Enterprise Resource Planning (ERP) systems are commercial software systems that integrate business solutions for the core process and the main administration function of an organization. For instance, a core process such as product planning and control is integrated with key administration functions such as financial management and supply chain management (Worster et al, 2012). In many organizations, the application of ERP systems in management of finances results in benefits to the organization such consistency of data for the management function. IT best practices for financial managers provide the basis for referencing enterprise systems in the financial functions (Bradford, 2010).
An effective ERP system integrates financial information flow from both the internal and external sources of an organization into a single comprehensive solution. ERP solutions for the financial management incorporate practical systems to manage basic finance functions such as capital budgeting decisions, risk analysis, corporate finance and the corporate governance (Turner, 2012). I have positive experiences with the use of ERP systems as an aide in the financial management functions within an organization. For instance, ERP provides the opportunity of integrating every procedure of the risk management of various projects that the company undertakes while simultaneously providing information on the potential risks that could face the company both in the short and in the long term (Turner, 2012). The integrated information on project risks was easily retrieved from the enterprise system. The ERP system aided the capital budgeting decisions of the organization. The system constantly provided an updated database of the expected cash flows and the initial capital outlay of the various projects that the company intended to undertake. This database enables finance managers in the enterprises to make well-informed decision regarding the budgets of capital. The informed decisions and accurate prognostics are critical in ensuring that key end-to-end finance process in an organization result in cost efficiency, improved production levels and the increased financial performance of the enterprise.
The financial management ERP module also integrated the corporate governance and the enterprise financing functions in the systems. Corporate governance is a critical function of the finance managers. The function seeks to ensure the enterprise relates well with the various stakeholders such as shareholders, consumers, tax agencies, government and community that surround the business. IT system in the financial department integrated information on approaches that the enterprise adopted in dealing with its stakeholders. The database provided by the ERP indicated the steps that the company had undertaken to safeguard the interests of all stakeholders associated with the enterprise. The information also ensured that the managers of the enterprise behaved ethically (Worster, 2012). Obtaining funds for the running of any organization is the critical function of the financial managers. The inclusion of the ERPs system in the enterprise aid finance managers in determining the appropriate sources of funds to finance operations and projects of the company (American Psychological Association. (2009). For instance, data from the system enabled managers to decide whether to use debt or equity from shareholders to fund its projects. ERPs also assisted in determining the appropriate mix between debt and shareholders’ funds.
From the experience that I have acquired while working with the ERP systems in the financial management module, it is emergent that the formulation of financial strategies to guide the enterprise in a predetermined period is aided by employing the ERP systems. Enterprises adopting the use of ERPs in their financials will have clear financial strategies that will ensure the company avoids financial distress and bankruptcy (Bradford, 2010). The strategies will ensure the coordination of all managerial functions.
The module will handle business processes such as payments to suppliers and employees, creation of financial reports that include income statements and statement of financial position and management of both current and non-current assets (Bradford, 2010). The finance management module will include tables such as employees, suppliers, expenses and revenues.
The finance management module for ERP is critical for any entity and will interact with other modules such as human capital, supply chain management and project management. All the other modules require finances to facilitate their operations. The finance management module will collect and store information that regards the other modules providing a link from one to the next.
Outsourcing is a process that entails contracting and subcontracting of where the business identifies noncore activities that form but of its business description. The firm will then look for another company to perform the noncore activities identified. Outsourcing frees up cash, facilities, time and staff, which are later, concentrated to the activities that the company has comparative advantage (Worster, 2012). Offshoring is where a firm relocates a major process from one country to another. Such processes might include a supporting process like accounting or manufacturing. Offshoring and outsourcing are similar in that they both aim at reducing costs, utilizing cash effectively and improving a firm’s profits. However, the processes differ in many aspects. For instance, outsourcing does not require the relocation of a business process to another country. Outsourcing also involves another entity that will perform the noncore services. Offshoring can be contrasted from outsourcing in that another entity does not have to perform processes. The same business might perform the processes albeit in a different country.
