referred to as treasury management, helps company leaders meet working capital needs to keep their business solvent.
Customer Management
Customer management often is a separate module of ERP systems that documents all customer and prospect interactions and provides a central repository for the resulting data. This includes customer contacts, order history, prospecting, customer service, and marketing touches. Information from the customer relationship management (CRM) module is integrated into the accounting module in an ERP system functions because it is critical for forecasting revenue, as well as for analyses that lead to enhanced sales and marketing efficiency.
Vendor Management
The vendor management component centralizes all vendor contacts and interactions as part of a business’s procurement and supply chain management processes. This component helps a company better understand the status of open purchase orders and how much is owed to vendors and provides a central view of spending by suppliers. It helps business leaders identify areas for cost savings and improve contract negotiations with vendors.
Banking Management
The banking management component of an accounting module in an ERP system hooks up to a company’s various financial institutions to automate the flow of statement data into the GL and facilitate bank reconciliations. Cash payments and receipts in the bank are automatically synched to the accounting, AP, and AR modules, giving the company better visibility about disbursements and customer payments that have cleared.
Profit-Tracking
No financial ERP module would be complete without a profit-tracking component. This feature allows management to see the overall financial position of the business at both high (summarized) levels and detailed levels. Understanding how a company makes profits today, and predicting profits in the future, is a fundamental necessity provided by the analysis and forecasting features within this component.
Multi-Currency Capabilities
Companies of all sizes may need to deal with multiple currencies. Whether due to paying global suppliers or accepting payment from international customers, converting foreign currencies (opens in a new tab) can be tricky and underlie real gains and losses. The multi-currency component aids the ability to make, accept, and convert payments made in other currencies.
Reporting
Reporting entails the provision of both regular, standardized reports as well as custom analyses. This is a core feature of any accounting module in an ERP system, because financial reporting, whether internal or external, is a universal need for all companies.
Conclusion:
ERP for accounting and financial management modules, which offer complete financial management solutions, are essential to contemporary business operations. These modules offer an extensive number of functionalities to meet the various needs of organizations, from general ledger management to tax compliance. Businesses may improve efficiency, acquire better control over their financial resources, and optimize their financial processes by utilizing accounting modules in an ERP system. In the end, this will help them grow and succeed in the highly competitive business environment of today. For further information contact Cherryberry ERP.