What Is an ERP Accounting Modules & How It Drives Greater Financial Management

ERP Software / September 2024

What Is an ERP Accounting Module?

An ERP accounting module is the foundation of an enterprise resource planning system. It is designed for accountants and finance departments and is integrated within each business process to manage financial activities throughout an organisation.

Accountancy is a mainstay core function for strong financial management, taxation, payroll, and strategic planning. ERP accounting modules incorporate features such as:

• General Ledger
• Accounts Payable and Receivable
• Asset and Cash Management
• Financial Reporting and Budgeting

These features support the finance team’s bookkeeping and financial management efforts. When linked to various other modules and submodules that make up an ERP, they help the broader business keep accurate financial records by identifying investment issues and enabling leaders to make better-informed business decisions.

When planning for ERP implementation, accounting features are seen as the most critical ERP function by 89% of decision-makers.

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How CFOs and Accounting Departments Benefit From ERP

There are three main reasons why businesses focus on ERP accounting integration:

1. The business is growing and leaders require a broader view of financial data
2. Teams need access to data for insights to drive product and market growth
3. The business is a collection of siloed teams with no centralised data source

The first people to consider an ERP are often accountants – 23% of employees from finance and accounting teams push for ERP Software adoption alongside IT department employees. They will have a clear understanding of the broader financial impact of a better, wider, view of capital and revenue across business processes.

Adopting ERP Software can extend and integrate that information across departments, branches and divisions. An ERP makes key finance data live and accessible to a range of key roles within the company, improving clarity.

Reporting becomes more timely and related to detailed business processes, not just a product or department. All of which creates more detailed insights that are easier to understand business performance from.

These insights enable the accounts team to track financial data as it flows across the business. While leaders can identify growth areas, and high-cost departments and adapt the business with a focus on growth.

The broader benefits of an ERP accounting module are the integration of data from multiple areas of the business, including production, sales and supply chains, offering greater operational flexibility and insights. Linking finance to a bill of materials, and suppliers and meeting other governance and compliance needs boost business performance.

ERP Software vs. Account Management Software: What’s the Difference?

The key difference between an ERP and accounting software is the scope across the business that the ERP application provides.

Most businesses start with an accounts package for payroll and expense management. But as they grow they soon find it hard to link siloed finance information with sales, production, marketing, supply chain, and returns.

For smaller organisations looking to keep the lights on, accounting software provides a quick-to-adopt and easy-to-use solution for balancing the books without unnecessary complexity.

Can Businesses Use Both an ERP & Accounting Software?

One reason that a business might need to run both types of software is that one could be compatible with generally accepted accounting practices (GAAP). This choice makes it easier to certify and present accounts to auditors.

Some businesses that work in regulated markets such as banking and government might also have to report in a particular manner that requires accounting software over an ERP, although modern ERP Software should meet all GAAP or International Financial Reporting Standards (IFRS) reporting needs.

Overall, there are good reasons for the use of both. But as a business grows, risking a disconnect between accounts and the rest of the organisation can put a company at a competitive disadvantage.

Successful Examples of Accounting Teams Using ERP Systems

ERP is typically the domain of manufacturing, distribution and industrial services business. But seen wide adoption across professional services, healthcare and other sectors. With a keen eye on cost, they are more likely to focus on running their accounts through the ERP rather than using discrete applications.

Advanced ERP accounting features that larger firms might require include streamlining of audits, improved audit trails, management of joint venture initiatives and financing, and insights into high-volume or high-risk accounts.

As for proven results, one business using QuickBooks and a third-party payroll provider, found that it was nearly impossible to keep accurate time records and reconcile payroll with general ledger accounts. The business turned to an ERP accounting module to manage its accounting and payroll processes, reducing payroll processing time by 84% and balancing accounts faster.

In another case, Noble Biomaterials adopted an ERP “after the company experienced significant growth. Initially, the motivation was optimizing their financial and accounting operations, but eventually, management and IT teams also wanted one source of truth to support company-wide processes”.

Other use cases of an ERP include coping with changing business legislation and new technology that will impact accounting. Cloud ERPs feature the latest AI and machine learning technology to generate better insights based on business data.

As Gartner points out, “By 2026, 30% of enterprises will rely on their ERP applications to enable environmental, social and governance (ESG) reporting.” All features that will trickle down to smaller businesses in years to come.

Challenges Integrating ERP Accounting Processes

When compared to more account-focused solutions, an ERP system presents its own challenges:

• Requires leadership buy-in
• Complex adoptions can take months or longer (and not all will succeed)
• Team training is required to use the system
• Can be challenging and complex to deploy with legacy system data
• May require additional fees to integrate with existing applications/modules

Depending on your needs, some accounting software providers offer an ERP that creates a direct upgrade path. For others, choosing a new ERP can have many advantages that outweigh remaining with your original provider. ERP accounting systems are a relatively modern cross-business solution to link all that data.

So, with ERPs taking over more finance features across departments, does a company need an ERP solution, an accounts package, or both?

That’s a question that many operations managers, IT and business leaders ask when considering adopting new software. Or if they plan to upgrade legacy applications (many firms still use spreadsheets for accounting), or when a business is looking to implement an ERP to unify corporate reporting.

How AI, Automation & Blockchain Are Impacting ERP Accounting Modules

All businesses that are looking to automate or reduce the volume of manual processes will investigate ERPs. Most find that giving managers and workers access to smarter, clearer informational tools to perform more high-value tasks is a compelling use case.

This approach can also apply to accounts where many still use manual processes for growing volumes of work that will become unsustainable. Deploying an ERP accounting system will also benefit accounts, by simplifying tasks like accounts receivable and payable, while improving cash flow and management.

On the horizon, Blockchain is a transformative ledger technology that will likely impact accounts in the coming years. Blockchain improves the security and reliability of transactions but still requires verification. As business becomes more automated, blockchains and digital assets/finance will increasingly come to the fore to speed up transactions and increase security.

Experts have recently explained how CFOs will increasingly rely on “inhuman accountants” using AI in ERPs to detect fraud and help auditors spot unusual transactions.