Enterprise resource planning (ERP) explained
A form of software known as enterprise resource planning (ERP) is used by enterprises to manage routine business operations like accounting, purchasing, project management, risk management and compliance, and supply chain management. Enterprise performance management software, which aids in planning, budgeting, forecasting, and reporting an organization’s financial results, is also a component of a full ERP suite.
ERP systems enable the exchange of data between numerous corporate activities and tie them all together. ERP systems avoid data duplication and ensure data integrity with a single source of truth by gathering an organization’s shared transactional data from several sources.
ERP systems are essential for managing hundreds of organizations today, regardless of size or industry. ERP is as essential to these businesses as the power that keeps the lights on.
An ERP system is what?
How can these solutions manage an organization’s regular business operations, such as manufacturing, supply chain management, accounting, and finance?
Enterprise resource planning systems are comprehensive, integrated platforms that can be used on-premises or in the cloud to manage all facets of a distribution- or production-based firm. Additionally, along with your primary accounting function, ERP systems serve all facets of financial administration, human resources, supply chain management, and manufacturing.
By monitoring all facets of manufacturing, logistics, and finances, ERP systems will also offer transparency into the entire business process. Multiple departments can utilize these integrated systems, which serve as the organization’s core hub for end-to-end process and data.
ERP systems and software provide several capabilities for large, medium-sized, and small organizations, as well as industry-specific adaptations.
What distinguishes financials from an ERP?
Although ERP software is frequently referred to as „financials,” financials and ERP are not the same thing. ERP’s Financials subset of modules is referred to here.
Financial functions include modules for financial accounting, subledger accounting, accounting hub, payables and receivables, revenue management, billing, grants, expense management, project management, asset management, joint venture accounting, and collections. Financial functions are business operations related to the finance department of an organization.
Financials software complies with the reporting requirements of regulatory bodies like the International Financial Reporting Standards Foundation (IFRS), Financial Accounting Standards Board (FASB) for Generally Accepted Accounting Principles in the United States (GAAP), as well as for other nations using reporting and analytical capabilities (HGB in Germany and PCG in France, for example).
Financials software must be able to generate periodic financial statements for regulating regulators, including the European Securities and Markets Authority (ESMA), the US Securities and Exchange Commission (SEC), and others. These regulators use reports like the quarterly 10-Q and annual 10-K. A technology called narrative reporting is utilized for these kinds of financial reports. The CFO is the person in charge of finances in the end.
ERP covers a wide range of company activities, including financials, while financials just deals with one aspect of the organization. ERP software may have features for order management, project management, logistics, product lifecycle management, enterprise performance management (EPM), human resources/human capital management, supply chain management, inventory, manufacturing, and maintenance.
ERP also connects with front-office tools like customer relationship management (CRM) programs to create comprehensive customer perspectives. Additionally, next-generation technologies like the internet of things (IoT), blockchain, artificial intelligence (AI), machine learning, and digital assistants are frequently integrated into cloud-based ERP solutions. These cutting-edge technologies give information and capabilities that not only improve many conventional ERP activities but also open up new possibilities for greater productivity, new services, and deeper insight throughout an organization. Because ERP systems cover the entire organization, managing them frequently requires collaboration with the CFO, the CIO, the COO, and other important senior leaders.