In the concept of ERP, the most basic module is finance. It is crucial to the financial functioning of your business and does not only refer to the software. It provides you with reports to help you make sound decisions.
This is a very important module that determines the success of your ERP system as well as the company; therefore, as a business person, you should understand it.
The finance module in ERP is where financial management can have the biggest impact on managing what really matters. Everything you need to know about the Finance Module in ERP will be covered in this article.
What Is an ERP Finance Module?
The Finance Module in an ERP system is considered one of the central meeting points of a business. As it streamlines basic financial operations, there is no necessity for computational operations of accounts, invoices, or spending.
This saves organisations from several time-wastage tasks, hence optimising time and cost. It proves particularly useful for reaching other financial operational clusters such as manufacturing, sales, and inventory.
An up-to-date picture of the company is created as all systems possessing relevant data are simultaneously updated every time a financial transaction is made. This makes it possible for the ERP system to meet all financial reporting obligations as required.
The Finance Module in ERP must be the one that any organization seeking to improve its operations efforts on has. It enhances budgetary preparation, appraisals, and resource utilization in an organization.
We now know what the Finance Module in ERP means, so it's time to study the essential features that may be used to implement the module in a company.
ERP Finance Module Features
Here, we go over a few features that let you make efficient use of the Finance module in ERP. These are a few of those characteristics:
General Ledger (GL)
The company's master list of all financial transactions is called the GL. These consist of capital, assets, liabilities, income, and expense accounts. A clear, straightforward picture of the financial operations is provided by its close connections to other business activities.
Profit Tracking
The finance module in ERP has a profit tracking feature that allows for tracking a company's profitability in addition to a variety of profits and ROI projections based on historical account data. The fact that it identifies several profit centers also makes analysis possible.
Cost Management
This feature of the Finance Module in ERP reduces expenses in a number of ways, including by calculating actual costs, spotting waste, and regulating expenditure to stay within the budget.
Accounts Payable (AP) & Accounts Receivable (AR)
Reduces errors and payment delays by automating accounts payable and accounts receivable processes. Additionally, it can conduct transactions in a variety of global currencies, a capacity known as multiple currency operation.
Fixed Asset Management
Businesses can track depreciation, monitor and manage assets like cars and other equipment, and lower maintenance costs with the help of an equipment tracking service.
Risk Management
Assesses credit risks and the general management of operational risks that impact the cash flow management of businesses.
Financial Reporting
This feature of the finance module in ERP provides multiparadigm reports that can be shown graphically or in tabular form. These reports help companies' management make decisions and players meet their financial obligations.
Processes managed by ERP finance modules
The Finance Module in ERP streamlines and performs a variety of essential processes, enhancing efficiency and accuracy in financial management. Here are the key processes these modules handle:
1. Asset Management
Oversee the entire lifecycle of assets, from acquisition to retirement. This includes recognition, registration, amortization, and disposal. Key performance indicators (KPIs) include fixed asset turnover ratio and percentage of fixed asset loss.
2. Budget Management
Establish and monitor budget strategies. This process involves setting targets, validating assumptions, and obtaining approvals. Measure effectiveness with KPIs like time to produce and approve budgets and budget variance percentage.
3. Expense Management
Manage expense policies and processes, including report submissions and cash advances. Analyze performance with KPIs such as actual expense versus budget, expense-to-sales ratio, and payment cycle time.
4. Supplier Payment Processing
Ensure timely payments to suppliers. This involves managing prepayments, discounts, and settling liabilities. Relevant KPIs include the number of payments processed and days payable outstanding (DPO).
5. Customer Payment Collection
Handle customer invoices and receipts. This includes creating invoices, managing billing issues, and processing payments. Monitor effectiveness with KPIs like average invoice age and days sales outstanding (DSO).
6. Debt Collection
Oversee the collection of outstanding receivables. This involves generating statements, managing disputes, and optimizing collection efficiency. Key metrics include the number of delinquent accounts and time to settlement.
7. Bank Reconciliation
Reconcile bank transactions such as payroll and collections. This process ensures accuracy and involves reviewing transactions and managing cash positions. Important KPIs include the time to reconcile and total reconciliations performed.
8. Tax Provisionin
Ensure tax provisions are accurate and compliant at the end of each period. This includes monitoring close status and calculating provisions. Use KPIs like the number of return-to-provision adjustments to assess performance.
9. Statutory Tax Filing
Prepare and file tax documents across jurisdictions. This involves managing data and ensuring compliance. Key KPIs include effective tax rate (ETR) and percentage of on-time filings.
10. Revenue Recognition
Manage revenue from customer contracts over time. This includes identifying performance obligations and recognizing revenue accordingly. Relevant KPIs include time from fulfillment to revenue recognition and the number of revenue accounting entries.
These interconnected processes enhance an organization’s financial health, providing real-time insights into its business situation. By utilizing the features of finance module in ERP, companies can make informed decisions that align with their operational goals.
Benefits of ERP Finance Modules
Finance Module in ERP facilitate and undertakes several general and necessary procedures that make the financial management effective and efficient. Here are the key processes these modules handle:
Improved Financial Transparency
The Finance module in ERP provides insight into all of the business's financial operations. The most recent data can be used by the company's leaders to assess its financial performance.
Better Decision-Making
A leader can make decisions that will benefit the organization if they get accurate and current information from their subordinates. Predicting income and expenses for the appropriate budget plan is another benefit of accurate analysis.
Increased Productivity
Automating financial activities includes all repeated processes, including invocation. Instead of manually copying data, this efficiency enables the financial teams to free up time for planning and data analysis.
Risk Reduction
Compliance and governance mechanisms that are automated decrease the likelihood of noncompliance. This not only prevents costs and possible penalties related to non-compliance but also serves as this paper’s most compelling motivation for its recommendations.
Enhanced Financial Reporting
Reports generated from a consolidated database also have the benefit of removing the potential for reporting inaccuracies. Because of the staff's availability, analysis may take longer than data compilation. Trends on the mechanisms required to expedite other strategies are particularly helpful.
Optimized Resource Allocation
When high-quality data is accessible, resources can be managed effectively. With the goal of increasing revenues, this enables firms to identify areas for improvement, and resources must be distributed appropriately.
Faster Financial Close
By automating procedures, ERP systems address typical issues in the financial close cycle. This expedites everything, ensuring timely report delivery and providing you with faster access to critical insights for more informed decision-making.
Stronger Vendor and Customer Relationships
Communication with customers and vendors can be made easier with the aid of several centralization management technologies. It is true that prompt payments and correct billing increase the level of confidence between the service supplier and the service recipient, which in turn improves the quality of the services provided.
It will be simpler to handle financial operations and get knowledge that results in system advancements when a business integrates a finance module into ERP. Therefore, the finance module in ERP is the greatest investment for companies looking to improve their financial management.
Need a trustworthy ERP partner?
High Systems (HSE) is here to help, so don't worry. As one of Odoo's official partners, we design Odoo ERP systems to meet your company's requirements. We have been in business in the Middle East for more than 20 years, and we make it easy for you to begin with the least amount of stress.
Our team of professionals is available to provide training and assistance so that you are completely prepared to excel with the ERP program's finance module.
Find out how Odoo ERP may improve your financial situation. For more information, visit our website or contact us right now.
Related Article :
- Best ERP System in Dubai