Enterprise resource planning (ERP) software is the jack-of-all-trades for the modern enterprise. It helps with the most important functions facing a business: billing, payments, transactions, reporting, budgeting, purchasing, supply chain management, inventory management, human resources, and the list goes on. ERP software assists with almost everything.
Today’s business leaders understand the importance of not just having an ERP system, but also keeping it updated and robust. In one survey of supply chain leaders by The Hackett Group, 44 percent had already implemented an upgraded ERP system or were in the process. In both cases, however, business leaders thought it was vital to have powerful ERP software in place.
Perhaps the most important application is that ERP software integrates vast amounts of important information in one location. For something like accounting and finance, in which reaching the right conclusions depends on having all the relevant information at hand, companies need a system of record: somewhere to collect, store, manage, and monitor all their financial information alongside all other relevant business information.
Without ERP for finance and accounting, companies are left with an incomplete, inaccurate, or inefficient perspective into their own performance. No wonder 53 percent of businesses surveyed rank ERP as a priority sector for investments: It’s seen as a must-have, especially for practicing effective accounting and strategic finance. However, just as important as ERP software is having the right modules and functions included. Those elements make the difference between software and a true solution. For ERP to add the most value to the accounting and finance department, companies will need to target their investments strategically to build the strongest tech stack possible.
Essential elements of ERP
Crucial as it may be to have a strong ERP solution in place, it’s important not to rush forward with new investments and implementations without considering all the options. The ERP market is huge, and ERPs themselves are whole ecosystems of features, functions, and data sets. Companies have the means to closely customize their ERP to their needs and wants, which offers lots of flexibility but creates the risk of building a flawed product.
Determining the key features to include with ERP software starts with a comprehensive evaluation process. The goal is to clearly define requirements and priorities. It’s also important at this phase to solicit feedback from stakeholders across the enterprise, both inside and outside the finance department. Ignoring input from the people who depend upon financial management tools can lead to poor buy-in and adoption.
During the evaluation phase, every company will reach different conclusions about which ERP features to include. Whatever those choices are, however, the features should offer robust reporting capabilities. Without quality reporting, ERPs can excel at ingesting data but then struggle to transform it into insights that affect decision-making in a meaningful way. When evaluating a specific product, the evaluation team should pay close attention to how intuitive reporting feels and how deeply it dives into the data.
Also, the ERP's ability to integrate features and systems is essential as the connective tissue. It should seamlessly integrate features and data that live inside the ERP. It should also connect third-party solutions, SaaS apps, and existing software to the rest of the finance tech stack. It must become a single source of truth where any piece of data, from any source, is accessible from one central hub that integrates everything.
When an ERP integrates well with other vendors' platforms — rather than trying to replicate the same features — it saves time and money and allows the ERP to evolve with the company. It also creates an end-to-end link between all data, which opens up exciting opportunities for automation and analytics. The evaluation team shouldn’t think of ERP as a replacement for existing solutions but rather a centerpiece that weaves them together into one all-encompassing picture of enterprise resources.
Optimizing ERP within finance
When introducing any new technology, even an upgrade of an existing tool, the people and processes matter as much as the software itself. Make sure 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 (of time or data) to proceed forward. These are especially important in accounting and finance, where processes that depend on outside data or manual workflows can become inefficient before breaking down entirely. To close the loop, everything must work under the umbrella of the ERP system.
Adopt an automation strategy — Related to the previous point, when data flows through the ERP without encountering obstacles, processes become predictable enough to automate. Work that used to take lots of people lots of time can now run on autopilot, finish faster, and generate fewer errors thanks to how ERP weaves together data sources and standardizes processes. Savvy companies will adopt an automation strategy to make the most of what’s now possible.
Integrate the whole ecosystem — When there’s an ERP in place that integrates easily with a wide range of other solutions, it’s important to lean on that capability. Develop a plan to integrate as much of the ecosystem as possible. Anywhere that a gap or missing link exists, work 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 accelerate how data circles through it.
Construct a modern infrastructure — The finance department of the future needs a modern infrastructure to handle everything from the rise of remote work to the expansion of regulations to the explosion of data. A modern infrastructure isn’t just capable; it’s accessible and functional in ways the give users full access to all the data and tools they need from any location. ERPs can be the cornerstone of this infrastructure, but it’s not the only piece.
A fully integrated and highly capable ERP system can be a competitive differentiator for the finance department. Likewise, the absence of an ERP or reliance on an insufficient system can be an operational obstacle that makes every initiative harder. It’s clear which category finance would rather be in. It’s also clear how to get there.
Chen Amit, co-founder and CEO, Tipalti