ERP: Finance’s Cardiac Monitor
Finance is the cardiac monitor of a company’s health. It can reveal the early warning signs of potential disaster or reinforce healthy behaviors. How effectively that monitor works, then, is crucial. Can you agree with the following statements about your company’s financial health monitor with confidence?
- Our financial management and accounting systems are easy to use, accurate and enable us to close our financial reporting quickly at the beginning of each month for the previous month.
- We are confident that our financial systems contain accurate data.
- We are confident in our accounts payable process and closely monitor our performance to assure that we are availing ourselves of offered discount terms.
- We have an accurate and timely invoicing process. We track our receivables closely to assure our overdue payments remain insignificant.
Or is the opposite true?
- We require too many independent spreadsheets to close out our books each month.
- We are uncertain about our inventory levels and they are difficult to track.
- Each month it seems to take longer and longer to reconcile our financials.
If the latter set of statements sound familiar, it may be time to consider an ERP system.
Enterprise Resource Planning (ERP)
Originally designed for manufacturing companies, ERP (as coined by Gartner in 1990) described the evolution of MRP (materials requirements or manufacturing resource planning) as it expanded to include Finance and HR.
ERP systems integrate business processes across functions. Many small to mid-size enterprises don’t realize how impactful that is – especially for finance. Individual departments relying on separate systems likely means variations in revenue and expense numbers. Reality is difficult to determine. As a result, time that could be used improving your business is instead being wasted on reconciliation.
Often, the first signs that your company needs ERP software will arise in the Accounting department. Listen to those pleas. An ERP system can help Finance in many ways:
Transparency
ERP systems enable the CFO to quickly delve into company details:
- Budgets, forecasts and project costs
- Forward-facing predictions and rearward-facing impact reviews
- Cash-flow analysis
With the ability to see real-time business details, financial and executive officers can provide the C-suite a current, accurate and holistic view of operation. That visibility provides the opportunities for rapid response to trouble and quick asset realignment to leverage opportunity – both strong competitive advantages.
Financial reporting
According to the MIT Center for Digital Business, companies that embrace data-driven decision management have 4 percent higher productivity rates and 6 percent higher profits. Financial reporting also includes government reporting when required.
Scalability
Enable production, accounts payable and receivables to be scaled to exact requirements.
Inventory Management
Through setting stock levels and automatic reordering, ERP helps business optimize inventory.
Asset Management
Replacing lost or stolen assets, or failing to put unused assets to use, wastes money. An ERP system can ensure better management of a business’s fixed assets.
Assuring ERP is a help, not a hindrance
The right ERP system for your business:
- is customizable, to meet your organization’s and industry’s unique needs
- is easy to configure and use
- eliminates the need to extract data into spreadsheets for producing meaningful reports and analyses
- is the sole repository of all business data
- improves employees’ productivity
- is expandable when your business expands
- the reports you need at “the push of a button”
- prevents painful financial surprises
Ask yourself how you would rate your current ERP system on a scale of 1 to 5, against each of these eight factors. A perfect score is 40. If you score 20 or less, it’s time for action. Your embedded problems are probably costing you a lot of money. Don’t allow it to fester.