ERP Modules: Features & Functions

ERP-Financial Management Systems

You are going to learn:

The ERP Systems;

ERP Modules;

ERP Finance module;

ERP Interview questions;

ERP Processes;

ERP and other ERP finance module tutorials.

The ERP systems are a great revolution in the field of business IT. It has piled up a wider range of business processes into a single system of business management. The modus operandi of this system is merely the running of data among different modules or simply parts of ERP systems. An interesting thing we cannot skip while talking about the ERP system is the module of finance being the nucleus of all the business processes. 

What does an ERP finance module do? 

It provides all the required and necessary data to the other modules so that the other modules may be enabled to carry out their specific tasks. As it is obvious that the Manufacturing department needs information for estimation, and the raw materials to be requisitioned, and the required labor time. The basis is provided to the human resource payroll and, to the procurement department, in turn to the supply chain is only possible in presence of artificial intelligence maintained in the shape of finance-related data. That’s why the module of finance secures the core position among all other ERP modules features.

An ERP system in absence of financial information works like being in a fathomless abysmal ocean. For effective and efficient Inventory management the system needs to be so powerful and advanced that may handle the related features of typical inventory management as financial management provides. This is a part or a connection between chain of  the ERP; you may think it like a part of accounting in ERP.

The systems must be fully automated for the determination of the required economical quantity for a relevant range. The said quantity needs to be ordered in such chunks as may be cost-effective regarding the size of orders and carrying or holding the quantity and the other related cost. This inventory management may be in such a manner that the cost of throughput determination must be clear. An ERP accountant can best understand how the automated system works for required quantity, average quantity, reorder level, lead time, and the required resources. When you look at a ERP financial module case study you will notice a common thing  that is all the business processes are interconnected like a chain or beads in a string. 

Inventory Management is then connected with liquid resources required for the running of a business. This is another part of financial management. It is either interconnected to budgeting or cash requirement, which is a part of working capital. So, financial management is the core basis for an ERP system. Financial management is related to decision making, therefore a well-established ERP system or more specifically we can say a well customized and configured ERP system being clear from data redundancy and well cleansed in a clear sense provides a perfect approximation for sound decision making.

Decision-making is a neural phenomenon; that requires mental sharpness and quick revolutionary skills abiding by the arithmetic rules. But for good decision making, we need some assumptions that may be extempore but based on the history of events. An ERP provides the same ground for decision-making that is regarded as the history of past events. So, some sort of consistent past data is the prime prerequisite necessary for the decision-making process. 

 The ERP financial systems provide the basis every department works on in a company. The decision-making process is required at every level of management ranging from baseline to the top-level management that carries out the strategic decisions. 

An ERP Finance/ ERP Financial Module reality? 

The financial part of the ERP finance module tutorial explains the finance module in detail that is supplied with the financial data to get processed. The financial data is provided to input either in ledgers or in form of journal entries. The specific system of ERP is modeled although not synchronous with IAS & IFRS but nearly to the accounting systems and procedures mainly focusing on IT requirement; this module processes the provided data and thus enables the users to generate the required reports more handily. These financial statements provide the basis for financial reporting that is made available to all the stakeholders in form of yearly or quarterly annual reports. 

The accounting part of the ERP systems assigns and segregates the duties of staff in larger organizations as the ERP systems is the requirement of larger organizations therefore it assigns different functions to different staff members such as estimations of cash requirement and management, processing of different vouchers, accounts receivable, and the processing of invoices, accounts payable, and the processing of payments, general ledger, daily registers, etc. 

Finance Module Salient Features-ERP Record Maintenance:

Inputting the data in different ledgers or registers is the starting point in the case of ERP systems after getting the required accounts made ready. This is recording the financial events of the business. 

These events are economic therefore maybe material, and all the transactions are required to be recorded by the business. So, is the reason for recording them. Then there may be any adjusting entries like at the trial balance stage of financial reporting. Or, there may be any write-offs against the provisions made for various estimates and materialized by the end of the period. All these things constitute record maintaining. 

Required Resources Planning: 

Primarily these reports are used to estimate the required resources for the business. How much cash do we need to run our day-to-day business activities? How many debtors do we need to maintain and how should be our debtor’s policy that may support our need for inventory or stock in trade. 

How many days do we need to pay off our invoices received? How much raw material do we need for the planned short-term or long-term goals? How many and what type of labor force do we need for specific or technical tasks to be accomplished for the specific period. For a required sales level how to run the business based on the total required resources. How much finance do we need from financial institutions, at what cost; how much can we finance by our debtors; how much can we finance by delaying the payments to our creditors. Planning for the required resources today ERP plays the key role to determine them. Sales level we need: 

 ERP gives us the direction to lead our business. As we budget for our business we plan every aspect. Planning for sales is the first step to start the journey of thousands of miles. If we plan accurately for the business we must make sales; but if there exists a strong competition among several rivals, then we must have an effective strategy for winning against our rivals. For this purpose, we need a veteran and sagacious marketing team mature enough to hold the other bulls by their horns. Sales must be planned using the past years' results so that the required value maximization for the business may timely be made. 

Therefore, our required sales; sales force; exploring the new markets; stock in trade; and the time to realize our sales needs our past to be kept in mind regarding profitability, inflation, demographic trends, and other systematic and unsystematic trends. 

Profit planning: 

Among other functions, a primary function of ERP; in the perspective of financial management modules is profit planning. The profit is planned through certain analysis and, product pricing and with a viewpoint of market competition. This is also a phase of estimation or budgeting but past data is used. Thus based on these parameters we plan for our profit. These are the points that contribute to the share price and determine the dividend to the stockholders and the taxation to the state. 

Planning the profits shows the major product line contributing towards the revenue or profit and the other products contribution too; that in turn determines the return on investment for any department or product. 

This tells us to monetize the efforts made for running the business. Profit planning gives rise to cost; that is the cost of sales. This way we can determine the cost incurred for attaining the level of contribution that shapes our profit. So, we imagine the names of responsibility centers; responsibility centers may be regarded as the different departments and their responsibilities for incurring the costs and making profits. 

The related tools are meant for customization to enhance the profit. 

Working with Ledger 

Working with different ledgers may not be allowed as in larger organizations there are many more transactions than a single general ledger may not effectively handle or in other words, a single employee may not be sufficient for all those transactions; this may be a statutory requirement or maybe constructive obligation of an organization or required as the best and only option. 

Therefore, the ledgers are segregated into different ledgers based on specialty or similar nature transactions and assigned to different staff. That is why ERP systems are the best choice for such larger organizations where so many employees work on different assignments as assigned to them and they have control over their assigned system for which they are completely responsible. The assigned ledger is a general ledger or any special one but records all transaction that provides their balance to the trial balance and finally to the financial reports. 

A special point let it not be skipped; is the integration of the general ledger or any other assigned ledger with other modules of ERP systems like one installed for customers or invoices to be paid that sits in the inventory module. ERP Systems give great flexibility to its users as one can make entry anywhere in the respective register or the parts of the interconnected application or directly in the general ledger but being restricted ERP system may not allow to independently make entries with such flexibility. 

But as a centralized organization working in a centralized manner, the ERP Systems working can be viewed in a central location for any entry made. As their assigned GLs are consolidated and summarized in a single report as is the example of Fixed assets or other tangible or intangible assets, capital, or revenue. 

Another advantage of this GL management is the handy accomplishment of statutory requirements; that is income tax return filing or VAT filing. Any anomalous activity may be checked easily. As the systems of ERP is fashioned in such a manner that it alerts us of any anomalous activity. 

Accounts Payable 

This is an integral part of CRM or the supply chain management whereby whatever an organization owes to the vendors and suppliers is recorded; invoices received or near to pay are recorded in this module. This is a part of the software that integrates with CRM and the procurement department and finally parks in the inventory system. 

Another factor of this module that is very crucial is its effects on the liquidity of the business. In simple words, the effect is on the balance sheet and cash flow statement. But the ultimate effect that may be seen is it is being cost-effective as the huge labor costs have been cut short by implementing the ERP systems. 

The system is designed in such a way that it does much more work in a quick and faster way that saves time that is the most precious resource. More sophisticated ERP Systems capture data from image forms and convert them into editable information that replaces clerical work. Ignoring the fact of spontaneous liabilities as managed in financial management the ERP systems tell the employees concerned about the aging schedules or other payments concerning the due date. 

Receipts 

As an organization wants to get its value maximized; for this purpose, it needs an effective operational strategy; therefore, its business is either manufacturing or trading type that is merchandising one, the business has to sell something; no matter if retailed from other suppliers or manufactured. This activity leads to the creation of debtors. Receipts or debtors in a business are the completion of the second effect of sales. Debtors are easier to be converted into liquid assets, that is why these are near to the receipts of a business, for the invoices are escalated and sent to the customers and clients to collect the receipts from them. 

Among different types of ERP software mostly provided by Oracle financial ERP, there is a built-in feature that allows the customers, to access a provided interface, access to their invoices and payments, etc. This system also alerts for reminders like to the customers and but now several systems are also operated through android apps that allow safe access to the account statements and alert the respective users in different ways. What is its advantage? Every organization has a debtor’s policy; for the speedy realization of the debtors' receipts, it may introduce trade or sales discounts.

Or for bulk sales or it may also bring such discount that enables the customers to buy more and this way the sales of the organizations boost. To be conclusive ERP systems automate the different sectors of a business as for the debtor’s management the system being the effective choice reduces much more costs related to the recovery and communication apart from another cost of financing the working capital or the permanent one. The collection process is not only less costly but speedy and may very well be assimilated into the debtor’s policy, which develops the cliental as well. True Picture of The business: 

At any point of time during a period, a user or a stakeholder may have some consideration in his mind that may need a strong supporting reason for his reaching a fruitful decision. Thus the record maintaining provides data for reporting. These reports may be generated at any point of time even before its set time and enabling one to get conclusive decisions. In short at any point, a clear and true picture of the business entity can be drawn using these reports. 

Fixed Asset Management

As tangible assets are long-term assets a company usually buys as a result of capital expenditure or incur period costs for their acquisition. 

But only busing and putting in use do not accomplish the goal. These fixed assets need maintenance and effective management. There may be a breakdown while using them or downtimes related to setups or maybe the normal wear and tear. 

How much the efficiency got affected is another related point that also affects the productivity, or capital, or other assets. All this needs sound management of the assets. The ERP systems do this management like nobody’s business. There may not be a need for an actuary or other expert when once the management of the assets is sound and programmed. All that is possible by using ERPs. 

The scope of ERP for assets management is so vast that covers all the assets of an organization regarding their record keeping, maintenance, and other capital nature expenditure, and the depreciation as well but based on all the statutory requirements applicable. The track record of an asset being depreciated gives a business organization an accurate estimation for the timely replacement of obsolete machinery and other assets. How effective is the use of the fixed assets is another aspect of a business organization but the handy gauge is provided by the ERP system? Indeed, it gives the right direction for the business. 

Tracking and managing the Risk 

These ERP Modules are available and operational to so many organizations across the world; customized and configured to the specific needs of specific organizations. Why?

Because of their credibility and highly built-in security features. In today’s highly competitive environment businesses in leading positions are much more prone to the vulnerability of theft of their top secrets that are part of their being so much successful. These ERP modules provide their needs to get accomplished in less time in a great protected mode, that minimizes the hindrance of many types of risks and apprehensions. 

ERP is well equipped with the risk management and recovery tools but again it is worth mentioning that these are based on customization and configuration of the software; that can be run anytime, in the crucibles entangling the organizational teams either; in the shape of bugs or any internal issue impending, or maybe a natural disaster brought by the natural blows, or any security or internal or external compliance risk jeopardizing the goodwill of the organization may well be tackled. 

Complying with the external regulations or internal standing orders may be a bit harder and dynamic; these types of synchronously arising requirements need the up-to-date knowledge that must the internal IT team possess so that risk may well in time be perceived and minimized. 

Like in FMCG based environment the organization cannot put the health of the masses in an area at risk. There may be external standards and regulations for the FMCG items therefore the organizations must keep track of these regulations and abide by them to order to evade such risks. Therefore, ERP must be the best configured for these types of alerts. As the financial module is the one that has a great part in business management. 

A well-managed financial management-based customized financial module must be like a guide for the implementation of financial strategy, it may be customized for the hurdle rate applicable for the financial investments, it must provide the risk of losing any opportunity. It must provide for the reserve's creation for long terms, for the bad debts percentage threshold based on the credit markets and credit policy, etc. 

Reporting 

All input data in different modules are accumulated for results; results are value maximization if we see it through the finance-colored spectacles. But before it, different ledgers balances show the processed data in the shape of financial statements that in turn give revenue and expenditures for these activities. Then the info leads us to the ultimate results that may be considered before making any financial decision by a stakeholder. So reports are generated for the utility of stakeholders.

ERP module gives handy access to these reports to the internally allowed users. But the reports after getting audited are made available to the other stakeholders. At the trial balance level, the analytical processing is easy and needs fewer efforts as there may be required purification of data from non-cash items. This is the basic level for reporting and analysis. 

The dashboard flexible for its customization gives much more information regarding revenue and expenses thereto, which may individually be perused and the same dashboard is responsible for graphical representation of the information processed into reports either separate, consolidated, or in multiple currencies translated into the reporting currency. Multinational companies transacting in multiple currencies Those organizations having setups and business facilities in more than one country have transactions in different currencies; they use multiple currencies for different countries. 

Apart from this fact very interestingly some organizations import raw materials from other countries where they find cheaper raw material then they have to transact in either international currency or with other currencies of other countries where they have their suppliers or clients. This feature of the ERP systems brings a great deal that sets the currency exchange rates for the currencies and the same ERP systems translate them accordingly. 

 VAT & Taxation 

 AT different level transactions ranging from payroll to input and output tax or income tax; or other imports related taxes, the ERP provides such great flexibility that we can input their rates as available in tax compliance system; Then we don’t need to separately calculate the amounts to be deposited into the central treasury of the country. In the instance of any required audit for internal or external compliance the related module of ERP provides the required supporting facts in no time. 

For monthly submissions of VAT only the figures are taken from the systems totally with the compliance data; then paid using either credit card or other bank account. The only need for such working with ease comes with the purchase of the required taxation module as the dexterous use in the chart of account needs professional perceptions to alternatively give an organization the solutions in the absence of this module. This is the real shape of artificial intelligence for regulatory compliance requirements. 

Conclusion

To conclude the ERP systems our focus comes to the utility of the system; the ERP Modules are of great use but with the perspective of financial management and complying with their required conditions; the ERP has the central position. It is given comparatively great weightage to the module of finance.

If you are preparing for ERP interview question; Oracle financial ERP, or ERP finance module interview questions then this text may give you a better understanding.

Starting with budgeting and planning for the upcoming period the dashboard analytics is something of very valuable use for the organization. This gives a yardstick to control and monitor the financial activities of a particular business sector. Time management for the production and the related activity levels is its great feature whereby we can schedule the activities at lesser or no lag. 

Beforehand figures of productivity can be ascertained exactly at this stage before the real activity has started; but variances do come out as there exist several factors within which the business entity has to survive; some are systematic and the others unsystematic. This provides the productivity of a particular sector or the manager in other words. At this stage of planning we can check if how may we speed up the activity level in the relevant range; or how can the required productivity be achieved. As it is worth mentioning here that the general ledger is the main center that provides all of the financial data and information in a single interface that is also the main feature of ERP in the finance department.

The ERP financial module gives a clear-cut and complete view of the financial position or other statements constructed by the available building blocks in the shape of different ledgers balances. This fact in its other sense helps minimize the data entry human errors; if made at any stage can be detected and rectified easily. For the front Analytics dashboard, the system provides every related information required.

Keeping the invoices intact in soft format and storing them in different repositories provide the data and information available easily with its true accuracy. This feature also comes with another important factor that is the integrality of information; the information stored is intact and may not be able to be amended without dual authentication as most of the ERPs have a built-in feature whereby the maker makes the entry and the authorizer or supervisor supervises it; that’s the dual checking and help minimizes the chance of error or fraud, and by this way, no document can be lost or will not take any more time for searching. 

Like many ERPs to cloud computing-based technology; thereby the interface can be assigned to particular individuals responsible for it, and he can access it from anywhere provided the web is in his access. This feature has helped greatly in the pandemic times as COVID was devastating the world environment and humanity, but The ERP systems allowed the user not to halt the smooth processes of business although got affected to an extent.