An enterprise resource planning (ERP) System is a familiar, and beneficial tool for many in accounting and finance. At its core, an ERP System provides a general ledger (GL) which houses a company’s necessary accounting data, enabling reconciliation and the accurate closing of the books. Consequently, ERP Systems are often touted as a silver bullet solution for finance teams — but, this simply isn’t the case. Since accounting and finance teams manage different processes, there is no single solution to solve each of their problems collectively.
The primary ERP System limitation is that it lacks the functionality necessary for effective financial reporting, planning and forecasting required by finance teams. Additionally, ERP Systems require difficult implementation processes and your team must be properly trained to render effectiveness of the system. Despite what you may hear or even see in promotional material, ERP Systems cater to the needs of accounting, not finance.
ERP Systems are great for registering transactions, debits and credits — items that already happened. However, it’s not capable of presenting a viewpoint of future possibilities for finance and FP&A teams to yield mission-critical deliverables of a finance function like meaningful analysis, scenario planning and forecasts.
These are two distinctly different operations within a Company, and thus, need dedicated software solutions to match. In this post, we’ll walk you through some of the things to look for in an ERP System as well as FP&A Software to satisfy your planning and analysis needs.
Accounting and finance functions go hand-in-hand but are uniquely complex, requiring a team with the knowledge and skill sets to satisfy their end of the function. The need to improve ERP usage is top of mind for many CFOs. In fact, 27% of finance leaders claim enhancing the existing capabilities of the ERP as their top technological priority, according to a recent EY survey (survey results).
Now consider a Finance Function like a human body, with limbs representing a specific division within finance and the blood and organs powering those limbs the software and technological resources.
Head and Brain: The CFO or VP of Finance
- The CFO is not only the figurehead atop the finance function, but also the one responsible for establishing processes with the most impact. Without one, it’s an exhausting effort for a CEO to enact the finance strategies and see them through to fruition.
Neck and Spine: Controller
- The Controller oversees the accounting function and provides rigidity and structure for accounting and metrics, much like the spine does for the body. Controllers ensure the accounting preparations are accurate and the books are closed accordingly, allowing the CFO (head) and FP&A (shoulders and core) to strategize (move) accordingly.
Shoulders and Core: Financial Planning and Analysis (FP&A)
- FP&A teams and analysts are the core function in finance. Similar to your shoulders, FP&A is flexible, providing a range of motion and the potential to pivot. Much like your core, it enables the movement needed to achieve desired outcomes. If executed correctly, FP&A can and should be the most value-added asset of a finance team. Without a strong core or FP&A unit, you hold yourself back from assessing your metrics and deciding what action to take to reach your targets.
Arms and Legs: Accounting, Tax and Treasury
- Accounting teams assemble and organize the transactions and financial data to ensure debits and credits match and are ready for reporting and analysis. They reach and grab items, or in this case data, and put it all together. They’re necessary, but not always top of mind, much like your arms and hands.
Blood: GL/ERP System
- Similarly to blood pumping through your body, an ERP System enables the movement of financial data. It’s an essential function, but it’s not necessarily organized for use at all times.
Heart: FP&A Software, BI tools and Excel
- FP&A Software and other finance technology tools bring everything together and are the engine that powers the body. Finance and FP&A power the strategies and insights to help scale the Company. Without the heart, your body cannot function and the same can be said for finance teams and their desired software solutions. Blood is supplied to the heart, similarly to how an ERP System data flows into FP&A Software for reporting, forecasting and analysis, and is disseminated throughout the organization in the form of actionable insight.
Finance must be flexible and plan multiple scenarios and forecast using different assumptions, which is lacking in traditional ERP Systems. Another disadvantage of ERP Systems for finance and FP&A is the data sourced from it isn’t structured for finance teams to analyze and report on, and despite what is advertised, there is no out-of-the-box automation to organize the data for use. Due to this limitation, finance and FP&A teams can’t efficiently or effectively create necessary financial reports, nor iterative forecasts.
Additionally, There’s an unnecessary gap between the time you close the books and reporting on metrics. This is a real problem for accounting and finance that is often overlooked when procuring an ERP system. There’s mounting pressure on finance to deliver actionable insight at a moment's notice, and this is truly difficult for many to provide efficiently.
Choosing the best ERP System can be a daunting task. You must consider both accounting and finance stakeholders while ensuring IT approval. Change isn’t easy but necessary for growth, and you want to be sure your choice improves operations while delivering a return on investment.
Some of the best ERP Systems include Quickbooks Online, Netsuite, Sage Intacct, and Microsoft Dynamics, just to name a few major players. There are also ERP Systems dedicated to specific industries, though those options tend to lack the features of some of their counterparts. Quickbooks tends to be the first choice for many small and midsize businesses (SMB) due to its easy-to-use environment and friendly pricing.
As companies scale and projects evolve, many feel the need to consider procuring a new ERP System. A preemptive move from Quickbooks to another ERP System like Netsuite won’t solve your problems. Many times companies move from a solution like Quickbooks Online to Netsuite too soon.
Quickbooks’ limitations include lack of security, reporting and forecasting functionality, among other shortcomings. Netsuite, although a more feature-rich ERP System, doesn’t offer true reporting, planning and analysis capabilities either. Not to mention it can cost your company hundreds of thousands of dollars annually and require additional service costs to operate. If you’re an SMB, it might make more sense to stick with Quickbooks Online for a while longer and turn to other financial planning software to satisfy your needs.
As we mentioned earlier, there is no silver bullet for finance and accounting. Each department requires its own set of tools of the trade. Finance needs a solution such as FP&A Software to effectively provide actionable insight that drives strategic growth initiatives most efficiently — features ERP Systems don't provide.
FP&A Software centralizes data from your ERP and other sources of truth (prepare yourself for a barrage of acronyms) — like your customer relationship management (CRM), human resource information system (HRIS)/human capital management (HCM) software, among others.
With centralized data, advanced FP&A Software, like FutureView Systems’ FP&A Platform, automatically structures and configures it for you to analyze and report on. This automation saves finance countless hours of tedious manual labor, prevents possible errors and allows you to maintain version control with the latest data. If that sounds like something you could use in your finance function, contact us, we’d love to speak with you.