The financial module of a ERP software is the component that houses almost all of the most important accounting and financial management functions of a company within the ERP software. It contains the land register (journal) and general ledger as well as all other requirements for proper financial accounting and reporting.. However, the deep integration with all other modules of the ERP system is what really makes it valuable.0
An ERP system is a modular software. It is designed to integrate a company's business processes into a single central system. The finance module exchanges data with other modules in the process. There are almost no areas that are left out. Among them are warehousing and logistics, production planning, purchasing, sales and even integrated CRM modules. As soon as a transaction in one of these interlinked modules has an impact on finances, it is also accompanied by a transaction in financial management. Some of these transactions are mandatory within an ordinary accountingothers serve to provide better transparency and overview.
The finance module - an important ERP module
The finance module is usually the first component to be activated in an ERP system. At ERP implementations in companies, isolated accounting systems are mostly replaced by the ERP module. The accompanying automation of financial accounting helps ensure accounting accuracy and timely posting. In this way, the financial regulations and reporting requirements, which have become more stringent in recent years, can be met without additional human resources. In addition, the consolidated financial data provides the basis for measuring and improving business performance.
The financial module is also the component that most distinguishes ERP from other integrated business applications, such as PPS systems or pure enterprise resource planning systems. It is the truly substantial module and often serves as the first building block when introducing or changing ERP software.
The main contents of the finance module
The following areas and contents essentially belong in an integrated finance of an ERP software:
The determination of profits provides a company with a picture of its financial health. The overview of how it uses its financial resources is the benchmark. With profit tracking - or profitability analysis - the company has an overview of where its profits come from. It determines its return on investment (ROI) based on sales transactions and cost data.
The general ledger is the comprehensive record of all financial transactions of a company. It records, among other things, income and expenses, capital accounts, assets and liabilities. Liabilities.
With accounts payable, a company manages its liabilities to suppliers or creditors. Automating this area minimises errors and helps optimise cash management. Accounts payable also integrates data exchange with the purchasing system, which can be part of the finance module or a separate purchasing or procurement module. Connected to a system equipped with an automatic Incoming processing of external documents a high degree of automation can be achieved. Typical tasks in accounts payable include invoice processing, cash management and bank reconciliation.
Accounts receivable is the area where a company manages receivables from customers. It tracks payments and manages cash and invoices. Creation of recurring invoices, financial statements and payment reminders should be able to be automated in the process. By automating these processes, a company can generate accurate invoices and speed up collections. Optimised cash flow and customer satisfaction are key goals. Typical accounts receivable work includes invoicing, credit allocation and reconciliation of invoices with cash receipts.
Fixed asset management
This area is used to track and manage fixed assets. Machines, computers, operating equipment or vehicles fall under this heading. With asset management, a company can operate calculation of depreciation, but also consider legal requirements and tax implications. The overview of the use of its Attachments of a company with all its allocated costs is thus achieved.
Procurement and purchasing
Many ERP financial modules include functions that a company needs for basic purchasing of materials and services. Integration with accounts payable typically provides the necessary processing of invoices, reconciling them to ensure that the supplier's invoice matches the information in accounts payable before a payment is initiated.
Risk management identifies events that affect the financial stability of a company. This includes control of credit risks and a healthy cash flow. Possible payment defaults or delays become transparent. Problems related to security, legal obligations, compliance and reputation should thus be avoided.
The reporting system
Through integration with all other ERP modules, comprehensive and overarching reports can be created. These can be used for analysis and internal use, but also cover the legally required reports of financial accounting. The insight into the financial data through the reporting functions helps the company to make data-based statements about its finances. Business Intelligence (BI) and analysis functions provide transparency and reliable forecasts. The presentation in dashboards can also simulate scenarios and create overviews.
All information regarding taxes to be paid or possibly reclaimed can be generated and processed in this area. These functions provide the basis for tax reports and audits. The reports that a company needs for its tax return can also be generated.
The advantages of an integrated finance module
Your business decisions are only as good as your data. If you have several databases or/and systems with overlapping data, there is a high probability that at least one of the systems contains outdated data. However, if all these systems are interconnected, changes in one area are reflected in the others and you can be sure that your data is consistent across systems. This results in further advantages:
- The ERP finance module helps to speed up a company's financial processes and provides audit-proof management of income and expenditure. It enables a company to provide transparent financial information to suppliers, customers, financial partners and authorities.
- Authorised persons in the company receive information they need to understand the financial data of their company.
Better planning and budgeting is achieved through analysis and reporting functions of the ERP finance module.
- Accounting errors, including data entry errors, are easier to identify and avoid.
- By networking all the information into one Business transaction you can quickly find every detail and save yourself unproductive searching.
- The analysis of receivables and customer accounts to identify payment risks and implementation of measures to promote timely collection ensure an orderly cash flow
- The company can access its financial information in a centralised manner.
- The financial figures can be combined with other data from the ERP system to produce meaningful reports.
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