Written by Tom Miller, ERP Focus
Financial compliance is a must-have for any business and an essential component in most ERP systems. Failing to be compliant can have catastrophic effects on your business. This is where ERP comes in to ‘save’ the day. Financial compliance requires your business to correctly abide by all the rules established by regulatory organizations. These will vary from country to country. In the USA, these include the Securities Exchange Commission and the rules of the Sarbanes Oxley Act. ERP financials have a responsibility to assist in financial compliance, but the buck stops with how you implement and utilize your ERP system for financial management.
Transactions are at the heart of any ERP financial system. As these transactions accumulate they add up to our on-hand inventory and our sales order backlog and other totals we care about. Are your transactions all treated in accordance with generally accepted accounting practices? They should be and this is standard with most ERP systems.
We usually see a time and date stamp on every transaction and the name of the person who entered the transaction. This is our audit trail which is one of the GAAP requirements. In addition, we want to ensure that only authorized people can create certain transactions. We can use the user security section of our ERP to allow people in sales to enter and adjust sales orders while only people in inventory control or shipping can record that a particular order shipped. Then other people in finance will invoice the customers and collect payments through the ERP financial modules. Segregation of duties is another requirement for ERP financial control and compliance.
Processes of all kinds should be documented and we should audit regularly to ensure those processes are followed. Documentation of any financial-related processes and the audits are also a part of ERP financial compliance. Problems come from the selection and implementation of ERP as a tool to enhance the ability of a business to carry out its mission to deliver products and services to customers.
Include Your Finance Team
Include your accountant in the ERP team. They must verify that all compliance requirements are addressed in your business processes and in the ERP financial modules. That includes in the up-front selection of ERP. On average it takes 22 weeks to select ERP, make sure some of this time is spent with stakeholders in your finance depart to ensure to meet all the requirements for legislative compliance. Your accounting should also have a role in the configuration of the system controls at implementation. Your ERP might allow you to turn off some or all of the audit logs meaning the system will run faster and use fewer IT resources. If that log is required for compliance, pay attention when the accountant objects. Don’t wait for your CPA to issue a conditional statement after the end of the year.
What is so hard about these requirements? Nothing, really, as most are built into your ERP system from the beginning. The problems come from the selection and implementation of ERP as a tool to enhance the ability of a business to carry out its mission to deliver products and services to customers. Any needs of finance might be treated as secondary. While it might be true that your customer would not be eager to pay for financial compliance, they do recognize that compliance is not optional and would pay for it without complaint.
Author Bio: Tom Miller is a columnist for ERP Focus, and has completed implementations of Epicor, SAP, QAD, and Micro MRP. He works as a logistics and supply chain manager and he always looks for processes to improve.
Looking for more? Download our Enterprise Resource Planning Buyers Guide for free to compare the top-24 products available on the market with full page vendor profiles, key capabilities, an ERP software market overview, our bottom line analysis, and questions for prospective buyers.
Latest posts by Elizabeth Quirk (see all)
- The ERP Software Guide and How to Choose The Best One - March 5, 2020
- 3 Security Features to Protect Your ERP Data - March 4, 2020
- How to Manage ERP Customizations - March 2, 2020