In today’s fast-paced business world, finance and accounting departments need on-demand insight into what’s happening throughout their organization. And, they need the tools to efficiently process, control, cost, account for, and reconcile transactions.

Finance departments that rely on legacy financial systems, disconnected spreadsheets, and manual processes probably find these mandatory tasks to be laborious and inefficient.

According to a 2016 report by the Financial Executives Research Foundation and Robert Half, 59% of U.S. companies and 66% of Canadian companies still reconcile their accounts manually. These time-consuming processes strain internal staff and resources. Manual processes are also highly error-prone, with errors impacting reconciliation processes, period-end close processes and financial report reliability.

From a financial reporting perspective, the study found that “[c]ompanies that can achieve a quick, smooth close may have a competitive advantage because the accounting and finance department can deploy resources towards more high-value activities, such as analytics.”

Manual business processing can also impact the quality of internal controls. With 22% of U.S. companies and 31% of Canadian companies using more than 100 controls, today’s finance and governance departments are under ever increasing pressure to manage risk and keep their companies compliant.

For example, earlier this year, we were retained to evaluate the operations and systems of a company that was newly formed through the merger of several other companies. This newly formed entity had inherited all of the legacy systems, processes and data standards of the combined companies.

Our analysis included detailed projections of benefits and costs of an ERP-enabled business transformation. In the finance department alone, the company stood to save nearly $400,000 annually in labor and audit expenses through improved accounting processes and internal controls.

How Finance, Accounting, and GRC Departments can Benefit from Integrated ERP

Implementing an ERP system gives you opportunities to automate integration transactions, systematize your internal controls and facilitate compliance reporting.

Most sophisticated systems come pre-packaged with standard user roles that comply with segregation of duty requirements that provide a good starting point for compliance with SOX or other legislative compliance requirements. So, by implementing these roles out-of-the-box, a buyer would be prevented from receiving and paying for goods without appropriate approvals. And, if a company modifies basic roles, many systems will allow you to run a conflict-check to determine whether any of the updates create potential non-compliancies.

Similarly, most modern systems come with automated workflow and approval capabilities. Again, from a control and governance perspective, these functions can make defined transactions contingent on certain events. For example, the system can be set-up to prevent a buyer from cutting a purchase order for more than $1,000 without senior management approval. From the ERP perspective, a buyer would generate a purchase order, which would then be systematically routed (for example, by pop-up notification, email or SMS message) to the senior manager for approval. Enlarge the process flow to the right for a high-level view of alternative workflow scenarios that are triggered based on invoice variance thresholds.

From a compliance and reporting perspective, the system would track the entire process of who did what and when, including invoked system rules. Automated audit trailing can significantly reduce internal and external audit costs and associated business disruptions.

5 Ways for the Finance and Accounting Department to Contribute to an ERP Software Evaluation Project

When it comes time to evaluating ERP software capabilities, the finance and accounting department has an important role to play.

At a minimum, your finance team will want to evaluate key needs relating to whatever functions apply, oftentimes including: company set-up, general ledger, accounts payable, accounts receivable, treasury, fixed asset accounting, budgeting and financial reporting capabilities. As discussed below, they should also be involved in the evaluation of other business functions, particularly to the extent of finance and accounting implications.

Here are five tips to guide your finance and accounting team’s involvement in its ERP evaluation project:

1. Learn about innovations in ERP finance and accounting functionality and how you might be able to benefit

For example, in legacy systems (and some modern systems), general ledgers were segmented using extensions to natural accounts. This approach creates unwieldy chart of account structures that are difficult to modify.

Many modern systems allow you to dynamically add analytical dimensions that cut vertically across a general ledger. This provides for a leaner and more flexible ledger that can quickly be adapted to suit your business’ changing needs.

2. Evaluate financial reporting and analytics tools.

Most modern ERP systems come packaged with financial report writing and analytic tools.

For financial report writing, it’s important to evaluate the ease with which you can prepare financial statements and with which you can slice-and-dice those statements. For example, how easy is it to create a P&L statement by product line? By geography? Period-over-period? Percentage change?

Also, finance and accounting personnel need an ability to analyze financial results. If a particular variance account seems out-of-line with expectations, does the financial reporting tool permit drill-down and analysis? Is there a Microsoft Excel add-in?

Finally, don’t forget to evaluate user-friendliness of the tools. If you want to develop a nimble and responsive finance organization, one of your goals should be self-sufficiency. That means maximizing your team’s ability to use the tools with minimal IT involvement. You might want to evaluate how easy – or hard – it is to prepare financial reports, link data or perform ad hoc analysis.

3. Evaluate the system’s dashboarding and workflow capabilities to monitor exceptions and automate routine tasks.

It’s critical that finance and accounting teams have additional tools to efficiently and proactively manage cash flow. Common uses of dashboards and workflow include the following:

  • Accounts receivable dashboard that groups invoices by ageing period and workflows that automate standard Dunning processes to support collection.
  • Automated credit hold processes for customers that exceed their limits.
  • Dashboard or workflow alert to notify accounts payable of opportunities to benefit from terms-related discounts.
  • Automated standard approval processes for purchase requisitions, above-threshold (quantity or dollar-based) purchase orders, and sales price discounts.

4. Make sure that the finance and accounting function is adequately represented during the requirements gathering and software evaluation stages of the project.

In modern systems, accounting and operational business functions are tightly integrated. As a result, the manner in which a system supports – or doesn’t support – business functions might impact the accounting of those transactions.

For example, certain systems do not support depot repair processes where the company repairs goods that are owned by the end-customer. We’ve seen some vendors propose a workaround using a return merchandise authorization (RMA) process. Although this type of workaround might be viable from an operational perspective, the finance department might have an issue if the system requires the company account for the customer’s goods as its own on its balance sheet.

As a result, it’s almost imperative that finance and accounting personnel provide their input throughout the process.

5. Define and prioritize your needs before you start evaluating ERP systems.

Defining your needs in terms of priority (e.g. must have, nice to have, low priority) and timing (e.g. Phase 1, Phase 2) will give you a baseline against which you can evaluate multiple solutions. It will also provide you with a basis to scope ERP software needs, obtain meaningful pricing and plan the implementation project.

So, before you start making a list of systems and before you start asking vendors for software demonstrations, it’s important to understand what functionality is needed when. There are inevitably going to be wish-list and lower-priority items. Ultimately, some might be implemented, others might not. Decisions will come down to costs, benefits and implementation project impacts. So, if an item is flagged as low-priority, your evaluation team will probably spend much less on it than the must-haves.

There are industry standard best-practices for defining business requirements and evaluating ERP software. Learn how best-in-class Fortune-500 and mid-sized companies evaluate their needs and manage their ERP selection projects. Download our 5 ERP Selection Best Practices white paper.

5-ERP-Selection-Best-Practices Guide

Download this guide and you’ll learn a step-by-step approach to systematically finding the right-fitting software