ERP & Financial Compliance: What You Need to Understand

Financial compliance simply means that your business is in compliance with all the rules established by regulatory organizations. These will vary from country to country. In the USA these include the Securities Exchange Commission and the rules of the Sarbanes Oxley Act. ERP financials have a responsibility to assist in financial compliance, but the buck stops with how you implement and utilize your ERP system for financial management.

Transactions are at the heart of any ERP financial system. As these transactions accumulate they add up to our on hand inventory and our sales order backlog and other totals we care about. Are your transactions all treated in accordance with generally accepted accounting practices? They should be and this is standard with most ERP systems.

What Is so Hard about That?

We usually see a time and date stamp on every transaction and the name of the person who entered the transaction. This is our audit trail which is one of the GAAP requirements. In addition, we want to ensure that only authorized people can create certain transactions. We can use the user security section of our ERP to allow people in sales to enter and adjust sales orders while only people in inventory control or shipping can record that a particular order shipped. Then other people in finance will invoice the customers and collect payments through the ERP financial modules. Segregation of duties is another requirement for ERP financial control and compliance.

Processes of all kinds should be documented and we should audit regularly to ensure those processes are followed. Documentation of any financial-related processes and the audits are also a part of ERP financial compliance.

Problems come from the selection and implementation of ERP as a tool to enhance the ability of a business to carry out its mission to deliver products and services to customers

What is so hard about these requirements? Nothing, really, as most are built into your ERP system from the beginning. The problems come from the selection and implementation of ERP as a tool to enhance the ability of a business to carry out its mission to deliver products and services to customers. Any needs of finance might be treated as secondary. While it might be true that your customer would not be eager to pay for financial compliance, they do recognize that compliance is not optional and would pay for it without complaint.

Include your accountant in the ERP team. They must verify that all compliance requirements are addressed in your business processes and in the ERP financial modules. That includes in the up-front selection of ERP. It also includes a role in the configuration of the system controls at implementation. Your ERP might allow you to turn off some or all of the audit logs. The system will run faster and use fewer IT resources. If that log is required for compliance, pay attention when the accountant objects. Don’t wait for your CPA to issue a conditional statement after the end of the year.

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Tom Miller

About the author…

Tom completed implementations of Epicor, SAP, QAD, and Micro MRP. He works as a logistics and supply chain manager and he always looks for processes to improve. He lives near San Francisco Bay in California and can be found on the water in his kayak or on the road riding his motorcycle. Contact Tom at

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Tom Miller

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