The digital revolution continues its triumphant march all over the planet, conquering ever new industries and spheres of activity. IT solutions are increasingly used by various businesses and individuals to considerably streamline or entirely automate a plethora of routine operations and free humans to pursue more creative activities that machines are yet incapable of.
Some assignments turn out to be exceptionally fitting to be delegated to the cyber brain and accounting is definitely on the top of the list of such processes. Dealing with the data that mostly consists of numbers is a monotonous job that requires constant concentration and meticulous attention to minute details. And that is exactly what ERP system in accounting is good at.
ERP Software Accounting: A Complete Guide for Astute Business Owners
ERP or Enterprise Resource Planning (aka SAP – Systems Applications and Products in Data Processing) is a kind of software widely leveraged by companies to ultimately enhance their revenues. Being similar to CRM in this overarching goal, ERP adopts different tactics of attaining it. Facilitating data management, CRM is focused on improving rapport with the clientele and processing customer data. By contrast, ERP is called to boost cooperation within an organization by sharing huge amounts of information across all departments with the subsequent efficient handling.
While being quite accustomed to seeing this tool leveraged for various operations with data, many entrepreneurs still ask “What does ERP mean in accounting?” since, at first sight, ERP and accounting seem to be far-sundered domains having little in common. Yet, the ERP accounting definition shatters this misconception and explains how the two may be married to propel your company on the road to success.
What Does ERP Stand for in Accounting?
Trying to explain the role of ERP in accounting, experts often do it by contrasting ERP vs accounting software employed by organizations as a standalone solution. The latter is typically described as a suite containing a set of modules used to manage all financial activities of a company, such as sales and purchase orders, expense handling, electronic payments, billing/invoicing, timesheets, etc. Moreover, it is extremely helpful in compiling vital financial reports, including income statements, balance sheets, as well as profit and loss statements.
What is ERP accounting software and how is it different? Accounting ERP systems do all of these and perform a bunch of other functions to boot. In addition to the abovementioned parameters, ERP accounting systems software is instrumental in tracking numerous tangible and intangible assets. The former encompass human resources and materials, while the latter consist of working hours, customer relations, product life cycles, and other basic performance indicators.
In view of the foregoing, it is evident that the opposition of the accounting system vs ERP is a fallacious one. The modern approach to dealing with accounting issues presupposes integrated solutions when the respective module is a part of the ERP package. Alternatively, you can start digitalizing your company’s activity by introducing standalone accounting software and then supplement it with some activity-specific modules (like supply chain management, reporting, and analysis), effectively turning the entire structure into an ERP financial accounting system.
The Truth and Myths about the Meaning of ERP in Accounting
Together with the faulty counterposition mentioned above, there are many other delusions circulating the business world about ERP as a kind of accounting software.
Myth 1: A Small Company Doesn’t Need Accounting ERP
Many budding entrepreneurs believe that the small-scale venture of theirs has too little staff and a modest scope of operations to bother about the introduction of any accounting software. And an entire ERP system is surely for huge businesses with their prodigious capital turnover and thousands of employees on the payroll. So, when the company has grown enough, the time for implementing ERP will come.
The Myth Buster
Modern ERPs are designed to suit any size and kind of enterprise, catering to a wide gamut of business needs and requirements. Just make sure you pick one that is the perfect fit for the venture of yours. Moreover, its modular structure allows for easy scalability with a view of a company’s expansion.
Myth 2: ERP is a Pricey Item
ERP sounds expensive, especially if it is a cloud-based one. Since it is meant for business purposes, it purports to cost you a pretty penny, which contradicts the popular ethics of staying lean.
The Myth Buster
It would be useless to claim that a good accounting ERP can be bought for a bargain price from next to nothing to old songs. Yet, this is an investment that is sure to pay off by increasing the efficiency of your personnel. The legends of enormous ERP-related expenditures often come from the wrong scope or over-engineering solutions chosen by companies that acquire functionalities they hardly employ and may perfectly do without.
Myth 3: What is an ERP Accounting System Introduction but a Long-Lasting Nightmare?
“Well-informed people” believe that tailoring a system to the unique needs of your organization is a matter of weeks, if not months. Migrating data, documenting procedures, harmonizing the accounting ERP with the existing technical ecosystem, and final testing will put on hold other business activities indefinitely.
The Myth Buster
Implementing any novelty is a disruptive procedure, yet talking of months-long chaos ravaging the entire company is a shameful exaggeration. Having accumulated considerable experience in system integration services, the specialists of our company can state with confidence that configuring ERP takes a couple of days provided there are clear business requirements which have been explicitly articulated and previously agreed upon.
Myth 4: Training Employees to Use ERP Accounting is a Headache
Instead of doing their job, the personnel will grope their way with using ERP by trial-and-error method often botching the tasks. They will have to stay in the office beyond working hours to learn the nuts and bolts of the new software, which bodes no good for the morale among the staff.
The Myth Buster
Learning new skills and switching to another modus operandi is always a challenge. To cushion the blow, you should choose the right partner for implementing ERP, or any software, for that matter. The best of them offer consulting, support, and maintenance services being instrumental in helping your personnel to take changes in their stride.
Myth 5: ERP is the Concern of the IT Department and the Management
Average reps may think that any software is the responsibility of the IT folks who should implement it and the executives who will thus have fewer errands to attend to.
The Myth Buster
Of course, the IT people will see – that the system is launched and works properly, while the management will exercise general supervision over its functioning. But since it is the ordinary employees who will use the ERP accounting process most, this software benefits them especially, so their active involvement and genuine enthusiasm matter greatly.
Elements of ERP Accounting Software
As is the case with conventional accounting, there are some software components that make supporting and monitoring financial activity possible.
This is the foundation of any accounting system responsible for managing all financial operations. As a part of ERP, a general ledger is called to provide you with accurate financial data in real-time and can be accessed from any device. Plus, it should be protected enough to prevent unauthorized intrusions or tampering with the data. All other accounting software components can be considered as sub-ledgers.
This component shows payments that come in, enabling you to see which clients paid on time and which are still due. Tracking all transactions, purchases, billing, as well as recurring and deferred payments will prevent sending outdated invoices and let you remind the customers who haven’t paid about the fact. If your clientele is large, this sub-ledger becomes an indispensable element in supervising the inflow of money.
Again, this feature is about the money flow, but in this case, the current direction is aimed outward. It lets you track invoices and automatically and instantly pay for anything you buy. Thus, it completely excludes paying for services twice or missing the payment date. Besides, the module provides transaction history so that you could analyze how efficiently the system functions.
It is a feature especially important for larger companies that own great amounts of property, commodities, real estate, etc. All of these are united under the umbrella term “assets”. Tracking the lifecycle of them is a headache for such organizations, so it is where your ERP steps in. Moreover, it can be done via mobile apps that enable you to choose employees who will be granted access to the data in question, so security issues are taken care of, as well.
Traditionally, this financial aspect was handled manually (even in large companies), which required a lot of time, effort, and manpower.
ERP accounting software automates salary calculations, taxation issues, hiring, retiring, vacation or sick leave payments, and any other personnel-related expenses.
Analytics and Audit
This module goes further than just gathering information and accumulating it in one place. It processes the data to make conclusions about the company’s overall strategy or its particular aspects. In the time of cut-throat competition when the speed of decision-making is often your main differentiator, such function is what will let you thrive, outselling your competitors.
Teaching your Personnel to Work with ERP Accounting Software
If you have a robust ERP enabling accounting, it won’t bring value by itself. To make it your asset, you should train your staff to leverage it to the full extent. How do you go about it?
Keep the Personnel in the Know
People tend to dislike changes, especially if they involve additional efforts on their part. To forestall and mitigate the possible backlash that may develop after your employees realize that a new age has set in, it is necessary to communicate with them. Briefing the staff on the reasons for introducing state-of-the-art software and its benefits is sure to allay fears of one part of the team and motivate the other.
Evaluate Strengths and Weaknesses of Your Staff
Before shaping your plans, it is necessary to realize where you stand. Assessing your employees’ hard and soft skills as well as the ability and desire to learn is important for choosing the best course of action and techniques to reach the goal.
Come up with a Training Plan
A detailed plan should consist of a definite number of stages with an indication of the time required to study each aspect. To make sure the people have mastered the content, some evaluation metrics should be envisaged. The flexibility of the plan is what matters most. Preferably, a self-paced approach is to be applied to let each person move along with their own speed (within reasonable limits, of course).
Monitor the Progress
No matter how flexible the strategy might be, deadlines must be set and met. But it is a bad idea to wonder how the trainees are doing a day or two before the bell rings. Tracking the progress on a permanent basis to identify the laggers-behind is the best approach to adopt.
If you want the training to succeed, it is vital to keep your ear to the ground and hear what the trainees think of it. Moreover, you should inquire about how the employees are using the ERP that have you deployed and what skills of working with it need tweaking, honing, or even overhauling.
If you follow these tips, your personnel are sure to master any ERP you install. But it shouldn’t be just any ERP. The choice of the integrated accounting software that will suit you to a tee is the cornerstone of success in whatever business you are engaged in.
ERP Accounting System Examples
There are several major players in the ERP market whose solutions deserve special consideration.
Coming with a free trial version, this cloud-based solution is easily scalable to grow together with your company. Its accounting module enables tying sales and order fulfillment to pricing, which, together with its comprehensive cross-departmental integration, provides full visibility of the organization’s workflow. In NetSuite, all financial back-end processes (expenditure and asset management, billing, inventory, etc.) are automated, giving employees more time for their core responsibilities. Customers can choose among several packages with a different scope of functionalities, finding the best fit for their enterprise.
It is an excellent tool for startups and small businesses, which is simple to learn and use. With its three basic components being reporting, inventory, and pricing, it is primarily honed to cater to accounting needs, so many companies employ its Balance Sheet, Profit and Loss, and Chart of Account functionalities. It is somewhat slow in performance and hard to switch between modules, but as an elementary system of financial record, Quickbooks is second to none.
This cloud-based software is a perfect fit for manufacturing and wholesale distribution ventures. Its forte is data entry streamlining that enhances this dreary procedure and eliminates human error at the same time. Another Sage productivity-boosting functionality Sage is a multicurrency management tool, which, combined with sales tax automation, makes this software especially valuable for international financial operations. Its pricing plan is an epitome of flexibility, allowing users to pick and pay only for the modules and features they need.
Being quite comprehensive, this tool excels in the manufacturing sector, taking care of taxes, costs, and payables as well as providing forecasts and real-time data tracking. To automate some tasks and produce valuable analytics, Syspro leverages smart platforms communicating online (the so-called smart factories). Once you opt for it, you should contact the vendor as it is delivered on a quote-based plan (both locally and accessed from the cloud).
Microsoft Dynamics Nav
This solution can also be either deployed locally or in the cloud, but only on Windows-powered devices (unless you are ready to pay for the app that can be hosted elsewhere). With its in-built currency exchange rate feature and multiple-language support, it is especially valuable for international business operations.
This tool’s accounting fortes include multi-entity accounting and automated record-keeping. On balance, it is most effective when leveraged by midsize companies.
If off-the-shelf solutions don’t beckon to you, our company is where you should address. We can build a custom accounting app tailored to your specific needs, so you will pay only for the functions you want to see in it. Of course, it can’t be done in a jiffy, but if your priority is a top-notch product living up to your expectations, it is worth a little waiting.
The competition on the global market of today leaves you with no choice, but to employ business accounting software as a part of your ERP suite. By selecting the tool wisely and training your personnel to effectively use it, you will provide your firm with a powerful performance-enhancing means, which is sure to bring an inflow of revenues into your company’s coffer.