Key Functions of the Accounting modules in an ERP system

 One of the modules that could compose an ERP system is an accounting module. It typically includes accounting, finance, and reporting functions. Each of these functions is made up of several components. A recent industry study of companies looking to purchase ERP systems. Ir shows that the finance module was the most critical for 89% of respondents. The number and scope of components included vary by software provider, and, even within the components, there are natural differences in features and capabilities. Let’s explore the functions and benefits of an Accounting Module in an ERP system.

Features of Accounting Module

 Accounting module in an ERP system combine all the core features of various standalone accounting systems — general ledger, accounts receivable, accounts payable, and reporting and analysis — into a single module. 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 maximise collections from customers and optimise 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 centralises all vendor contacts and interactions as part of a business’s procurement and supply chain management processes. On the other hand, it enables a company to gain a better understanding of the status of open purchase orders and the amount owed to vendors, while also providing a centralised 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. The system automatically synchs cash payments and receipts in the bank to the accounting, AP, and AR modules, providing the company with better visibility about disbursements and cleared customer payments.

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, standardised 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. The primary financial statements, including the income statement, balance sheet, and cash flow statement, are run directly out of the module. Moreover, they can often be modified to fit specific reporting needs, such as consolidated/subsidiary views and different accounting standards, like Generally Accepted Accounting Principles (GAAP) in the U.S. or International Financial Reporting Standards (IFRS) outside the U.S. You can program reports for internal managerial use, such as dashboards, or develop them ad hoc for a particular purpose.

 

Benefits of ERP Accounting Modules

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, businesses can program workflows to conform to industry-specific standards, and managers can use role-based dashboards to monitor adherence to those standards. 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.

Better Cash Flow Management

Optimising cash flow and managing working capital are much easier when supported by an accounting module in an ERP system, especially the cash and banking management components within the modules. Furthermore, business managers can visualise cash inflows and outflows more precisely because of the enhanced visibility and reporting combined with real-time bank-balance information. Together with insights derived from customer and vendor management, this makes it easier for managers to forecast future cash requirements and manage credit facilities.

Improved Vendor and Customer Relationships

The centralised vendor and customer management tools provided by an ERP system with finance and CRM modules enable better communication with suppliers and customers. Suppliers appreciate timely payments and company contacts who have better visibility into supply chain status and billing information. Customer service is enhanced, since all customer contact is documented in the CRM module, and order status is visible across the company. 

Scalability and Customisation

ERP systems are scalable. It means that a company can start with a few modules and a small number of user licenses or subscriptions and add more as needed. The accounting module in an ERP system tends to be one of the first adopted and can grow along with the business. Examples of this approach to scalability and customisation include adding business units and/or subsidiaries. It also includes expanding the chart of accounts and ramping up the volume of transactions. 

 

Conclusion

ERP accounting 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 organisations, from general ledger management to tax compliance. Businesses may improve efficiency, acquire better control over their financial resources, and optimise their financial processes by utilising Accounting modules in an ERP system. In the end, this will help them grow and succeed in the highly competitive business environment of today.