ERP finance modules guide (finance features in ERP)
Your ERP finance module is a significant component of your ERP implementation - it handles everything from accounting procedures, to tracking profit, and financial reporting. While it's expected that your ERP financial module should handle features such as accounts payable (AP), and your general ledger (GL) requirements, there are a vast range of functionalities available in today's ERP software market. ERP systems have a wide range of capabilities in all areas, and finance is not unique in that different systems will support different requirements.
When you’re validating ERP financial modules for your own enterprise purposes, you should be prepared to investigate, and clearly understand these capabilities, in order to meet your specific functional requirements. Enterprise resource planning systems typically operate on a modular format with the ability to take or remove components from your configuration - it is unlikely you will choose to remove your financial features from your main system, but there are other components that you may add which you should ensure are supported by your system. If you are handling payroll and reporting in your ERP, you should make sure that your ERP can consider this in its calculations - particularly when tracking profit and loss in time to manufacture items beyond simply tracking material cost.
What is an ERP finance module?
An ERP finance module gathers financial data and turns them into reports including quarterly financial statements, ledgers, profit tracking, and balance sheets. A finance module in ERP is a central part of your business - you need to know where the money is. Your finance module should handle transactions, invoices, as well as offer reporting and revenue management across your entire business spanning all your departments, and allowing each department access to the data they need.
Let's take a quick look at what features you should include in your ERP finance requirements.
What ERP finance module features do I need?
- General Ledger
- Accounts Payable
- Accounts Receivable
- Asset Management
- Cash Management
- Customer management
- Vendor management
- Banking management
- Profit tracking
- Multi-currency capabilities
This list is not exhaustive but includes lots of areas where financial reporting and tracking are important to most businesses. Your ERP financial module is a distinguishing feature of ERP - most integrated systems don't allow for full oversight of spend and financial reporting across all areas of business like ERP does - make sure you use it effectively.
ERP finance module features
Let’s take a look at what a typical full-featured ERP finance module offers; then work against this set of capabilities until your own requirements exceed, meet, or fail to meet the baseline. Using Oracle’s ERP finance module as a model, the following functional tiers apply:
- General Ledger (GL)
- Accounts Payable (AP)
- Accounts Receivable (AR)
- Asset Management (FA)
- Cash Management (CM)
Within these tiers, necessary data dependencies apply involving:
- Customer management dependency due to the AR tier
- Vendor management dependency due to the AP tier
- Bank management dependency due to the CM tier
When considering your financial ERP module requirements, you should break down your business' needs from each feature. For your General Ledger requirements, you may request automating transactions, or you'd like your ERP to have preset rules that calculate the amounts for your GL transactions. In Accounts Payable, you may need your software to be able to accept invoices in multiple currencies, as well as different payment systems. Your ERP finance module requirements are something you need to strongly consider when drafting up your ERP requirements document, our requirements template includes eight sections, and twenty functionality questions so your business has a full picture of exactly how your ERP needs to handle finance.
At an enterprise-wide finance level; other necessary data integrations apply including:
- Accounting management integrated in association with the GL tier
- Soft and hard assets management in association with the FA tier
Each dependent tier, and/or related enterprise integration interacts with three core elements:
- A form generator that allows the entry, alteration, or deletion of individual records
- One or more distributed databases that store, and retrieve individual or multiple records
- A report generator that retrieves and soft-displays, or hard-prints, consequent, demand-based information
Processes managed by ERP finance modules
Ultimately these direct and indirect components allow a series of cohesive financial actions that allow the user to execute the following processes:
- Manage interactions between the enterprise and any involved product vendor, supplier and service provider by using the AP tier.
- Receive, account for, and manage customer-driven revenue data via the enterprise GL integration and the AR tier.
- Manage and reconcile bank-related records through the auspices of the CM tier.
- Index, track, value, and actively manage soft, and hard, assets across the enterprise by use of the FA tier in association with the GL integration.
- Establish, track, value, and manage the enterprise’s overarching financial framework by applying the GL integration.
Together, then, these five key features establish an ability to produce a comprehensive, finance-based, understanding of the enterprises’ business situation in realtime. When applied appropriately, these feature-sets produce relevant financial information that will accrue to, not only, the company’s business goals but also its operational requirements as well.
As I mentioned at the outset, while this baseline description represents a full-featured model, smaller ERP platforms may, or may not, apply. Consequently, as with any other feature validation effort, be sure that you begin your process by establishing a comprehensive set of requirements to use as a planning tool.
Should you fail to do so, you will run the risk of missing some salient bit of information, or worse, buy the wrong system, for the wrong reason, at the wrong price.
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