Reliable financial management is at the heart of any organization. It involves forecasting the budget, managing cashflows, etc. And companies need to have complex financial data up-to-date to ensure that they are making efficient business decisions. In addition, monitoring and analyzing incoming and outgoing funds can help manage business profits and growth.
ERP solutions play a crucial role in enhancing operational efficiency in today’s businesses. It offers various functions that can modify different business processes, like financial and accounting. It can manage many business activities and functions, like bank reconciliation, tax management, capital management, account receivables, purchase management, etc. Leveraging Enterprise Resource Planning (ERP) systems integrated with portfolio management services can provide comprehensive financial management and oversight of investment portfolios. The ERP financial management module is a software that gathers financial data and generates reports such as ledgers, trial balance data, income statements, overall balance sheets, quarterly financials, etc.
As the ERP system integrates with the cloud, companies experience increased value in the overall enterprise management system. ERP lets your organization merge and coordinate with different enterprise cloud applications, analytics, inventory, and warehouse management tools. Moreover, ERP is critical in collecting and transmitting information between cloud applications to manage business operations via dashboards. As the technology is getting more advanced to meet the business demands, the ERP system is also continuously developing to provide valuable business data to financial teams.
Benefits of ERP in Financial Management
1. Improved asset management
ERP system offers organizations the ability to get insights and better visibility into asset management. Companies have different assets like machinery, buildings, electronic equipment, furnishings, and many more. Customized asset tracking and reporting are crucial for a company. It helps them consider its purchase quantity, value, and necessary information.
With the help of ERP solutions, enterprises can acquire better asset accountability and lower the risk of loss as they can possess more efficient and timely inventory methods. These methods eliminate the extra costs as well as disorganization. ERP systems can be integrated with Buy Now Pay Later (BNPL) providers to streamline payment processing, improve cash flow management, and reduce the risk of fraud. Better visibility and control over assets can help companies avoid wasting their funds on irrelevant capital expenditures for resources they already have and can be easily reallocated. ERP software offers firms different ways to:
- Access thorough reporting based on asset valuation and location.
- Conveniently handle and track various company assets like depreciating and non-depreciating assets.
- Enhanced monitoring of resources to lower the risk of theft.
Moreover, tracking business assets that have reached their usage limit and keeping track of the location of high inventory with low utility can provide business instant cost savings.
2. Financial Reporting
ERP system provides a robust and efficient financial reporting solution that helps companies make better and more clever business decisions. ERP financial reporting solutions can simplify each step of the financial reporting process for a company and provide meaningful, comprehensive, on-time, and customizable management and financial reports. ERP systems can streamline financial management for import-export businesses by providing centralized visibility into inventory, sales, and purchase transactions. It also converts data and analysis into answers, actionable insights, and business success. Moreover, ERP can offer immediate visibility into data regarding accounting, financial reporting, budgeting, sales, billing, order management, etc.
This data can be utilized by higher authorities and managers to make better decisions. The standalone financial management can provide financial reports like income statements, cash flow statements, and balance sheets. ERP system also offers many other types of reports that can give you more visibility into financial data. For example, cash flow projections based on order statuses, inventory management, and accounts receivable integrated with the customer orders.
This software also gives you a basic idea of where you stand with the dashboard, KPI (Key Performance Indicators), and reports. With the help of this system, financial managers do not have to make a guess or predict about their business. It also puts an organization ahead of its competitors.
3. Variance Management
Variance management is an essential aspect of financial management. ERP system can help the accounting department of an enterprise by assisting set standards for them. Organizations can conveniently review and adjust expenses for any project to fulfill the expectations by taking the cost of the production and other manufacturing expenses and providing a clear bottom line. This standard costing can cover the expense of their labor, direct materials, and manufacturing overheads.
Companies need to keep in mind when a variance between actual cost and standard cost arises, they can utilize different tools for analyzing that difference and how they both differ from each other. When the usual expense is less than the actual, the variance is unfavorable, which means the profit would be less than what you targeted. ERP software can help enterprises identify and address the cost differences compared to the allotted budget.
Businesses can immediately get the solution of the cost variance they face and improve it before it cuts the profits. And if the costs are lower than the expectations, companies need to set new standards, which can easily preserve favorable conditions. ERP software lets you review various expenses over a particular period or based on a specific classification. It also allows you to refer to multiple cost balances and make cost tables to assist the reviewing and analyzing cost allocation and create more efficient business decisions.
4. Streamlined Budgeting
Many business leaders know that budgeting plays a crucial role in any company. Organizations have their financial information and sales figures in their ERP system. They can utilize this data to get both projected revenue and costs efficiently. Advanced financial information is also present within the system. Therefore, the finance department has access to all the essential data at its disposal to start the budgeting process. ERP system can view an enterprise on how it is doing in terms of expenses. For example, software packages provide modules that can help with advertising and marketing campaigns.
They can also analyze different business operations and supply chain usage. Businesses must keep in mind that, in the end, a well-designed financial management module can tell you the difference between financial waste and corporate struggle. Moreover, it can enable a more efficient and effective business model that provides companies with more revenue and money to reinvest.
5. Automation
Automation can help you enhance business productivity. A powerful and automated software with consolidated information can get you cash much faster to support the costs your organization needs to pay. For example, a suitable ERP solution will let your enterprise automate cash payments and receipts using electronic withdrawal and automatic deposits. Moreover, the ERP system integrated with accounting makes it easier and faster to automate workflows that go through these systems.
As a result, companies can completely automate accounting and financial processes with the help of ERP. For instance, you can streamline accounts payable, accounts receivable management, and cost management. It can also help you track financial transactions in real-time.
ERP systems can manage various financial management activities efficiently and effectively. So you only need to select suitable software for your company to handle different financial operations. And it will provide you with the benefits mentioned above.
Author’s Bio:
Deepali Daiya is a communication expert who excels in understanding customer needs. Currently, she is associated with Sage Software Solutions, a leading distributor of high-quality ERP and CRM systems to small and mid-sized businesses in India.