Enterprise Resource Planning systems or ERP systems have been around since the 1960s. They are systems used to gather, store, and analyze data arising from several activities within the organization.
One of the core modules of an ERP system is the financial module. It has the ability to collate financial information from different business units that are subsequently used to generate reports necessary in determining the company´s real financial status and in making decisions that allow the company to compete and thrive in the market.
There are many medium to large scale organizations that benefit greatly from the installation of an ERP financial system. However, what many do not realize is that an ERP financial module does not replace the functions of a Corporate Performance Management solution.
To understand this premise, let us first look at how ERP Financial systems work.
ERP Financials in Action
As previously mentioned, the ERP financial module is used to generate important financial reports such as General Ledger, Profit and Loss statements, balance sheet, cash flow, trial balance, and many more.
So what ERP financial modules are there?
General ledger (GL) is the foundation of an ERP system. GL gives the company the needed minimum dynamism and flexibility in order to address the existing and potential financial management requirements of any organization.
With a GL module, an organization can perform budgeting and planning tasks. In fact, it is considered to be the ultimate key to enhancing the reliability of your financial data as GL fully integrates with all other modules in the system.
Along with the GL comes other add-on modules such as GL security which enables the organization to control access rights of all its system users. There is also GL Consolidations module that allows the company to merge accounts and transactional details among and between different locations.
Intercompany transactions module is another and this module allows you to input GL and AP transactions which affect several companies. What it does is it automatically distributes transactions across several companies. This module indeed allows for simplification of the work done when doing intercompany accounting.
Accounting module is a transactional module that has the ability to perform tasks such as vouchers, balance sheet, and profit and loss. This module can do variance analysis and cost allocations as well.
Now that you have a general idea of how ERP financial systems work, there is a more important question that needs answering.
Is an ERP financial system really enough? Can it replace the work the CPM or BI solutions?
While ERP financial systems have come a long way and there are several benefits to be had with an implementation of an ERP financial system, it is wrong to say it effectively replaces the work of a CPM or BI software.
The first reason is the way in which ERP systems are designed. An ERP system is about data gathering based on an on line transaction processing data method. Whereas, CPM solutions are based on an on line analytic processing technology that is primarily architecture for multidimensional analysis.
Second, ERP systems are very good when it comes to handling transactional details. However, it falls short when it comes to summarizing data and spotting trends which is very important when forecasting or doing deep dive analysis.
Third, budgeting within ERP financial systems is limited. Many organizations who continue to grow in revenue and complexity easily outgrow their ERP financial system. Meanwhile, a CPM solution like Performance Canvas by DSPanel for example, is a solution that scales with the organization. It is prepared to handle both organic and inorganic growth and it is prepared to handle complex financial modeling needs.
Fourth and last point, the reporting feature of an ERP system is not as robust as that of a CPM or BI solution. While it is true that you can generate reports in an ERP financial system, not all of the reporting needs can be effectively addressed by the ERP financial system.
In fact, customizing reports within an ERP financial system is a time consuming and tedious task most especially when multiple tables need to be collated to arrive at the right financial data. Meanwhile, CPM or BI solutions in the market offer easily customizable templates or easy to customize reports from scratch because of its self-service or report wizard function.
Modern CPM Solution
Not all CPM solutions are of course robust which is why choosing the right CPM solution to aid your organization in its budgeting, forecasting, reporting and analysis or consolidation needs is important. Making sure that your CPM solution complements your ERP financial system is a huge task.
Performance Canvas by DSPanel is one of today´s most modern and robust CPM solution that truly understands how to complement your ERP system.
Performance Canvas by DSPanel not only offers self-service reporting and analysis, it also offers a complete budgeting and planning suite and the ability to perform simple to complex consolidations.
It can even automate accounts receivables and accounts payables, perform profitability analysis, do sales budgeting or project accounting.
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