The ability to respond to new customer needs and to seize market opportunities as and when they arise is crucial in the fast-changing scenario. Successful firms today recognize that a high level of interaction and coordination along the supply chain will be a key ingredient for their continued success. Enterprises are continuously struggling to improve themselves in the areas of quality, customer satisfaction, overall performance, and profitability. To achieve this, they have no recourse left but to propel the business in conformity with the dynamically changing environment and strive to bring automation of financial reporting.
ERP describes software which enables a company to effectively manage user access to its network resources. ERP is characterized as software which manages all the assets and resources of a business, including basic and peculiar applications such as general ledger, accounts payable and receivable, manufacturing, inventory, and human resources.
ERP is a cross-functional enterprise system driven by an integrated suite of software modules which supports a company’s fundamental internal business processes. ERP offers an integrated real-time view of the core business processes, such as production, human resources, sales & distribution, etc. ERP software consists of distributed functional packages of separate modules.
Objectives of ERP
- Provide support for all sorts of best business practices.
- Allow such practices to be implemented to increase productivity.
- Enable the customer to modify the business processes that are implemented to suit the needs
- Streamline data to bring automation of financial reporting
- Helps transform the company’s functions to be agile, cost-effective and focused on supporting business goals.
- Facilitate organizational decision making in a timely and effective way.
ERP Basic Features
Features and functions of Enterprise Resource Planning (ERP) help align management, personnel, and equipment, integrating all facets of the business into one framework to support every part of the manufacturing process. Typical modules of ERP systems include accounting features and functions, human resources (HR), manufacturing management, customer relationship management (CRM), and other business functions. This, in turn, ensures the automation of financial reporting or periodic financial statements being produced and presented with accuracy.
ERP software is often designed for a specific industry or manufacturing type with specialist features and functions. Before comparing ERP solutions, it is important to understand which features and functions you need to find the best ERP system for your business.
- Business System
- Fixed Assets
- General features– Application logic, common service functions such as the currency, date, editing, and help, diagnostic functions, transaction flow control, word processing, text, text editing, action messages, etc.
- Business System features- Business forecasting for products markets, business planning in the form of resources to execute, MIS for strategy monitoring and control, business modelling for the strategy development and testing, target fixing and allocation by the key parameters, etc.
- Sales features– Basic data (master) management, sales order processing, finished goods stores management, dispatching goods and invoicing, sales analysis, budgets and controls, receivables analysis, market research information database, etc.
- Production features– Bill of materials, product group classification, work order generation, scheduling and control, work process sheet, routing, WIP tracking, valuation, production Planning: BOM, MRP, MPS and capacity planning, Production-Materials interface, etc.
- Materials features– Purchasing and materials procurement, stock management and valuation, inventory-level analysis, quotation/inquiry processing, subcontracting, material accounting and bill passing, goods receipt and issue system, analysis of quality by process, material, work centre location, etc.
- Finance features– Ledger balancing, payables and receivables, cash-flow management, loan management, funds management, subsidiary ledgers, working capital management, assets accounting, bank reconciliation, consolidation of group accounts, cost analysis for business decisions, tax management, financial status reporting, accounting by units and divisions with a local focus, bringing out comprehensive report system for business decisions, etc.
- Personnel features– Personnel data management, personnel attendance system, time management, payroll accounting, salary, wages, incentives, bonus, income tax and other deductions, planning, recruitment, training and up-gradation of human resources, personnel cost, projection and planning, etc.
- Fixed Assets features– Fixed assets accounting: inventory, maintenance of registers, depreciation accounting, fixed assets retirement and disposal, capital work-in-progress, year-end processing for balance sheet schedules, building quality assurance data for equipment/process/technology selection, etc.
- Maintenance features– Plant maintenance planning, machine breakdown, preventive and conditional maintenance, monitoring performances for maintenance action as against all kinds of productive assets, etc.
How does ERP benefit in the automation of financial reporting?
Enterprise Resource Planning (ERP) encompasses the enterprise under one umbrella of computing systems, business processes and procedures intended to maximize business performance. Originally designed for manufacturing organisations, ERP is now available for a wide variety of sectors, including financial services firms and customer-focused businesses. ERP systems are being adopted by most of the organisations for innumerable benefits, some of which include the following:
- Integrated Information: Integration is a big advantage of introducing ERP. By integrating various divisions of the company, ERP helps to reduce operating costs. The main idea behind ERP is to control the accuracy of data and data entry as well as redundancy. A unified operating system will replace many, disconnected databases with a single system, integrating various applications and sources of data.
- Standardization of processes: A manufacturing business that has expanded through acquisitions would probably find that different units are using different methods to create the same product. Standardizing processes and using an integrated computer system will save time, improve efficiency and decrease headcount.
- Standardization of human resource information: A unified method of tracking employee time and communicating benefits is extremely beneficial, as it fosters a sense of fairness among the workforce as well as streamlines the entire company.
- Effective Management of Repeatable Processes: Repeatable processes are one of the fundamental priorities of ERP systems. By developing repeatable procedures, management will ensure that activities are performed using best practices across the organization. Employees can boost productivity by carrying out activities the same way every time.
- Lower Training Costs: Since the processes are the same throughout an enterprise, training programs are also standardized and reduce overall development costs. Training can be patterned and optimized to reduce the time spent in training, which ultimately leads to less non-productive time.
- Reduced Inventory Costs: ERP systems allow for integration between processes and ordering activities. Every time a procedure is executed; the inventory levels can be updated in real-time. Once a pre-defined level of parts inventory is reached, the replacements can be automatically ordered from the business supplier.
- Improved Business Visibility: Through generating reports based on real production activities, the organization’s overall performance can be measured and improved more easily. Things that may involve monitoring include time it takes to complete activities, levels of output, units of production per unit of time, and almost any metric that would help an organization assess its results.
- Enhanced and Efficient Technology: Since it has better access to data, this tool may also be used by top management to make better and more effective decisions. Besides, the ERP program has the potential to reduce manual work and streamline essential business processes for many of an organization’s departments.
- Easy Reporting: An ERP program strengthens and makes reporting more personalized. It provides easy report generation technique. With better data access, reports can be produced and modified whenever you wish.
- Easy Data Accessibility: An ERP system allows you to access data in real-time and boost self-service of critical information. Many ERP vendors provide mobile functionality so you can stay connected and well informed about your business processes and performance at all times.
- Increased Security: ERP system not only improves data integrity and security but also increases data restrictions to keep your customer information and business data safe and secure.
- Providing Business and Financial Solution: For almost every type of organisation, ERP offers the best business and financial solutions. It enables businesses to improve efficiencies in their everyday operations by enabling the flow of capital and funds into diverse and critical business activities.
Steps in ERP Implementation
For achieving automation of financial reporting, the steps involved in the implementation of an ERP system are mentioned below:
- Identification of the needs or factors necessitating the requirement for implementing an ERP package
- Evaluating the “as-is” situation or the present state of affairs of your business
- Deciding upon the future goals or desired would-be situation for your business
- Ensuring the commitment and involvement of top management (large investment decisions are invariably taken at the top management level)
- Reengineering of the business processes to achieve the desired results
- Evaluation of the various ERP software available in the market
- Selecting or finalizing of the ERP package
- Installing the requisite hardware and networks needed in your business unit
- Develop customers (or business processes) of the software
- Finalizing the implementation consultants (consultants will be hired to bring the “best practices” in the industry)
- Implementation of the ERP software
The criterion for choosing the ERP System for automation of financial reporting
The right framework for enterprise resource planning will combine key business functions, thereby improving the bottom line. The wrong application of ERP can drain your IT budget. When assessing ERP vendors, the following parameters should top the list.
- Functional Specifications: It is important to consider whether the application accommodates your business needs. Functional compatibility shall depend upon a complete analysis of the company’s unique business needs and the ERP industry’s varied solutions.
- Define and prioritize company processes: Identify core corporate functions, and curate a comprehensive view based on input from all stakeholders. Moreover, functional incompatibility can be avoided by determining that the ERP system is configured for discrete or process manufacturing, work orders or repetitive manufacturing, distributor or manufacturer process management, multi-plant or a warehouse setting environment, and multilanguage and/or multicurrency needs.
- Evaluate your options: Not all ERP systems are created equal and you should evaluate a product’s relative strengths. The Oracle Accelerate software, for example, leverages the wide spectrum of world-class business applications in the organization to offer a robust, modular ERP package.
- Business Model: While selecting an ERP package for automation of financial reporting, you must look for subtle issues such as company’s corporate culture and management style and how the system will harmonize with your model of doing business.
- Flexibility: Enterprise Resource Planning is a kind of long-range investment. A flexible system shall scale and grow with your company, accommodating new specifications and evolving business needs as they emerge.
- Time to Implement: A successful ERP rollout minimizes the conversion-related costs and disturbances. A smooth deployment process sponsored by the vendor also facilitates user buy-in and a quicker time to ROI.
- Industry Expertise: The ERP solution you choose should come with a proven track record of successful installations in your industry. Many ERP vendors provide applications customized to a particular industry. For example, the Oracle Accelerate program has applications for 32 industries, ranging from aerospace to wholesale distribution.
Some popular ERP service providers are SAP ERP, Infor ERP Baan/LN, Infor ERP SyteLine, Infor ERP VISUAL, Infor ERP BPCS/LX, Infor ERP Adage, Microsoft Dynamics GP, Microsoft Dynamics NAV, Microsoft Dynamics AX, Oracle Real Application Clusters, Oracle E-Business Suite, Oracle Grid Computing, support for enterprise Linux, and Oracle Fusion.
ERP plays a vital role in the automation of financial reporting for any productive business enterprise. A successfully implemented and unified ERP system will assist the company in enhancing the alignment of strategies and operations, productivity and insight, financial management and corporate governance. The key success factor for implementing ERP involves the dedication of top management, change management and resistance to over-customization. The ERP framework also allows for cost savings through greater flexibility and reduced overall risk.
Read our article:The Significance of Financial Analytics and Reporting for Businesses
Varun Hariharan has completed the Legal Practice Course from BPP Law School, Manchester. He has a Masters in Commercial and Corporate Law from the Queen Mary University of London and LLB Honours from Bangor University, UK. He specialises in law related to corporate, artificial intelligence and technology law.