The creation of the modern ERP system began in the 1960s. Most manufacturing systems were developed to assist accounting departments, with general ledger and accounts payable/ receivable functionality at the core. Over time, the systems evolved to include MRP and inventory control because understanding where and how you spent your money allowed for better cost control. Eventually, more shop functionality was added until the ERP software evolved into the version we know today, with less emphasis on the original financial foundation.
Today, ERP selections can lean toward the needs of the shop floor, leaving financial teams underserved. How can accounting departments get the functionality they need and meet the shop floor team’s system requirements?
The best way to balance the needs of both the front office and the shop floor is through a comprehensive ERP solution. Integration of third-party programs, such as QuickBooks or Great Plains into a core ERP solution can work, but the solution is commonly fraught with challenges such as duplicate data entry, information delays and silos, interface issues and customization expenses.
Benefits of a Comprehensive ERP System with Accounting Functionality
A comprehensive ERP system with accounting functionality developed on the same database as the rest of the software makes every aspect of your business visible, traceable and incredibly efficient. Take a look at how a comprehensive ERP system can seamlessly transmit and communicate accounting information throughout a manufacturing environment:
A quote/sales order comes in and as it is being entered, the customer service representative gets an immediate alert if the customer has exceeded their credit limit or is on account hold. When creating the sales order, all customer-specific price breaks and pricing terms are available for accurate invoicing. As shipments are released, sales order data is translated immediately to accounts receivable where an invoice can be sent to the customer with the click up a button. Post production, the ERP system can analyze labor, overhead, fixed asset depreciation and up-to-the-minute inventory costs to determine the actual cost to make the order and activity-based costing reports can be easily generated to determine the profitability of the customer. The kicker? Nowhere in the process was there duplicate data entry, manual interference or information delays.
With a comprehensive ERP solution, you gain full accounting functionality such as accounts receivable, accounts payable, business intelligence, expense tracking, financial reporting, fixed assets management, general ledger, human resources and payroll, job and process costing, invoicing, purchasing and more. The advantages of an ERP solution with native accounting functionality are impressive:
- Real-Time Integration: The real-time nature of a native accounting package means data is automatically gathered, processed and passed between modules across the whole enterprise for greater flexibility.
- Meticulous Bookkeeping: When the accuracy of your books is only as good as your data entry, then it is best to eliminate the errors and delays that accompany manual data entry as much as possible. Comprehensive ERP solutions allow for data to seamlessly move throughout the business without silos or data re-entry.
- Reduction of Time: Account closures, month end reporting and payroll processing time are all greatly reduced with comprehensive software.
- Labor Savings: Without the need for employees to rekey data or manage spreadsheets to generate reports, you can allocate your staff to new tasks and responsibilities.
- Activity-Based Costing: Gain a better understanding of the gross profit margins of your customers to determine their profitability and decide how to best manage their pricing structures.
- Powerful Reporting: Knowing how and where you spend your money and receive your income puts you in charge of monitoring cash flow, controlling costs and managing financial risk. With reduced reporting lags, you can make faster and more accurate business decisions with an eye on the bottom line.
- Accurate Forecasting: Populate an accurate budget by building a forecast supported by actual costs elements.
- Smoother Audits: Whether internal or external, financial audits are greatly improved with comprehensive ERP software that tracks every aspect of the business. Easily research historical information, track who made entries and when, and record who modified records.
- Robust Accounts Receivable: Aging and communication with your customers is greatly eased with automatic tracking of terms, violations and collections.
- Multi-Facility Management: For global, multi-facility companies, understand the influence of your finances over the enterprise as a joint system and easily manage operations for more than one office location.
There is no reason that both the shop floor and the financial department can’t be satisfied with a new ERP solution. The key is to stop trying to integrate a third-party accounting program into your ERP system and instead find a comprehensive ERP solution designed to support the entire enterprise.