What Is an ERP Finance Module? Features and Benefits

Adrian Alleyne | Content Strategist | May 31, 2024

The finance module has been a core component of Enterprise Resource Planning (ERP) from the software platform’s earliest iterations. While today’s ERP systems include other features and modules as part of the standard package, the fundamental role of ERP remains the same: helping organizations manage the production and delivery of goods and services and—perhaps most importantly—the money received and spent in the process. The finance module is critical to those efforts. Other core components of ERP include supply chain management, manufacturing, human capital management, and enterprise performance management capabilities.

What Is an ERP Finance Module?

An ERP finance module is a core component of an ERP system that manages and automates a company’s financial functions and performance. It serves as the financial hub, where various financial data streams converge, and is designed to organize and automate tasks related to accounting and financial management, including accounts payable and receivable, expenses, invoices, revenue recognition, and asset lifecycle management. It also provides financial insights through standard reporting and financial statements and facilitates regulatory compliance. ERP finance modules also support more strategic analyses of an organization’s performance against key performance indicators (KPIs), broader trends affecting the business, and underlying drivers of profitability. Practically every echelon of the finance department uses the ERP finance system every day, from the most senior finance executives such as the CFO and controller down to junior budget analysts and financial auditors.

Key Takeaways

  • The primary purpose of the ERP finance module is to track, assess, and report on an organization’s financial performance. It is also key to an organization’s financial planning and forecasting.
  • The finance module is the most widely used ERP module and sits at the center of any ERP platform since it tracks revenue and cash flow.
  • The major benefits of an ERP finance module include greater financial transparency, more informed decision-making, greater productivity, and reduced risk of financial woes such as a cash shortfall.
  • ERP finance modules increasingly are adding artificial intelligence capabilities to support financial decision-making, such as predictive analytics to use cash more efficiently while minimizing shortfall risk.
  • Finance modules can ensure the integrity of financial data, facilitate compliance with accounting standards and regulations, and provide real-time visibility into a company’s financial health.

ERP Finance Module Explained

Widely used by organizations’ finance, accounting, internal audit, and even asset management teams, ERP finance modules support financial management by capturing the transactions and financial data from across an organization. This gives finance teams the information they need to analyze, make decisions, and automate processes around the movement of money into and out of a business. Another primary purpose is to provide reporting on an organization’s financial performance, including regulatory requirements such as US Securities and Exchange Commission filings for public companies.

Imagine that you’re a global manufacturer of small appliances and your microwave ovens require high-voltage transformers. Bearing in mind that you sell appliances in multiple countries with differing currencies and accounting rules, how much revenue do you make for each appliance sold? When, and how much, do you pay your high-voltage transformer suppliers? What’s the current value of each of the four factories where you make your appliances? How profitable are your microwaves in comparison to your toasters or air fryers?

When you factor in multiple geographies, product lines, manufacturing facilities, and supplier networks, answering these questions can be extraordinarily difficult without an ERP finance module that tracks this vast and complex financial data. It can also be time-consuming and error-prone to answer these types of questions, especially if your organization’s financial data is spread out across multiple financial systems. An ERP finance module can automatically bring together these disparate systems and sources of data, making it easier to manage all aspects of your financials, including reporting, addressing accounting standards, and financial planning.

ERP finance modules can also help automate many routine financial tasks, such as accounting for intercompany tax, tracking transfer pricing, and processing and matching invoices.

In addition, the modules can provide advanced capabilities such as AI and predictive forecasting to help optimize cash flow, so you can use cash as efficiently as possible while limiting the risk of a shortfall. Finance modules can employ document recognition and optical character recognition to help automate invoice entry and increase accuracy. They can incorporate machine learning into that invoice entry process to get progressively better at reading invoices, learning where different elements of an invoice appear on the bills from a given supplier or customer. While ERP finance modules have been around for a long time, innovation such as AI, machine learning, predictive analytics, and character recognition have greatly changed the value and impact of these modules. And since finance modules are often offered as cloud services, they can be frequently updated to add new features as they’re developed, which suggests that today’s quick pace of innovation is likely to continue.

ERP Finance Module Features

An ERP finance module touches a lot of different parts of the finance department’s responsibilities. To get a better sense of what a finance module handles, let’s walk through some of its key features in more detail.

1. General ledger

A general ledger records your organization’s financial transactions, keeping track of sales, expenses, purchases, inventory, cash flow, assets, liabilities, and equity. Any ERP finance module starts with the general ledger, as it’s the cornerstone of your organization’s financial reporting and is used to create financial statements.

2. Accounts payable

Accounts payable (AP) is one of the main types of accounts within the general ledger. It’s a record of your organization’s short-term debt owed to suppliers and creditors, showing up as a current liability on your balance sheet. As part of an ERP finance module, it includes features such as supplier and invoice management and payment processing to help you pay vendors accurately, efficiently, and on time.

3. Accounts receivable

Accounts receivable (AR) is another primary type of account within the general ledger and is the opposite of accounts payable. It’s a record of what is owed to your organization from your customers. Within the context of an ERP finance module, the accounts receivable feature organizes and even automates invoicing and payment processing. This can help you improve cash management while increasing your finance team’s productivity.

4. Asset management

Asset management, as the name suggests, is the process of managing the entire lifecycle of your organization’s assets such as buildings, plants, vehicles, and other capital expenditures, as well as intangible assets such as intellectual property and data. An ERP finance module with asset management functionality is designed to automate many of the steps in asset acquisition, capitalization, depreciation, and retirement.

5. Cash management

Cash management within an ERP finance module lets your organization manage liquidity and better control your cash. Cash management looks at all your inflows and outflows to show your finance team expected cash flows to inform their future financial plans. It lets managers analyze the enterprise-wide cash position, cash requirements, and currency exposures, ensuring liquidity and optimal use of cash resources.

6. Financial planning & analysis

The processes and tools that help your organization accurately plan, forecast, and budget financials to support major business decisions and future financial health falls under financial planning and analysis (FP&A). An ERP finance module holds the data and reports that the FP&A function needs to do its job effectively.

7. Risk management and compliance

Risk management helps your organization monitor and control user access and activity. It also helps your organization manage internal controls in order to document, test, and certify for mandates including Sarbanes–Oxley and Internal Control Over Financial Reporting (ICFR). The finance module assists with risk management by automating workflows, letting you define and configure the rules and processes for granting and monitoring user access based on what each role requires. It also provides audit trails for transactions and helps enhance your broader financial controls.

8. Vendor management

Vendor management as a function of an ERP finance module can help your organization manage end-to-end relationships with suppliers. This includes selecting and setting terms and conditions with vendors, monitoring their performance and compliance with your standards, and handling contract renewal or termination.

9. Banking management

Through an integration with your company’s various bank accounts, an ERP finance module lets you view account balances and transactions, transfer funds, and reconcile transactions to create accurate financial statements.

10. Profit tracking

If your general ledger serves as a record of what you’ve been doing financially, profit tracking in an ERP finance module tells you how well you’ve been doing. It sheds light on your organization’s overall financial health and, at a more granular level, how various products and services are contributing to your bottom line through their sales and costs.

11. Multicurrency management

Many organizations do business in multiple regions across the globe. Multicurrency capabilities homogenize transactions in various currencies, providing you with an easy-to-understand overview of your performance in your preferred currency. Such a system will use the latest exchange rates to keep this data current. Many systems can also break down your company’s performance by country or region.

12. Tax management

Staying on top of tax laws is essential for cash and profit management—and to avoid hefty fines and penalties. And of course, the complexity only grows when you do business around the world. Tax management features in your ERP finance module can help you collect and track tax information for audit, filing, and reporting. Many such systems receive regular updates to reflect the latest regulations.

13. Reporting and analytics

While some ERP solutions also have separate reporting and analytics components to dig deeper into your data, most ERP finance modules have built-in reporting and analytics capabilities that offer common reports, dashboards, scorecards, and other tools that help you understand and visualize your finances.

ERP Finance Module Primary Benefits

As mentioned above, finance is one of the core modules of any ERP system, helping finance leaders increase forecast accuracy, shorten reporting cycles, simplify decision-making, and better manage risk and compliance. Below are some of the primary benefits to organizations and leaders.

  • Greater financial transparency: Organizations gain visibility into enterprise-wide and consolidated financial transactions with numbers updated regularly—ideally close to real time. Analytics and reporting capabilities also make it easier for finance and nonfinance leaders alike to get a quick sense of the organization’s financial health.
  • Better-informed decision-making: This transparency also translates to decision-making, as accurate, real-time information and advanced analytics help leaders better understand the impact of their choices and what’s in the company’s best interest. With this data, organizations can also forecast costs and revenue to produce more accurate budgets and plans.
  • Greater productivity: The ability to automate manual processes that can be slow and error-prone, such as invoicing, speeds up the entire finance function, allowing businesses to close the books faster and finalize crucial financial reports sooner. This gives finance teams more time to focus on analysis, scenario modeling, and other high-value work.
  • Reduced risk: By automating much of the work that goes into internal controls, compliance, and governance, organizations can reduce the risks and costs associated with noncompliance.
Among the benefits of ERP finance models are greater financial transparency, better decision-making, and more productivity with less risk.
Among the benefits of ERP finance models are greater financial transparency, better decision-making, and more productivity with less risk.

Processes Managed by ERP Finance Modules

Many of the features mentioned above play a central role in common financial processes. Accounts receivable capabilities, for instance, are a central part of the order-to-cash process. As leading ERP systems continue to innovate and evolve, organizations can use them to manage—and in many cases automate—more sophisticated processes. These processes are often interconnected and require integration with other core systems. The following list outlines 13 processes that can and should be managed via your ERP finance module:

  • Asset acquisition to retirement. This includes managing the full lifecycle of assets, which covers acquisition, recognition, and registration; assigning amortization; derecognition and disposal; and asset management insights. Popular KPIs for measuring this process include fixed asset turnover ratio and percent fixed asset loss.
  • Budget to approval. This covers setting budget strategy and allocating budget targets, creating and validating assumptions, driving consensus, monitoring and consolidating, and securing budget approval. KPIs that will help measure this process include time to produce, approve, and consolidate budget, along with budget variance percentage.
  • Expense report to reimbursement. This process extends to defining expense policies, processing expense reports, pulling transactions from credit card feeds, managing cash advances, and conducting analysis and audits. Actual expense versus budget, expense-to-sales ratio, and payment cycle time will help you track performance here.
  • Supplier invoice to payment. Paying suppliers includes managing prepayment and discounts, settling liabilities, managing the payables close schedule, and managing audits, disputes, and approvals. Popular KPIs for this process are number of payments processed, days payable outstanding (DPO), and percent discount taken.
  • Customer invoice to receipt. To receive payment for your products or services, you must create transactions, send invoices, manage any billing issues, process payments, enter adjustments, post receivables activities, and schedule receivables close. Metrics such as average invoice age, days sales outstanding (DSO), and percentage of invoices disputed can help to gauge performance.
  • Customer statement to collection. The full collection process includes generating and sending customers statements, managing collection activities (transactions, correspondence, disputes, etc.), handling settlement, optimizing collection efficiency, and monitoring outstanding receivables. For this process, KPIs include number of delinquent accounts, time to settlement, and time to manage collections.
  • Bank transaction to cash position. Reconciling bank activities such as disbursements, payroll, collections, investments, and borrowing involves reviewing and validating transactions, initiating interbank activities, and managing end-of-period positions. Popular KPIs for this process are time to reconcile and total number of reconciliations.
  • Daily close to financial forecast. Daily financial activity provides the data that becomes the basis for forecasting. This includes posting subledger activity, identifying anomalies, converting to corporate standards, reviewing daily activity, and setting financial forecasts. KPIs to measure performance here include time to reconcile and total number of reconciliations.
  • Period close to financial report. The end of a financial period requires closing subledgers, creating proforma general ledgers, reconciling accounts, closing ledgers, consolidating subsidiaries’ results to the corporate chart of accounts, reviewing and confirming financial management and accounts, publishing and securely sharing financial statements, and updating forecasts. To measure effectiveness, common KPIs include time to close the books and time to publish reports.
  • Report to forecast. The process of turning data from reports into the basis for forecasts requires reviewing current period performance; updating forecasts with the latest data; rolling forecasts forward to incorporate actuals; assessing variance and analyze trends; updating, monitoring, and consolidating forecasts; and updating financial plans. Common KPIs for this process include percent variance, time to analyze variance, and time to update forecast.
  • Period close to tax provision. This process checks that at period close, tax provisions are correct across various tax jurisdictions. This includes monitoring enterprise-wide close status, calculating tax provisions, reviewing and approving tax provisions, posting tax journal entries, and creating and incorporating tax footnotes for financial reporting. To see how you’re doing here, use KPIs such as number and amount of return-to-provision adjustments, and total person hours for tax preparation.
  • Tax provision to statutory filing. Timely and accurate filing of statutory tax documents across multiple regions entails calculating tax provisions at period close, manipulating supplemental data, managing transfer pricing, preparing reporting data, creating regulatory-compliant return documents, and completing statutory filings. Widely used KPIs for this process include effective tax rate (ETR) and percentage of on-time tax filings.
  • Customer contract to revenue. Recognizing revenue from customer contracts that are usually performed over time requires collecting customer transaction data, identifying accounting contracts with customers, identifying performance obligations, defining transaction prices, allocating transaction prices, recognizing revenue, and managing revisions and variations. KPIs such as time from fulfillment event to revenue recognition and number of revenue accounting entries per reporting period are useful to assess performance.

ERP Finance Module Example

Businesses looking for an ERP finance module have numerous systems to choose from. Since choosing the right finance system is a big decision, leaders from finance and other relevant departments should thoroughly evaluate each offering to understand how it would meet their needs.

Let’s take a closer look at two options.

  • Oracle Fusion Cloud Financials. This ERP finance module centralizes the finance team’s data and processes with support for payables, receivables, fixed assets, expenses, reporting, forecasting, and more. Together, these capabilities help companies gain real-time access to live financial data, proactively resolve issues using automated processing, improve decision-making with more accurate data and forecasts, control costs and increase visibility into spending, speed up cash inflows, and manage cash positions. This module provides built-in AI capabilities, such as continually improving exception handling with machine learning and AI-driven analytics. Oracle Fusion Cloud Financials also helps global enterprises address various accounting standards and laws, transact in multiple currencies and languages, manage complex contracts and billing schedules, and automate asset and lease management, among other capabilities. Oracle Fusion Cloud Financials is part of Oracle Fusion Cloud ERP, which is regularly ranked by analysts among the top finance systems for large businesses.
  • Oracle NetSuite. NetSuite offers a cloud-based ERP system used by more than 35,000 companies. Financials are at the core of NetSuite ERP as it helps manage financial processes such as AP, AR, general ledger, reporting, financial consolidation, and risk and compliance. The ERP suite offers complementary finance modules to address additional needs including revenue recognition, AP automation, and planning and budgeting. NetSuite Global Business Management builds on the capabilities of NetSuite ERP with support for global businesses with multiple subsidiaries or business units that deal in numerous currencies. NetSuite is one of the leading systems for small and midsize businesses looking to set the foundation for future growth.

All Your Financials, All in One Place with Oracle

Organizations across every industry that are looking for an ERP finance module should seek out a cloud system with deep, AI-supported capabilities to meet the diverse needs of their finance departments. Oracle Fusion Cloud Financials checks these boxes as a cloud financial platform that can automate many foundational financial management processes, giving businesses a clear view into their overall financial health. The module is part of Oracle Fusion Cloud ERP, unifying financial data with other mission-critical information from across supply chain, projects, customers, employees, and more.

Oracle Fusion Cloud Financials helps increase the productivity of finance departments and provides the forward-looking insights they need to make more informed business decisions. This ERP finance module is a complete solution ready to address the needs of global companies—including core accounting and AI-powered capabilities that drive further automation—across a variety of industries. With this cloud solution, customers also benefit from frequent updates that deliver continuous innovation, leveraging technologies such as machine learning, intelligent automation, and analytics to help them achieve more faster and with fewer resources.

ERP systems have evolved significantly over the years as providers continue to capitalize on the latest technological advancements and expand what this technology can do. While much has changed, however, there has been one constant: to remain competitive, organizations need an ERP module that can monitor and manage all their financial transactions and report on their performance. As such, the ERP finance module remains the core component of any modern ERP solution.

ERP Finance Module FAQs

How is ERP used in finance?
The finance function is one of the primary users and beneficiaries of an ERP system. An ERP system can track, manage, consolidate, and report on all of an organization’s financial transactions and automate many fundamental processes. It’s the basis for much of a company’s accounting work and its financial controls.

Is ERP a transactional system?
Yes, an ERP platform is one of the primary transactional systems for businesses, recording the organization’s financial transactions as well as other key data across the supply chain, employees, customers, projects, and more. Put simply, it serves as the system of record for the entire business.

Which is the most common ERP module?
The finance module is the most common and widely used ERP module because every business must closely monitor its financial position and outlook. Many companies start their ERP journey with financials before adding complementary modules that help with other aspects of the business.

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