The Enterprise Resource Planning system, commonly referred to as an ERP accounting system, consists of a set of software modules that help businesses improve the information flow between functional departments, enable the companies record their transactions and monitor their performance.
Prior to the introduction of the ERP systems about 25 years back, companies were making use of different software for each functional area of the business. To give you an example, the purchasing, accounting, inventory and sales departments were operated with the help of independent software packages. It was not only tedious, but also unreliable and error prone to track even the most simple business activity across the different departments.
A properly designed ERP system, however, has the capability to process any type of transaction from all departments of an organization to enable real-time tracking of operations of your business and provide accurate information to the managers. By implementing an ERP system in your organization, you can get rid of the need to export data from several systems and carry out additional computations to be able to accurately record, compare and evaluate your company’s performance.
ERP systems can be operated on a wide range of computer hardware as well as network configurations, employing a database as the information depository. They can be installed and maintained locally or on the cloud.
ERP Accounting System Modules
An ERP accounting system consists of several software modules with each one of them mimicking a major functional area of your organization. You can also selectively implement the ERP modules that are technically and economically viable in your specific case.
Production Planning Module
This module helps you to optimize the utilization of your manufacturing capacity by making use of historical production data to forecast sales. You can also monitor and compare the production and development budget against the actual costs incurred to date, identifying avoidable costs that you should be cutting.
The purchase module streamlines the raw material procurement function in your organization, automating the process of identification of suppliers, printing out purchase orders and billing. This module is integrated with production planning and inventory control modules.
When this module is integrated with accounts payable, inventory and order entry modules, it provides a comprehensive purchasing system that enables you to accurately record your orders, track your working capital and forecast your cash needs.
Inventory Control Module
The inventory control module provides a multi-location system that aids you in tracking stock levels, shipments, returns as well as adjustments. It also helps you to maintain appropriate stock levels in different warehouses. Integration of this module with those of purchase, sales and finance enables you to generate reports, reduce your excess stock and therefore cut unnecessary costs.
Sales Control Module
The sales module handles functions such as order placement, scheduling of orders, shipping and invoicing. Sales module can be integrated with your e-commerce website as well.
This is the core of any ERP software system. It gathers financial information from the different functional departments, enabling the company to both record and generate reports such as general ledger, balance sheet, trial balance, quarterly financial statements, etc.
Human Resources (HR) Module
It is this module that helps you to manage the human resource of your organization. It enables you to maintain a database of all the employees including attendance, salary details, performance, promotion, training, contact details, etc. Advanced HR modules integrate the database with knowledge management systems in order to help you make the best use of the expertise of employees.
This module delivers the tools that are required to help you manage simple as well as complicated contract jobs or projects. It makes it easy for you to prepare estimates, track costs, raise bills or submit quotes.
Benefits from Implementing an ERP Accounting System
An ERP system that has been thoroughly designed, set up properly and implemented correctly will provide a great deal of benefits to your organization, irrespective of its size.
• It helps to greatly improve the quality as well as the efficiency of your business. As the internal business processes get streamlined, you can focus more on core activities such as manufacturing and customer service.
•It provides you with information essential for making critical decisions.• It makes your organization more agile and better equipped to adapt to change. It enables flexibility so that the functional departments in your organization can work more efficiently.
• It improves data security because the common control system enables organizations to ensure that there is no compromise as far as key company data is concerned.
• It provides increased collaboration opportunities. An ERP system allows employees to share resources.
In the fast-changing business environment, implementation of an ERP system is not just the key to achieving business success. It is actually a core element that is essential for survival. If you are finding it difficult to get reports in real-time, your employees are wasting time entering the same data into different systems or your employees are using spreadsheets to calculate key business metrics, then your organization could benefit by implementing a modern ERP system.
We hope this article has helped with your understanding of what an ERP accounting system is and what benefits it can bring to your business. You may also find some of our other articles on this topics of use: issues that should be addresses in an EPR implementation; some of the better vendors to consider; and how open source ERP might be a better fit for your business needs.