Enterprise resource planning (ERP) systems make it easier for companies to manage all their business process in one centralized software system. It integrates multiple applications and consolidates the collected data so that companies can run smoothly and efficiently. Its applications may be most apparent for managing operations and supply chains, but ERP can also be an important tool for supporting and optimizing financial management processes.
How ERP Systems Can Improve a Company’s Financial Management Processes
Providing support for finance and accounting requirements is just one of the many benefits of an ERP system but that functionality alone can be invaluable to the entire organization. Financial management gives a more comprehensive view of the company’s financial status because it considers both actual and projected figures. Using an ERP system helps to ensure that this information is reliable, up to date, easier to access.
Simplified Data Entry and Collection
With just one system managing all departments, data only needs to be inputted once in a uniform format. The system will tag this information and apply it to relevant fields, so there is no need to enter it multiple times. It appears as a single data point, which is important for conserving time and resources.
Avoiding duplicate data entry is especially important for customer databases. If duplicate data is on the server, the finance department might mistakenly bill the same customer several times. Apart from the wasted effort, the company might risk losing a good customer over this mistake. Additionally, this compromises the reliability of company data as the numbers may be higher than that of its actual customers, which may be a relevant consideration for budget planning and other financial decisions.
Automation of Repetitive Tasks and Multiple Workflows
Payroll, invoicing, and taxes are all part of the monthly financial workload. The amounts may vary but all of the computations and documentary requirements mostly stay the same. Automate these tasks using the ERP system rather than having to do it manually every month. Some ERP systems may even offer end-to-end processes that allow the system to do banking transactions.
ERP systems can also integrate accounts receivable and accounts payable with cash flow management. Since the figures are updated in real-time, this makes for faster and more accurate tracking of financial transactions and allows for better planning.
Reduced Risk of Error
Manual tracking systems are vulnerable to errors simply because of the human element it involves. Interchanged numbers, incorrect labeling, and missing information result in faulty data, which is risky for businesses. To avoid this, ERP systems can cross-check documents and standardize report formats. It also logs user activity so that if there are still any data entry errors, they can be easily remedied.
Faster Report Creation
Finance reports require a lot of data and analysis. It takes a lot of time to do manually since all the information would have to be gathered first. With an ERP system, all information is readily available as soon as it enters the database and the reporting functionality can be used to perform an automated analysis for income statements, balance sheets, and other financial reports.
With the ERP system streamlining the report generation process, finance managers can focus on using this data for insights on how to improve the company’s financial status. The system can also be configured to include key performance indicators so improvements and business success can be measured with quantitative terms.
Compliance with Regulations
Most business industries have to comply with regulatory standards, and the requirements may change as regulations get updated. ERP systems monitor for these updates and keep the company informed about them. The system can also be used for fulfilling these compliances as it has access to all of the company’s financial and operational data. ERP makes it easy to track potential risks like vendor recalls, customer complaints, or even unusual expenditures within the company so that it provides a safeguard for regulatory compliance.
Financial management requires access to real and accurate numbers, which are then used to create financial projections. ERP systems help to ensure the accuracy of figures that the projections are based on, and this usually makes for more accurate predictions for costs and profits. In cases when the actual figures don’t match the projections, the ERP system can spot it sooner and give the company more time to address and remedy the variances towards the most profitable options.
Businesses rely on financial management processes to make decisions that will best profit the company. Integrating an ERP system into their operations allows for the finance team to work more efficiently. It gives them access to all the data they need and ensures that figures are accurate and updated. Armed with the right information, finance management processes can be better geared towards creating strategies for improving the company and set it up for more success.