What are the initial thoughts that come to your mind when you hear about the term enterprise resource planning (ERP)? If your answer is one of on-premise, Cloud ERP, production, inventory, discrete manufacturing, process manufacturing, or simply manufacturing in general, your thought process is absolutely normal. These are actually the top-of-the-mind recalls for the people who have a vague idea about the ERP systems. People who think about finances or financial record-keeping after hearing the term ERP are very rare, and those who come up with year-end closing are even rarer. And even as one rarely establishes a connection between an ERP system and the company’s financial management, it remains a hard fact that an ERP software simplifies financial record keeping and year-end closing.
There was a time when the financial management software meant the spreadsheets, which were pretty much prone to corruption. But those days have been left far behind now, with the modern-day ERP systems have evolved to a great extent. What we see today are far more advanced ERP software with a wide range of tools for financial management- and this includes specific functionalities for financial record keeping and year-end closing. This blog throws light on those functionalities, and underlines the role of an ERP software in simplifying financial record keeping and year-end closing.
An Finance ERP module has many benefits to offer to a company’s financial management in general, and to simplifying financial record keeping as well as year-end closing in particular. Let’s begin with financial record keeping first.
A critical tool to simplify a company’s finances
An ERP software acts as a crucial tool to iron out the flaws and make the entire process of financial record keeping smooth. It does so predominantly by improving and streamlining the reporting, banking, consolidating, income statements, balance sheets, and the financial accounting system. By streamlining these functions, companies can ensure that they achieve maximum efficiency, accountability, and productivity.
To begin with, using ERP software, businesses can create and generate customized as well as comprehensive reports. Businesses have a vast amount of financial data on a company’s sales, orders, billing, payables, receivables, labor, production, etc. An ERP gives the users instant access on the critical information pertaining to these functions, and helps them analyze how the finances come in and how are they being utilized. This visibility to the company’s actual financial position at any given time empowers the businesses to smarter financial decision making. Besides, using an ERP system, businesses can successfully make budgeting forecasts by analyzing the actual with the planned/anticipated based on past trends, and by creating multiple options based on specific “what-if” criteria gathered from various reports.
Moving ahead, an ERP system also tracks all the cash receipts and cheque writing to deposits, advance payments, bank reconciliations etc., and maintains different payment modes, thus simplifying banking. ERP systems can also automate payments by using electronic withdrawal and automatic deposit, decreasing the need for paper invoices and checks. ERP can further simplify financial records through the use of electronic bank statements. Furthermore, an ERP system also ensures consolidation by allowing the businesses to combine financial records from entities within their organization (regardless of number) into a single set of financial statements.
Income statements, and balance sheets made easier
Another area where an ERP system scores big in terms of simplifying financial record keeping is income statements, i.e. comprehensive record of a business’ revenue and expenses for a stipulated period that is compiled using data from ledgers, financial reports, and expense reports. An ERP software fetches the information from ledgers, financial statements, and expense reports into one comprehensive income statement, which can give them a complete overview of the company’s financial standing at any given time apart from helping determine sales and growth trends.
What an ERP also does to simplify the financial record keeping is that it makes the balance sheets easier to read and understand. The businesses can produce a balance sheet history, and tell who ever it may concern that they are compliant with current laws and regulations. Additionally, through its financial accounting system, an ERP reduces the paperwork, eliminates error-prone manual processes, simplifies financial procedures, and streamlines financial planning and management. In a nutshell, an ERP software, thus, acts as a platform that simplifies financial records, and helps pave the way to business success and growth.
ERP for simplified year-end closing
The major challenges businesses face while year-end closing is on the inventory, and tax reporting fronts. However, an ERP software simplifies things for businesses by automating these tasks, and thus eliminating costly errors to facilitate data-driven and insightful decision making.
To begin with, manufacturers find it difficult to keep the production going in full swing as they conduct a physical inventory count at their warehouses to make an accurate account of all the materials and finished goods for their financial statements, so as to meet their year-end closing requirements. This process can’t be completed manually, and has to be assisted by an ERP software that comes with warehouse management capabilities. Such software are known to reduce the amount of downtime required to complete inventory counts, as the inventory can simply be counted using scanners and barcodes, and the data can be updated to the system in real time. This ensures zero downtime, no need for error-prone manual counting, inventory accuracy, time and monetary savings, and a smooth year-end closing.
Moreover, the year-end financial statements that include balance sheets and cash flow statements consume a lot of time as well as manpower. But since they are an important requirement for tax reporting purposes, businesses invariably look for a workaround to this problem. An ERP software automates the reporting and compliance documents according to the industry-specific needs. Importantly, the reporting functionality allows businesses to determine profitability for the current financial year and with budget forecasting for the next year.
Some of the other benefits an ERP system delivers to businesses on the financial management front are streamlined operations, real-time in-depth financial insights, seamless integration between the Account Payable, Account Receivable, and General Ledger with all other ERP modules such as inventory, sales, purchase, materials management etc., quick posting of journal entry, easy data entry, and greater coordination among different areas of business.
To sum up: An ERP software is the missing piece in your business’ jigsaw puzzle, as far as smooth and streamlined financial record keeping and year-end closing are concerned. We at BatchMaster can help you with solutions tailored to meet the financial record keeping and year-end closing needs of your process manufacturing businesses. Connect with us today to explore the unlimited possibilities in this regard.