Does your ERP add the most value to your finance department?
Enterprise resource planning (ERP) software is the jack-of-all-trades of the modern business. It helps the most important functions that a business faces: invoicing, payments, transactions, reports, budgeting, purchasing, supply chain management, inventory management, human resources, etc. ERP software helps with almost everything.
Business leaders today understand the importance of not only having an ERP system, but also keeping it up to date and robust. In a survey of supply chain leaders conducted by The Hackett Group, 44% had already implemented an upgraded ERP system or were in the process of doing so. In both cases, however, business leaders believed that having powerful ERP software was essential.
Perhaps the most important application is that ERP software integrates large amounts of important information in one place. For something like accounting and finance, where reaching the right conclusions requires having all relevant information at their fingertips, businesses need a system of record: a place to collect, store, manage and monitor all their financial information as well as all other relevant business information. .
Without an ERP for finance and accounting, companies are left with an incomplete, inaccurate, or ineffective view of their own performance. No wonder that 53% of companies surveyed rank ERP as a priority sector for investment: it is considered essential, especially for practicing effective accounting and strategic finance. However, it is just as important as the ERP software to have the right modules and functions included. These elements make the difference between software and a real solution. For ERP to add the most value to the accounting and finance department, companies will need to target their investments strategically to create the strongest technology stack possible.
As crucial as it may be to have a solid ERP solution in place, it’s important not to rush into new investments and implementations without considering all options. The ERP market is huge, and ERPs themselves are entire ecosystems of features, functions, and data sets. Businesses have the means to tightly customize their ERP to suit their needs and wants, which provides great flexibility but creates the risk of creating a faulty product.
Determining the key features to include in ERP software begins with a comprehensive evaluation process. The objective is to clearly define needs and priorities. It is also important at this stage to solicit feedback from business stakeholders, both inside and outside the finance department. Ignoring feedback from people who rely on money management tools can lead to low uptake and adoption.
During the assessment phase, each company will come to different conclusions about which ERP features to include. Regardless of those choices, however, the features must offer robust reporting capabilities. Without quality reports, ERPs can excel at ingesting data, but then struggle to turn it into information that meaningfully affects decision-making. When evaluating a specific product, the review team should pay close attention to how intuitive the reports feel and how deep they dive into the data.
Also, the ability of ERP to integrate functionality and systems is essential as connective tissue. It must seamlessly integrate the functionality and data that resides in the ERP. It should also connect third-party solutions, SaaS applications, and legacy software to the rest of the financial technology stack. It must become a single source of truth where any piece of data, from any source, is accessible from a central hub that integrates everything.
When an ERP integrates well with other vendors’ platforms – rather than trying to replicate the same functionality – it saves time and money and allows the ERP to scale with the company. It also creates an end-to-end link between all the data, which opens up exciting opportunities for automation and analysis. The assessment team should not view ERP as a substitute for existing solutions, but rather as a centerpiece that combines them into an overall picture of the company’s resources.
Optimizing ERP within finance
When introducing new technology, even an upgrade to an existing tool, people and processes matter as much as the software itself. Ensure that all three elements within the finance department are aligned around ERP using the following strategies:
Create a Closed-Loop Process – A closed-loop process does not rely on external inputs (time or data) to move forward. These are especially important in accounting and finance, where processes that rely on external data or manual workflows can become inefficient before collapsing completely. To close the loop, everything must work under the umbrella of the ERP system.
Embrace an automation strategy — Related to the previous point, when data flows through ERP unhindered, processes become predictable enough to automate. Work that once took many people a long time can now run on autopilot, complete faster, and produce fewer errors thanks to the way ERP weaves together data sources and standardizes processes. Savvy companies will adopt an automation strategy to make the most of what is now possible.
Integrate the entire ecosystem — When there is an ERP in place that easily integrates with a wide range of other solutions, it is important to build on this capability. Develop a plan to incorporate as much of the ecosystem as possible. Wherever there is a gap or missing link, strive to fill it. For example, if the ERP doesn’t offer something like automated payment processing, add it through integration to further close the loop and speed up data flow.
Build modern infrastructure – The financial service of the future needs modern infrastructure to handle everything from the rise of remote working to expanding regulations to the explosion of data. A modern infrastructure is not only capable; it is accessible and functional in a way that gives users full access to all the data and tools they need from anywhere. ERPs can be the cornerstone of this infrastructure, but it’s not the only piece.
A fully integrated, high performing ERP system can be a competitive differentiator for the finance department. Similarly, the absence of ERP or the use of an insufficient system can be an operational obstacle that makes any initiative more difficult. It is clear in which category finance would rather be placed. It is also clear how to get there.
Chen Amit, co-founder and CEO, Tipalti