What is considered a Fixed Asset in Accounting?

Fixed asset in accounting
Reading Time: 4 minutes

What is considered a Fixed Asset in Accounting?

Summary: Assets are essential for a company to grow and generate revenue. Assets display the financial health of any organization. Plus, these assets are classified into many types like fixed assets when documented in the balance sheet. Each accounting period, its value is depreciated. Investors consider huge assets as a positive sign to invest.

Quote for Fixed Asset

Assets are resources owned by a company to execute business processes and aid in generating economic value for the business. Assets can be divided into two types – Fixed assets and current assets.

Current assets are a company’s resources that can be converted into cash within a year. Cash, cash equivalents, accounts receivable, stock or inventory, marketable securities, and prepaid expenses are some examples of fixed assets.

What is a Fixed Asset?

Fixed assets are resources a company uses for a long time to conduct business operations and generate revenue. Any business uses these fixed assets for more than one accounting period. Fixed assets cannot be sold immediately. They are used for many years, and each accounting period, the value of these assets is depreciated. Property, plant and equipment (PP&E) are a company’s fixed assets.

Fixed assets can be categorized into two types – Tangible assets and intangible assets. Tangible assets are physical assets that can be touched, such as buildings, land and equipment. Intangible assets are resources with no physical presence. For example, goodwill, trademarks, patents and licenses are Intangible assets.

<<Also Read: What is Fixed Asset ? | Meaning, Benefits and Examples>>

Example of Fixed Assets

I am listing some examples of fixed assets :

Tangible Assets

  • Land
  • Building
  • Vehicles
  • Computer hardware
  • Industrial Machinery or equipment
  • Furniture
  • Office Supplies

Intangible Assets

  • Software
  • Copyrights
  • Patent
  • Goodwill
  • License

Fixed Asset in Accounting

Fixed assets are purchased to perform business functions for the long term. These assets can deliver substantial economic value in the future.

Fixed Asset Accounting records all the financial activities from the purchase of the same to the disposal of the asset. It includes the record of the entire lifecycle of an asset – purchase, depreciation, audit, revaluation, impairment and disposal. Accounts for each fixed asset are maintained.

Accounting rules and regulations must be followed to maintain uniformity in a company’s financial statements. In India, the Institute of chartered accountants of India(ICAI) sets rules and regulations for accounting.

<<Also Read: Asset transfer from CWIP to Fixed Asset>>

Fixed Asset Accounting Cycle

Acquisition

The purchase of the fixed asset is documented on the balance sheet. It includes the total cost of the asset, shipment costs, and installation price recorded in the journal. Additionally, it accurately records if the fixed asset was purchased by paying the total price, instalments, or exchange.

Depreciation

Fixed assets are depreciated periodically. In the case tangible assets, its depreciated and intangible assets are amortized. All the accounting actions are documented in the ledger.

The standard methods used to depreciate fixed assets are the straight-line method, double declining balance, sum-of-the-years digits and units of production.

Revaluation

Revaluation of fixed assets is the increasing or decreasing value of investments compared to the market value.

Impairment

The period in which the market value of the fixed asset is lesser than the value recorded on the balance sheet. It is also known as writing down.

<<Also Read: The Scope of Financial Management >>

Disposition

After a fixed asset completes its useful lifecycle, it is disposed of by telling, trading or scrapping it. Simultaneously, these assets are eliminated from the accounting records. Finally, you can calculate the gain or loss of the asset you disposed during that particular accounting period.

Fixed asset - examples

What’s the Difference Between Total Assets and Net Assets?

A company has assets and liabilities. Companies accumulate assets normally to increase revenue. All the assets are registered on the balance sheet of a company. Net assets are the total value of assets a company owns, subtracting all the liabilities. Net assets are also referred to as net asset value. For an entity, net assets are pivotal because it gives vivid information on what a company owns and owes. Plus, it reflects the financial health of a company.

Net Assets calculation

Let’s look at the formula to calculate net assets.

Net Assets = Total Assets – Total Liabilities

Total Assets

Total are the assets owned by a company to procure economic value in the future. It includes cash, accounts receivable, inventory, equipment and many more. Companies own and acquire more assets to display financial strength and generate huge income in the future. Total Assets are divided into two categories – current assets and long-term assets.

Total Assets = Liabilities + Owner’s equity

Assets are significant for a company. There are many types of assets. All the assets together showcase the financial health of a company. If your company has more assets and fewer liabilities, it is a sign of yes for the investors. To grab a lot of projects, clients or investors, your company must display healthy finances.

In any firm, assets are documented on the balance sheet. It’s not easy to maintain all the records of fixed assets manually. There is a lot of software now that maintains, records and calculates the accurate value of all the assets for many accounting periods. They are also highly secured software. So it costs a lot to make an accounting mistake. Rely on the technology to get the best benefits for the good health of your company.

How is ERP Systems Manufacturing still helpful for Small Businesses?

ERP Systems Manufacturing
Reading Time: 4 minutes

SUMMARY- ERP systems manufacturing for small businesses brings a huge array of benefits in the manufacturing industry. The main function of the ERP system can help businesses streamline business operations like HR, accounting, finance, and much more. Right from small to large-scale businesses, ERP plays a vital role. In this post, we will see the significance of ERP software for small businesses.

As the world becomes more and more digitized, it’s important for small businesses to keep up with the latest trends and technologies. A technology that can be truly beneficial for small businesses is a manufacturing ERP system. ERP, or enterprise resource planning, is a type of software that helps businesses manage and streamline their operations.

There are many different benefits that ERP software for manufacturing can provide for small businesses. Perhaps the most obvious benefit is that it can help save time and increase efficiency. With an ERP system in place, businesses can automate many of their processes and tasks, which reduces time and other aspects of the business.

In addition to saving time, manufacturing ERP systems can also help businesses save money. By automating tasks and processes, businesses can avoid many of the mistakes that can lead to costly errors and rework. In addition, an ERP system can help businesses make more informed decisions by providing them with real-time data and analytics.

How Manufacturing ERP can help save time and money

As mentioned above, one of the biggest benefits of ERP systems manufacturing  is that it can help businesses save time. Through automation of functions, businesses can free up time that can be better spent on other areas of the business. In addition, an ERP system can help businesses avoid many of the mistakes that can lead to costly errors and rework. In addition to saving time, an ERP system can also help businesses save money.

<<Also Read: How can Manufacturing ERP help businesses function smoothly>>

How Manufacturing ERP Software costs can get adjusted in the budget of small-scale businesses?

The appropriate nature of the ERP for manufacturing might be a good fit for your business but it totally depends on the manufacturing industry, business, budget, and size of the business. However, the changing situations for a large company are quite different from that of the small one. This way, the solutions also change. 

If you run a small business and wish to choose an ERP system then it is essential to track your business’ strengths, weaknesses, as well as needs. Then, it is advised to make some small research to get the apt solution you were seeking. Today, there are a number of ERP vendors that offers solutions for varied industry, size, and needs. The top ERP solution can help you specialize in the business while holding the apt features to enhance your business. 

<<Also Read: The vital role of ERP in Manufacturing Industry>>

How ERP Software for Manufacturing can improve decision-making?

Enterprise Resource Planning software is being deployed by a number of organizations to manage their business processes. An important function of manufacturing ERP systems is to provide managers with timely and accurate information that can be used to make sound decisions. Here, we will see how ERP systems manufacturing can help improve decision-making.

Manufacturing ERP software can help managers in a number of ways. First, ERP systems manufacturing can provide managers with real-time information about the status of various business processes. However, this data can be used to track issues and opportunities as they appear. Second, ERP systems can help managers track trends over time. This information can be used to anticipate future problems and opportunities. Finally, Manufacturing ERP systems can help managers make better decisions by providing them with analysis tools that can be used to evaluate various alternatives.

Reviewing about what is manufacturing ERP software , it is stated that cloud ERP for manufacturing can provide many benefits, but it is also important to note that they are not a panacea. There exist a number of obstacles that should be thought of when implementing ERP systems. First, ERP systems can be complex and expensive to implement. Second, ERP systems can require significant changes to organizational culture and business processes. Finally, manufacturing ERP systems can be difficult to maintain and upgrade. Despite these challenges, ERP systems offer a number of advantages that make them an attractive option for many organizations.

<<Also Read: Top 14 benefits of ERP for Medical Device Manufacturing>>

 

The Benefits of ERP Systems manufacturing for small and medium sized businesses

Manufacturing ERP software can provide small businesses with a number of advantages, including the ability to improve efficiency and productivity, reduce costs, and make better decisions. By automating key business processes, ERP systems can help small businesses gain control over their operations and improve their bottom line. In addition, ERP systems can help small businesses keep track of their customer data and inventory levels, and can provide them with valuable insights into their business. By implementing an ERP systems manufacturing, small businesses can take advantage of the latest technology to streamline their operations and improve their competitiveness.

<<Also Read: What is the difference between Manufacturing and Production?>>

The Bottom Line :

ERP systems manufacturing are in existence for a long time, and they’ve been helping businesses of all sizes to streamline their operations, save money, and boost efficiency. While ERP systems were once thought to be too complex and expensive for small businesses, that’s no longer the case. There are now ERP solutions that are specifically designed for small businesses, and they offer all of the same benefits as enterprise-level ERP systems.

 

ERP Sales Modules and its 8 Powerful Features

ERP sales modules
Reading Time: 5 minutes

Summary- Today, with the rising competition in the market, organizations have been focusing on deploying ERP to attain success and desirable profits. However, it has become essential to understand various ERP sales modules and deploy them to carry out respective business operations. So, let us see the 8 core features of ERP sales modules you should consider. 

ERP sales modules

ERP sales modules is one of the most essential elements of a business since it helps handle all business activities for export/ domestic sales of an organization. The customer, as well as product databases, are stored and well-maintained in the ERP sales modules. However, the ERP sales modules also involves a few steps including sales and marketing, order placement, dispatching, getting inquiries, and order scheduling. 

Let us learn about the 8 important core features of ERP sales module in this post. 

1. User Database 

Usually, the account name with which your business is associated is classified as ERP prospect, suspect, or customer. However, the users can easily be grouped within the ERP database in order to create a baseline. On the other hand, advanced delivery tools would encompass tools such as prospecting tools, connected customers, and sales pipelines. 

2. Quotations 

The basic structure of quotes in the case of ERP sales modules is quite similar as per the order. While there has been no agreement to deliver. However, quotes usually get a closure date once the quote is not valid. After the completion of the negotiation period, the ERP sales module would help convert a quote into an order. 

3. Credit Limitations 

Whenever orders are to be delivered prior to payment, a company can set a credit limit for every customer. However, this would call for an alert in the ERP system whenever orders are exhausted. The system limit can call for shipments to be conducted till payment is received for those orders that are shipped and are yet to be paid. 

<<Also Read: Add-on modules in ERP Software and their benefits>>

4. Multi-layered sales order 

It is another important sales module. When an order is taken, there is some product description mentioned along with the sales amount. However, these description lines can be divided into releases where a small piece of description may have various delivery dates along with different quantities. Also, a sales order might have a request date wherever the customer would need that product. 

An ERP system can also aid multi-layered configuration while setting up correctly. However, the approved date can also be set in ERP like a shipping/ delivered date along with the transmitting process. 

ERP sales modules

5. Forecasting sales 

The sales prediction is another aspect of the sales module. It includes expected future sales by the consumer. A lot of ERP systems involve a number of statistical models to showcase the future from previous sales patterns. However, these models should project future sales as per the previous past patterns. These predictions are made based on the order history, growth projections of customers, supply chain type, and more. Also, forecasts are implemented to forecast order demands required to schedule future capacity or even component purchases. 

6. Backlog 

An ERP software should offer a database that will be query-able regarding all open orders. This is all sequenced by the due timings. Additionally, those orders to be executed in the next month might not have any systematic or immediate plan and this is exactly where the quality, as well as production control models, comes to the scene. 

7. Sales region 

It is an important element of ERP sales modules. An ERP software can offer geographic or even similar sales breakages through a salesperson. Also, every person who is selling will take a specific territory in the system. The person will be solely responsible for bookings, orders, as well as, backlog in that particular region. 

Even if you do not have at all a sales-driven business, fetching knowledge of the tremendous efficiencies connected with ERP sales modules can give an immense impact on the ROI system. 

8. Return Material Authorization

While choosing an ERP software, you should also look if it offers RMA i.e. return material authorization. Whenever a customer demands to return a particular shipment, they will be asked for authorization which is typical for negative orders. 

The Topmost Benefits of ERP Sales Modules

  1. Database organization- The sales modules help fetch comprehensive details of your customers while also offering sales, marketing, and customer service data in an organized manner. Moreover, it offers you real-time data as well as accurate decision-making power.
  2. Error-free sales forecast- The modules can record data efficiently with important factors to consider. The crucial real-time data aids the sales section to perform accurate sales forecasts.
  3. Sales process layout- It helps build a sales team to see all required information at a single place. This will help salespersons track, monitor, and manage all sales function stages according to the status.
  4. Improves performance- ERP sales modules can update data, can schedule work, and can easily follow up on notifications regarding the sales process. This way, sales representatives can focus more on making more sales while enhancing the business performance.
  5. Enhanced internal cooperation- The ERP sales module helps salespeople work together flawlessly. It collects data on every work and shows it in a presentable way. This makes it even easier for everyone to work together. Moreover, the modules help fetch data quite easily while also aiding in decreasing the time required by skipping unnecessary meetings and collaboration.

ERP sales modules

ERP Sales Module Process

Now., let us see more about the ERP sales module process and how it works. 

  1. At first, the customer starts an RFP (Request for a proposal). 
  2. Then, after receiving the proposal, the sales team reviews it thoroughly. 
  3. During the review process, the sales team sees whether they can offer a proposal to meet customer needs.
  4. If the requirements are matched, the ERP sales modules team develops a proposal and then sent it to the customer. 
  5. Now, the customer would examine the proposal and would decide to move forward or not. 
  6. With the approval of the customer, the sales team would develop the respective contract and can send it to the customer.
  7. Again, the customer would review the contract and can decide to move ahead or not. 
  8. On the approval, the customer can start an RPF (Request for a proposal). 

<<Also Read: ERP Reporting: 7 Features to Consider for Your System>>

Down the Line 

Here, we have seen the core 8 features of the ERP system sales module and how they are benefitting the businesses. An ERP system implementation, as well as its purchase, might be an exciting task at the beginning. But, choosing the right ERP system for your business can make the foundations work well and help you grow your business with the passing time. The best ERP sales modules for your company can meet the requirements while helping you confront the prominent challenges as well as opportunities to showcase growth. 

 

12 Steps To Choosing The Right ERP Software

ERP software
Reading Time: 6 minutes

Summary: ERP Enterprise resource software is a vital tool for businesses which helps integrate business operations while making the functions even more smooth and flawless. However, it is quintessential to know the steps of choosing the proper ERP software which will suit your business requirements. This blog will talk about the crucial 12 steps to consider before selecting the right ERP software

ERP software

There is no doubt that ERP (Enterprise resource planning) systems are the mainstays of modern organizations. When it comes to answering what is ERP system then it is clear that ERP systems offer higher flexibility and integrate business functions, they can help businesses hugely to stay compliant in the competitive environment. The manufacturing sector has seen great supply chain as well as traditional business operations disruptions due to the pandemic. 

If your business is experiencing a limp with legacy or has a few different concerns, it might be a perfect time to invest in repairing how your business has been operating. 

What is enterprise resource planning?

So, while explaining what is an ERP system we must say that ERP is software that involves technologies that companies used to integrate business operations. Through this, users can integrate with the single interface and can share critical information while allowing extensive data collaboration. 

Steps to select the right enterprise resource planning ERP

Step 1: Rectify the operational errors 

The most important step of enterprise resource planning system selection is to rectify the issues. Suppose you are conducting an inventory through spreadsheets and are transferring all the inventory data manually to the accounting software. Undoubtedly, this must be taking much time and full of errors that couldn’t add some value. So, the best solution is to get a well-managed cloud-based ERP system that can integrate accounting and inventory. Additionally, you should review all business functions and see if there are any other functions that require a double entry or is there something that needs improvisation in the automation. 

<<Also Read: How to use ERP software?>>

Another fact of an ERP selection process to consider is while undergoing vendor selection is that large businesses come with a never-ending list of business needs. And most vendors assure you that they can satisfy your requirements. But, you should always stick to those vendors specifically that improve the critical business functions including cost, time, and training. 

Step 2: Get the proper amount from major stakeholders 

For better results, the employees, as well as stakeholders, should be inspired to transform and take part in evaluation functions. It is also important to remember that the ROI does not come just from the cost savings. When processes are enhanced through automation, the executives can easily work smarter. Moreover, time-consuming tasks are eliminated while offering higher customer satisfaction, employee retention, and high productivity. 

Step 3: Ensure the system is reliable 

To contribute a major role in onboarding an advanced ERP enterprise resource planning ERP system, it is highly recommended that you hire a stakeholder. There lies a logic behind this. The particular stakeholder can inspire others to get successful in ERP implementation. Hence, having an experienced person during selecting the ERP systems is a must. 

ERP software

Step 4: Get an experienced product person 

An ERP system is the main infrastructure that is required to stay reliant to grow with the company. Seek an open, modular, and flexible system. The system should go in sync with other systems. It might include integrating with suppliers for JIT manufacturing to easily integrate with the consumers. 

On the other hand, you should check if the system is modular enough to see the advanced functionality of the manufacturing advances. Also, you should check if the enterprise resource planning ERP system can grow as the business improves. 

Step 5: Check whether ERP systems have mobile access 

You should check if the mobile access is linked to the desktop browsers or if it is just an application specifically designed to check the desktop view. The motto of ERP software having mobile access is that your customers should be equally productive on tablets as well as smartphones when compared to office desktops.

Step 6: Make sure the ERP software is easy to use 

Manufacturing ERP enterprise resource planning software has a wide range of users. However, the user interface should be precisely structured and intuitive to its use. A well-designed interface will however help enhance employee satisfaction along with high productivity. 

Usually, UI/UX is the most critical factor when choosing an ERP solution. If you are having a user-friendly ERP with great-designed dashboards helps build better productivity and efficiency among employees. 

ERP software

Step 7: Select the appropriate deployment option 

An ERP system includes a wide array of users right from the cloud, solutions, and hybrid deployment solutions. These solutions have enhanced points whereas the benefits are far different from the on-site solutions. These benefits include high expense which gets minimized later as cloud systems function on a pay-as-you-go model. 

One of the benefits of ERP to consider is that the IT staff gets reduced since the functions are well operated by the software and vendor which is always active. Also, the cloud-based systems are greatly scalable and reliable that offer a high range of advantages to their users. 

Step 8: Authenticate support & training options

Before selecting the right ERP software, you should always check if the vendor has previously trained a group of people in the business. It is because the efforts of the vendor will be complemented by advanced training availability. 

However, it is mandatory to develop training timings with the vendor while allowing staff to commit to the training schedule. It is a simple concept that if nobody knows how to run the ERP software then it is definitely not worth investing time and resources into it. 

Step 9:  Select a vendor who knows your business requirements  

For most businesses, transforming to a new ERP software might need some outside help. This could happen either due to IT staff restrictions internally, a shortage of skills, or even due to time pressures. However, it all depends on whether you are partnering with any ERP vendor, with a systems integrator associated with ERP vendor or with a single technology consultant or a reseller. 

Do not choose a vendor who just gives you a tech-speak while elaborating the features of their ERP solution. Look at the real side of it and then take the final decision. Also, it is necessary to check if the vendor understands your business requirements. It is always better to have such vendors who would help resolve your issues accurately. 

Step 10: Get a demo prior to the initial process

In some cases, businesses get the entire vendor selection procedure and then ask the vendor to conduct a demo that showcases the employees working of ERP software. However, as per the expert suggestions, better planning is to ask a couple of vendors to give a demo at the starting phase and see how your employees are responding to the new system. See if the new system has some feedback or if there are some restrictions that are being imposed on employees without any prior notification. 

ERP Software

Step 11: Make the best of the agility 

Usually, legacy ERP software is treated as the most inflexible one that cannot be updated with the business since they are designed in a complex way. Since there has been an agile software development process, companies have been improving. Through no-code and low-code alternatives, businesses can make improvements to business operations without hampering the base ERP software. However, to get these things in place, companies must have appropriate governance. 

Step 12: Make a wise decision 

While selecting an ERP system, it is a must that you check hidden costs in the implementation process. You should also analyze before finalizing contract navigation while predicting the go-live date. 

Remember that before you start defining the ERP selection criteria it is a must that you should chalk out all the necessary requirements for your business and make a wise decision. Without clear definitions, choosing ERP software would be difficult. 

A quick glance at important questions for Choosing Enterprise resource planning software-

Now, let us see a few questions you must think of before purchasing ERP software. 

  1. Know the modules you hold
  2. Do you have mobile access?
  3. Is there any scope for advanced technologies?
  4. Can your ERP system be easily integrated with other tools at your workplace?
  5. Do you give industry-related solutions?

Down the Line 

An ERP software implementation might be a tedious task specifically for those businesses having outdated functions to fulfil the current enterprise stacks. However, the above-mentioned steps will help your business get the most appropriate ERP vendor while implementing a new system within a short amount of time and increased the success graph. 

Procurement meaning and process explained

Procurement meaning and process
Reading Time: 5 minutes

Summary: Procurement constitutes the transactional part of the business. It involves buying raw materials from vendors & suppliers at the most affordable rates. Although the techniques and methods of procurement have drastically changed over the years, the general principle remains the same i.e. getting essential supplies at the cheapest rates and on time. Therefore, qualified professionals need to monitor each component of the procurement process as it directly impacts a business’s bottom line.

Procurement quote

What is Procurement?

Generally speaking, procurement is a collection of multiple processes and activities allowing businesses to acquire the best quality raw materials at competitive prices and within the stipulated deadline. 

However, different companies define procurement differently. 

For example, for company A, procurement might mean determining business needs, identifying suppliers, generating & tracking receipts of goods, and redefining, updating, and negotiating payment terms based on the inputs collected from involved parties.

On the other hand, company B might have a narrower view of procurement, including only the generation of purchase orders and making the final payment.

Why is Procurement critical to your business?

A well-managed procurement process helps identify reliable vendors and suppliers. A reliable vendor ensures you get essential supplies at the most competitive rates and within the specified date and time. 

Many companies waste significant time, resources, and money dealing with inefficient suppliers. As a result, they get substandard materials. 

Another challenge is that many suppliers either don’t keep records or use traditional methods like pen and paper. They don’t use automated solutions like ERP systems to maintain and update records which wastes significant time and leads to human-induced errors. 

A well-managed procurement process solves the following challenges:

  • Helps identify reliable vendors and suppliers.
  • Reduce the cost of purchase of raw materials.
  • Ensures materials are delivered on time.
  • Maintains procurement records safely in ERP software.

<<<Also Read: Difference between Procurement and Purchasing>>>

Types of Procurement

Procurement can be categorized as direct and indirect based on how the company will use the items after procuring them. 

  •  Direct Procurement

It refers to procuring raw materials required to manufacture an end product. For example, a tyre manufacturer would procure rubber for producing tyres. Or a retailer would procure sugar from a wholesaler to further sell it to customers.

  • Indirect Procurement

It includes materials that don’t directly contribute to the company’s bottom line but play a significant role in executing day-to-day business operations. Examples include office supplies such as furniture, equipment maintenance, after-sales service, and running ads on social media.

Procurement can also be classified as goods and services based on the type of items being procured.

  • Goods procurement

It refers to procuring physical items & equipment but can also include digital products like software subscriptions. An efficient supply chain plays an important role, without which you might get low-quality products and experience a delay in receiving goods. Most importantly, both direct and indirect procurement form a crucial part of goods procurement.

  • Services procurement

This category includes people-based services. It differs from company to company, but it generally consists of:

a. After-sales executives

b. On-site laborers

c. Individual contractors

d. On-site security services

Both direct and indirect procurement form a critical part of services procurement.

Procurement statistic

9 critical parts of the procurement process

Although the procurement process greatly varies from one company to another, it consists of all or some of the points mentioned below:

1. Identifying products and services critical to a business

Initially, a company should identify the products and services it requires based on its needs and requirements. For example, it might include a brand new product that the company hasn’t previously purchased, restocking supplies of existing products, or renewing a service.

Here’s what you must take care of:

  • Type of material/service
  • The exact quantity of products
  • Precise technical specifications of products 
  • Service characteristics
  • Part numbers

It’s best to consult all business departments before making the final purchase, ensuring the procured item fulfills the needs of each department.

2. Submit a purchase request

Making a formal purchase request, also known as purchase requisition, makes sense if you want to purchase a large number of items or services in one go.

Usually, the procurement department manager creates a purchase request listing down the department’s needs and the technical specifications of the product specified. It includes:

  • Price format
  • Time duration
  • Quantity required
  • Size/dimensions
  • Installation
  • Performance
  • Supplier experience

The purchase request is finally sent to the finance & accounting department, which decides to approve or deny it. 

If approved, the procurement team can start the vendor selection process. If denied, both teams can sit together to identify & eliminate unrequired expenses and only pay for items critical to the department’s functioning.

3. Identify and select the best vendor

After the finance & accounting department approves the purchase request, it’s time to identify the best vendor and submit a Request for Quote (RFQ). 

The procurement team sends the RFQ to potential suppliers to receive a quote. And therefore, the RFQ should provide a detailed description of your business needs to the vendors. 

Here’s what you should focus on during the vendor assessment process:

  • Quality, Cost, and Delivery (QCD)
  • Total Quality Performance (TQP)
  • Regulatory compliance risk
  • Financial Stability
  • Past industry experience
  • Service quality
  • Delivery time
  • Cyber risk

Today, many retailers take pride in implementing eco-friendly policies. Therefore, it would be best if you tie up with a supplier that stands with environmental sustainability issues. This way, you can strengthen your corporate identity and build a brand in the market.

<<<Also Read: Top 10 ERP Vendor Evaluation & Selection Criteria>>>

4. Working out the price and terms

The industry practice is to get at least 3 quotes from suppliers before reaching the final decision. You should critically analyze each quote and identify clauses where you can negotiate to get a better deal. If you aren’t satisfied with the procurement terms, have several alternate suppliers before calling it quits. And if you agree to go ahead with the supplier, ensure that you create a written document mentioning all terms and clauses.

5. Generate a purchase order

Create and fill a Purchase Order (PO) and forward it to the supplier. Ensure that the PO contains all details regarding the goods and services you need and the stipulated time within which the supplier should fulfill the order. 

6. Examine the received goods

Once you receive the deliveries in your warehouse, check for any discrepancies, damage, or errors. Ensure that you have received each item mentioned in the PO and also check their quality — substandard, average, or excellent.  

7. Perform three-way matching

To avoid discrepancies or errors, the accounts payable team should perform three-way matching, which includes comparing the order receipt (packing list), purchase order, and invoice. The primary objective of this step is to ensure you don’t pay for inaccurate or unauthorized invoices. 

8. Make the final payment

If there are no discrepancies in the three-way matching process and everything is accurate, you should pay the invoice. An error-free account payable process helps verify that any payments you make match the invoice. This process ensures that payments are always made on time, helping build robust and long-lasting supplier relationships and preventing late fees.

 9. Record keeping

Storing and maintaining records for the entire procurement process, from identifying essential materials and generating purchase orders to creating RFQ and paying invoices, is beneficial for multiple reasons.

They help:

  • Reordering goods at competitive prices in the future.
  • Calculate taxes
  • Assist in the auditing process
  • Resolve potential issues that might arise in the future

ERP for supply chain

 

What is Financial Management ?

financial management
Reading Time: 6 minutes

Summary: Financial management comprises methods and techniques for handling a company’s financial assets. It helps the business track its expenses & profits and, more importantly, allows it to adhere to government rules and regulations. It often requires brainstorming effective financial strategies & high-level plans and sticking with them for a sustained period.

financial management quotes

What is financial management?

At its very basic, financial management is about brainstorming and implementing a financial plan and ensuring that each department sticks to it for the pre-decided time frame. An error-less financial plan allows key stakeholders to:

  • Make solid strategies based on factual facts, figures, and market realities.
  • Make investments in financially-sound start-ups.
  • Evaluate a company’s financial performance based on metrics such as price-earnings (P/E), Capital ratio, Return on equity (ROE), etc.

Financial management ERP software allows companies to get a comprehensive picture of their financial performance through a single window. In addition, they can quickly learn about multiple financial functions, including revenue recognition, accounting, payment processing, and fixed-asset management that facilitate the smooth functioning of a business. 

In short, a financial management system provides real-time status of a company’s finances and helps carry out day-to-day operations like period-end closing. 

 

Why is Financial management crucial for your business?

The three essential pillars of financial management are:

1. Strategizing

Companies need to identify their short and long-term financial goals. Moreover, the senior management requires access to valuable insights for scenario planning. 

2. Decision-making

Decision-makers make high-level decisions based on factual reports and relevant KPIs.

3. Controlling

Business leaders must ensure that each department is aligned with the strategy and operating within the set budget.

Effective financial management allows the workforce to understand the company’s financial performance and its long-term vision, mission, and values. 

financial management

What are the objectives of financial management?

Based on the pillars mentioned above, financial managers help companies achieve the following objectives of financial management:

  1. Complying with state, central, and industry-specific regulations.
  2. Tracking cash flow to ensure the organization has enough funds to fulfill its financial obligations.
  3. Maximizing profits by offering valuable insights on, for example, rising transportation costs that might increase the cost of finished goods.
  4. Developing multiple financial scenarios based on the changing market conditions, customer preferences, and the business’s current financial state.
<<<Also Read: The Objective of Financial Management>>>

What is the scope of financial management?

Financial management comprises four crucial areas:

1. Budgeting

The financial manager assigns available funds to meet operational expenses, including employee salaries and T&E, rents, mortgages, raw material costs, and transportation costs. They also need to set aside some money to explore new market opportunities and deal with emergencies.

Budgets are of two types — Static and flexible.

Static Budget Flexible Budget
Remains constant even if there are substantial changes in the assumptions made during the planning phase. Adjusts if the assumptions made during the planning phase change.

Analyzing and managing risk

Business executives depend on financial managers to understand various business risks and how to control them. The following points tell how:

1. Credit risk

If customers fail to pay on time, the business might face difficulties running its day-to-day operations. It will not have enough cash to meet its financial obligations, adversely impacting its creditworthiness and significantly reducing its ability to take loans at favorable rates. 

2. Operational risk

Examples of operational risk include the probability of a machine breaking down and signing a periodic machine maintenance contract with a vendor. It also includes planning and investing for:

  • Disaster recovery 
  • Crisis management
  • Business continuity

3. Market risk

Depicts the amount of risk that exists in a particular industry. For example, the impact of the COVID-19 pandemic on the hospitality industry. 

4. Liquidity risk

The financial management team has to track a company’s cash flow in real-time to identify the weak spots where most of the money flows out without generating any ROI. It also involves determining future cash needs and freeing up working capital for uncalled expenses.

<<<Also Read: The Scope of Financial Management>>>

What procedures does the financial manager follow? 

The financial manager creates a list of procedures that guide the financial management team in generating and distributing financial data, including payments, invoices, and reports, accurately while ensuring security at all times.

These procedures also define each stakeholder’s responsibility and determine the ultimate signatory authority. 

A set of procedures offers companies a tried and tested way of doing things faster and more efficiently. They don’t have to start everything from scratch. Instead, they can align their strategies with the rules and regulations mentioned in the procedures and expedite the process.  

Sage X3 for financial management

What is the role of a financial manager?

A financial manager manages the functioning of a company’s financial department. The list below provides their daily work routine:

1. Creating a capital structure

One of the crucial tasks of the financial management team is to generate a capital structure after estimating the amount of capital. This process involves short and long-term debt-equity analysis. The capital structure is based on the amount of capital the company owns and the amount to be raised from external stakeholders.

2. Assigning profits

If a company makes significant profits in a financial year, the financial manager must assign them for:

  • Contingency measures
  • Purchasing machines
  • Expanding to new markets
  • Investing in research and development
  • Product innovation
  • Paying dividends to shareholders

3. Financial control

Organizing & obtaining funds from multiple sources and controlling expenses constitute the most important tasks of a financial manager. They can use ratio analysis, cost control, risk management, profit management, and financial forecasting methods to manage their finances well.

financial management quotes

4. Estimating the required capital 

A crucial task of financial management is to estimate the amount of capital required by the company to manage its day-to-day operations. This step involves estimating the amount needed for purchasing and maintaining machines. A financial manager has to ensure that estimates are done in a way that eventually helps the company make profits. 

5. Judicious capital investments

A financial manager has to make intelligent investment decisions. Therefore, finding promising start-ups and identifying excellent investment opportunities is one of the essential functions of the financial management team. 

6. Managing money appropriately

Efficient administration of money allows the financial management to distribute salaries, meet financial obligations, pay taxes, maintain appropriate stocks in the warehouse, and purchase materials and equipment necessary for the proper functioning of the manufacturing facility.

An illustrative example of financial management

Consider the following example. A perfume manufacturer wants to release a new perfume in the market. The CEO calls a meeting to decide the total cost of manufacturing a thousand bottles. After the meeting, he asks the finance manager to determine where the funds will be obtained from, for example, external investors, bank loans, commercial mortgages, etc.

Then, the finance manager contacts several stakeholders to ask for funds. After receiving the funds, he ensures those funds are allocated to each department in the organization cost-effectively based on their needs.

After a month, when the sales data is revealed, the finance manager decides whether to invest the money in:

  • Manufacturing more perfume bottles of the same type.
  • Start a new line of perfume to cater to a different target segment.
  • Distribute extra cash to the stakeholders in the form of dividends.

While the whole manufacturing process is going on, the finance manager also needs to ensure that the workers are being paid on time. Further, creating and analyzing real-time finance reports is also crucial to determine whether the company is making the same amount of profits as was initially planned during the brainstorming sessions.

financial management

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Disclaimer: All the information, views, and opinions expressed in this blog are those of the authors and their respective web sources and in no way reflect the principles, views, or objectives of Sage Software Solutions (P) Ltd.

The Scope of Financial Management

Scope of Financial Management
Reading Time: 5 minutes

Summary- Finance management plays a vital role in all kinds of businesses and it is the backbone of any organization. Various factors, including profit or loss, are closely related to financial management. Let us discuss the scope of financial management in this post. 

Scope of Financial Management

Let us first learn what financial management is?

Financial management is all about organizing, directing, strategic planning, and manipulating financial rules in a company. It also embraces deploying management principles to the economic features of an organization. It is a pivotal part and is considered the backbone of all businesses. Financial management has the modern approach that makes sure that required funds are always available from different sources in organizations while also helping organizations to earn high ROI.

In this post, we will discuss the scope of financial management in detail.

So, the prime scopes of financial management include:

  1. Investment decision
  2. Working capital decision
  3. Dividend decision
  4. Assures liquidity
  5. Profit management
  6. Financing decision

Let us discuss each of the scope of financial management in detail.

Investment decision

The primary objectives of financial management are thoroughly involved in managing a company’s investment decisions. This includes determining and measuring the capital cost, predicting the benefits of a specific project, evaluating risks, and more. It is the topmost scope of financial management. Here, the economic managers/ executives discuss and decide how much funds should be invested into the company’s current or fixed assets to gain the highest returns. 

Scope of Financial Management

The two main factors of investment decisions are liquidity and capital budgeting. Capital budgeting is related to capital allocation and switching funds in permanent assets that could give greater returns in the near future. It is a crucial decision to be taken since the company’s long-term success depends on that. But, it is also a very tough task to execute since it involves cost benefits and estimations, which are pretty uncertain. 

<<Also Read: The Objective of Financial Management>>

Working capital decision 

Making informed and working capital decision is another essential scope of financial management. However, these decisions are related to the company’s investment in current assets or liabilities. This type of decision includes short-term and working capital financing. The existing assets include receivables, inventories, short-term securities, cash, etc. On the other hand, current liabilities include overdrafts, bills, creditors, and payable. 

<< Also Read: Financial Management: The Ultimate Guide (2022)>>

Dividend decision 

Making dividend decisions is a significant scope of financial management which is all about taking all dividend decisions of the organization. These decisions include building an appropriate dividend policy as per the retaining and distribution of company success/ profits. To carry out this process, the financial manager/ senior finance executive should decide on a maximum dividend payout ratio from the available gain of the business. 

Assures liquidity 

Maintaining proper liquidity of the business is a significant scope of financial management that makes sure that the supply of funds to the organization is regular. Here, the finance manager assures and tracks cash inflows and outflows while also avoiding situations like overflow and underflow of cash. This way, businesses can track the optimum level of liquidity.

Profit management 

The most critical scope of financial management is profit management since its primary aim is to profit the organization. This scope of financial management works to lower the cost of different activities via appropriate tracking. Also, it helps set a reasonable price policy in a single shot. Here, the financial manager tracks and measures the cost of capital while choosing inexpensive sources of capital. It is done by checking the different available resources. 

<< Also Read: Top 3 key features of ERP financial management systems>>

 Financing decision

This scope of financial management means deciding how and when the required funds should be made available from the current short/long term sources. The finance manager should develop an appropriate capital structure for the organization or even a finance mix to increase its value. To follow this cope properly, the finance manager should maintain a better balance between the debt and equity in order to offer high returns to the customers. 

One thing to remember is that the utilization of debt and leveraging the company’s finance impacts both the risk and returns to the equity customers. When the risk and return are accurately matched-up, the market values for every share are increased. Scope of Financial Management

Hence, the finance team should always decide the perfect time to raise funds while ensuring all securities.

Why is financial management critical? 

  • It helps companies in acquiring funds and doing better financial planning. 
  • Helps businesses efficiently use and assign received funds 
  • Improves the organization’s value 
  • Offers economic stability 
  • Aids businesses in making quick and crucial financial decisions

Scope of Financial Management

The Nature of Financial Management

Undoubtedly, financial management is any business’s natural and most needed function. It is highly needed to get the required physical resources and streamline production functions. Let us now see the nature of financial management through different definitions. 

 

  1. Finance is the foundation pillar of all economic activities of the organization. In any organization, the person who manages and controls all company finance is the finance manager. 
  2. The nature and scope of financial management should be studied in detail to avoid any finance-related losses. Financial management is responsible for the company’s overall growth, success, and risk-prone nature.
  3. Finance management is one of the best forms of education which got realized across the globe.  Many people have made their careers in financial management considering the dire need for businesses to grow. 
  4. Financial management is not an individual entity. Hence, an operational manager or a functional manager must take this responsibility to manage finance. 
  5. Multi-discipline is one of the natures of financial management. It totally depends upon different factors, including inflation, economy, accounting, banking, and much more. Considering these factors results in the appropriate use of business functions and finances as well. 
  6. Financial management has such a nature that not only relates to business functioning but also acts as the backbone of the economic, industrial, and commerce background. 

 

scope of financial management

 

Down the line 

For enhanced experience and profits, businesses must ensure that the modern approach to financial management closely deals with the fund’s availability, management, and allocation. Also, it should ensure where and how these funds should be invested, monitoring and planning the estimated ROI, working capital, and more. If an effective financial management plan is deployed in an organization, its profit and growth are certain. 

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Disclaimer: All the information, views, and opinions expressed in this blog are those of the authors and their respective web sources and in no way reflect the principles, views, or objectives of Sage Software Solutions (P) Ltd.

Top 4 Reasons why Distilleries need a Business Management platform

distilleries erp
Reading Time: 6 minutes

Summary: Today, India is the 3rd largest and fastest-growing alcoholic beverages market with a cumulative market cap of USD 5 billion. Research reveals that 30% of Indians consume alcohol and this figure has risen rapidly at a CAGR of 7% in the last four years. Therefore, several distilleries are trying to come up in this space and make a mark for themselves. However, it requires compliance with government policies and deploying a robust business management platform that provides solutions to various industry challenges quickly and efficiently.

business management platform

Companies operating in the brewery and distillery industry have to deal with challenges across numerous verticals, including marketing & sales, finance & tax, production & quality, service management, warehouse & distribution, business intelligence & reporting, purchase & inventory, and contact management. In this article, we will see how business management platforms like Enterprise Resource Planning (ERP) systems provide quick and efficient solutions to distillery companies.

1. Marketing & Sales

ERP software provides all the marketing and sales tools to track customer needs and stores all sales and marketing information in a single repository accessible to relevant stakeholders. Get an in-depth understanding of your customers’ preferences & changing market trends, succeed in online marketing, and benefit from mobile sales. 

  • Grow customer base
    Business management platforms allow distillery companies to acquire and grow relevant prospects by executing top-notch lead generation, digital marketing activities, and campaigns.
  1. Build and implement targeted marketing campaigns quickly.
  2. Get actionable insights to enhance your lead conversion rate.
  3. Track how your customers are responding to online and offline campaigns and reinvent strategies accordingly.
  4. Build pioneering digital marketing programs that ensure excellent word-of-mouth.
  5. Get more efficient tools to measure the impact of your digital marketing campaigns.

>>> Also Read: ERP for Alcohol & Distilleries Industry <<<

  • Salesforce automation

    Enhance your sales teams’ ability to find prospects with a higher chance of converting into full-time paying customers. A robust business management platform will allow them to search and close more leads by significantly increasing their productivity, both, in-house and in the field.

    1. Access inventory, sales history, quotes, customer feedback, schedule, and much more on your mobile device.
    2. Get comprehensive information about your customers, prospect, vendors, suppliers, and distributors.
    3. Provide discounts, perform profit and loss budgeting, and assign equipment instantly.
    4. Automate competition and market analysis 
  • Mobile Sales

    Significantly increase the agility and productivity of your sales reps by allowing them to access critical business information across various mobile devices, including smartphones, laptops, PCs, tablets, etc.

    1. Check inventory, prices, and much more instantly.
    2. Dramatically reduce preparation time for visits. 
    3. Speed up the invoicing process by sending invoices to the customer instantly.
    4. Software is compatible with all platforms, including android, windows, and iOS. 
  • Loyalty Management

    Business management platforms create and manage loyalty management programs that help develop robust and long-lasting customer relationships.

    1. Efficiently manage the earning and withdrawal of loyalty points.
    2. Collect donations and base points on sales.
    3. Allow customers to use loyalty points easily.
  • Email marketing

    Business management platforms enable distillery companies to market and promote their products on electronic media, create engaging email marketing campaigns, and do A/B testing that helps understand what strategies are working.

    1. Simplify surveys and create targeted email campaigns.
    2. Automate email marketing activities, thereby enabling the sales team to focus on mission-critical tasks.
    3. Nurture prospects across each stage to ensure they are sales-ready.
    4. Track how leads are engaging with your email marketing campaigns — what they are primarily engaging with and responding to.
  • Event management

    Distillery companies get a 360-degree overview of events-related orders, such as products sold in a giveaway or an event. You can also optimize equipment with the rise in demands and plan equipment loans with your orders.

    1. Interactive workflow management
    2. Lend chairs, tables, and daft installations efficiently.
    3. Manage everything from customer request and shipment to returning goods, and much more. 
  • Tele sales

    Increase customer database efficiently by the tele sales module.

    1. Use predefined delivery routes to minimize distribution costs.
    2. Create predefined calling plans.
    3. Create new up-selling and cross-selling opportunities through volume discount rewards.
    4. Access historical accounts, discount alerts, and promotions. 

2. Finance & Tax

Indian distillery market is setting up the global footprints. Recently, in an article published by Businesses World, IWSC Picks Indian Gin Distillery In World’s Top 5 Gin Producers. While Indian companies aim at entering the international markets, managing finance and compliances becomes an integral part of business operation.

Business management platforms consist of tools that enable distillery companies to integrate financial management workflow with other departments. This system helps bring together financial processes & analytics, controls costs, liquidity, and cash, performs automated and real-time processes, and helps get relevant business insights.

  • Finance management and accounting

    Manage accounts payables and receivables, general ledgers, budgets, and access detailed financial reports with a business management platform.

    1. Manage fixed and variable costs effectively.
    2. Maximize cash and drive efficiency with integrated accounts and payable capabilities.
    3. Create detailed reports on profits, inventory costs, sales, and sales costs.
    4. Get multi-currency and multi-language support and inter-company transfers.

>>> Also Read: ERP for Financial Services <<<

  • Discount management

Discount management plays an essential role in a distillery company’s supply chain management:

    1. Consists of sales and purchase modules.
    2. Manage multiple discount and promotion accounts simultaneously.
    3. Efficiently manage free items.
    4. Get volume-based periodic rebates.
  • Deposit management

    Manage deposits efficiently without getting into complicated administrative procedures.

    1. Automate separate invoices for goods.
    2. Calculate deposit limit and send automatic warnings.
    3. Check goods that are returned by customers.
    4. Easily integrate with sales, inventory, and purchase workflows.
  • Duty Management

    Distilleries businesses no longer have to calculate taxes separately for each item. Instead, you can calculate item-category taxes like excise duty based on a particular country’s legislation.

    1. Handle multiple taxes based on various geographies.
    2. Report taxes quickly and efficiently.
    3. Compute eco-taxes easily.
    4. Manage country-specific tax regulations without any delay.
    5. Manage crucial ERP modules, including sales, IT, purchase, warehouse, inventory, all from one place. 
  • Contract management

    Quickly build reports and contracts for short-term and long-term requirements, including loan, rent, and technical maintenance contracts.

    1. Get a complete overview of commitments and discounts.
    2. Get a 360-degree picture of volume commitments.
    3. Looks after building management (the pub owned by the distilleries company or a third-party vendor).
    4. Check the entire budget easily. 

3. Warehouse & distribution

Efficient management of warehouses and distribution centers plays an essential role in developing a cohesive supply chain. Business management platforms like ERP software allow distillery companies to streamline warehouse and distribution-related challenges that increase warehouse efficiency, manage discounts, and deliver top-notch customer service

>>> Also Read: ERP for Alcohol & Distilleries Industry <<<

  • Transportation management

    Move products from source to destination cost-effectively. Optimize customer service, reduce freight cost, and significantly increase your warehouse efficiency with ERP application.

    1. Pre-set delivery routes
    2. Allocate trucks and drivers with the click-of-a-button
    3. Manage third-party vendors, suppliers, and distributors
    4. Check and analyze constraints on volume, weight, and delivery date
  • Integrated Scanning

Streamline warehouse workflow using state-of-the-art Serial Shipping Container Code (SSCC) pallet tracking, enhance visibility across various interconnected logistics operations, and reduce/eliminate data entry errors.

    1. Join and split pallets through the scanner.
    2. Manage returned orders efficiently.
    3. Assign and distribute warehouse tasks quickly between the team members.
    4. Stock corrections at the pallet or lot level.
    5. Register finished products and raw materials faster and smarter.
    6. Check the authenticity and correctness of shipments and purchase receipts.

4. Quality management

Business management platforms help distillery companies manage raw material costs and complicated customer demands and adhere to strict government rules and regulations concerning food and beverage safety and quality concerns. In addition, this software will enable you to significantly increase your operational visibility, flexibility, and reliability and become more agile to handle orders. 

>>> Also Read: Efficient Quality Management in Sage X3 <<<

  • Traceability

    ERP software for distillery companies will allow you to track items from source to destination. You can control expiration dates and smoothen planning, purchasing, and quality assurance. Other features of the tracking module include:

    1. Label management
    2. Registration of laboratory quality requirements
  • Beverage production

    Drive efficiency by tracking business operations from purchasing raw materials to end-product packaging.

    1. Automate critical operations like capacity planning and production order management.
    2. Automate lot traceability of intermediate, finished, and raw materials.
    3. Automate macro planning solutions for production plans and purchase contracts. 

supply chain management ebook

  • Planning

    Streamline logistics and procurement policies via distilleries ERP. Formulate plans regarding what products you will produce on which product lines and use forecasting tools to develop short-term and long-term planning. This way, you can ensure that you are never short of the raw materials required to run your distilleries company.

    1. Automate lot management
    2. Automatically generate bar codes
    3. Get full traceability
    4. Optimize inventory value 
    5. Automate inventory processes
  • Quality management

    ERP for distillery management allows you to measure product quality based on intermediate and finished goods in the production process. Moreover, it also monitors the quality of the raw materials. Other functions of the ERP software include:

    1. Automatically block operations if bad results come up
    2. Backward and forward tracking
    3. Performs automatic ad hoc and in-process tests
    4. Top-notch quality reporting features
  • Manufacturing execution system (MES)

    Distilleries ERP simplifies the monitoring of your beverage production processes. It tracks all the processes that lead to the conversion of raw materials into finished products. You will also get the following benefits:

    1. Monitor losses incurred in the entire value chain from raw materials to finished products by tracking the material flow.
    2. Compare product parameters with specifications through parameter monitoring features.
    3. Integrate with other industrial hardware systems like matrix lasers, controllers, cameras, bar code scanners, and much more. 
    4. Analyze production performance quickly
  • Plant maintenance management

    Efficiently manage beverage production equipment, ad-hoc service requests, preventative maintenance, and easy handling of plant maintenance.

    1. Generate reports for spare parts.
    2. Capture maintenance information quickly and efficiently.
    3. Log spare parts automatically.

 

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At Sage Software Solutions (P) Ltd., we are home to world-class ERP software and CRM software that will solidify your business tech support fundamentals and enable you to build a customer-centric organization. You can also write to us at sales@sagesoftware.co.in.

Disclaimer: All the information, views, and opinions expressed in this blog are those of the authors and their respective web sources and in no way reflect the principles, views, or objectives of Sage Software Solutions (P) Ltd.

Top challenges in ERP implementation

Reading Time: 7 minutes
Synopsis: ERP implementation is a challenging task that can put a halt on business operations if not done correctly. Companies need to continuously motivate their employees and monitor the process to see that everything goes smoothly and each stakeholder faces minimum challenges.

What is ERP software?

Enterprise Resource Planning (ERP) software has become a part and parcel of businesses across industries. No company can think of surviving in the market, let alone competing with other players. ERP systems play a significant role in helping you manage critical business functions, such as sales & marketing, manufacturing, finance & accounting, managing relationships with vendors/suppliers/distributors, developing robust and evergreen customer relations, and handling inventory and warehouse management.

What are the benefits of ERP software?

The list below will shed light on some of the benefits of ERP systems:

1. Your sales team can sort prospects in the sales pipeline based on various parameters like:

a. Follow-up stage

b. Potential meetings

c. Meetings completed

d. Proposals made

e. Negotiations started

The best part is that that they can complete the sorting process in a simple drag and drop fashion.

2. Your marketing team can brainstorm effective customer acquisition and retention strategies based on crucial customer data such as geography, demography, psychography, behavior, ticket size, and past purchasing pattern.

3. Your support service department can form long-lasting customer relationships by interacting with them 24/7 and by acting on their feedback instantly.

4. Your ERP system sends continuous alerts and reminders to all business stakeholders allowing them to stay updated with real-time information.

5. Your manufacturing department can conveniently monitor the conversion of raw materials into finished products and check whether all the guidelines and specifications are being adhered to.

6. Your finance & accounting team can automate trivial jobs like creating invoices, maintaining and updating ledgers, and clearing taxes on time.

7. Your inventory and warehouse team can monitor the supply of raw materials and finished products in the stockpile. If the number of raw materials goes below the set threshold, the ERP will automatically send a purchase order to the vendor.

8. Your ERP can automate the process of selecting the best supply chain partners from a long list of vendors/suppliers/distributors.

9. Your ERP system comes with an integrated data analytics feature that can collect and process huge volumes of data. This helps to get a comprehensive understanding of the changing customer preferences and transforming market trends.

10. Your ERP system keeps you tax compliant by allowing you to adhere to government norms and practices. It also has a GST module that keeps you updated about any new changes in the GST regime.

Why is ERP implementation so difficult?

After reading how Enterprise Resource Planning solutions can help you in conducting business efficiently, it is time to delve deep and get a complete picture of the ERP implementation challenges and how you can overcome them.

ERP systems can be implemented in two ways — On-Premise and On-Cloud.

On-Premise ERP systems are deployed inside your office building. They are massive systems with several servers and network ports that require a separate room for installation.

Want to know how ERP systems can help you in achieving your goals and how to implement them? Read the guidebook “ERP Full Form” by clicking on the picture below.

ERP Full Form

The following list provides the advantages of an On-Premise ERP system:

1. The most significant advantage of an On-Premise ERP system is robust data security. Since the On-Premise ERP system is situated within your office, no external entity can use it. Also, unlike their On-Cloud counterparts, all the updates are done by the in-house technical team and not by external third-party vendors. It significantly reduces the exposure of critical business data to external stakeholders.

2. Once the ERP implementation process is finished, you no longer need to depend on an ERP vendor. It will substantially reduce your operational expenses because you don’t have to pay for the services of any third party.

3. Employees with a non-technical background require intensive training to learn how to operate an ERP. In the case of an On-Premise ERP system, your in-house technical team will provide the necessary training. You don’t have to pay the training fees to any third-party vendor.

4. Providing customized solutions is one of the biggest assets of your ERP suite. The in-house IT experts have a first-hand view of your company’s challenges that helps them develop solutions specifically tailored to your business needs.

What are the challenges when implementing and upgrading enterprise systems?

1. Implementing ERP can be challenging for most businesses. It is because On-Premise ERP solutions can significantly raise the operating expenses of the business. There are numerous reasons behind this. Firstly, they occupy a lot of office space for installation. So you need to ensure that you can pay higher rent. Secondly, you should have an in-house IT team that has decades of experience and access to the best quality software. It is one of the biggest challenges for small and medium enterprises to have a separate IT team because they lack the required financial resources to support one.

2. On-Premise ERP implementation can adversely impact the process and functioning of the sales department in your business. The following example will shed light on it. Suppose your sales team qualifies a lead and requires important documents before the customer can make the final purchase. In that case, the salesperson will go to the client’s place, collect the required documents, and carry them to the office for uploading them in ERP suite. Do you think this process adversely impacts your business? You will get a detailed answer in the next section when we talk about On-Cloud systems.

3. One of the most significant disadvantages of On-Premise ERP implementation is that it can disrupt the functioning of the business for a long time. Your company’s employees will have to work for extended periods in order to learn the basics of the new system. Some projects may be called off and others might have to be temporarily put aside. The senior management will have to create new workflows and redesign employee duties so that the business runs smoothly.

4. Some of the most challenging aspects of an ERP implementation are as follows:

a. Additional ERP modules come at an extra cost.

b. Only the in-house IT team is responsible for the upkeep of the new system because you aren’t dependent on any third-party vendor.

c. Data migration can be a serious headache during the implementation phase. Critical business data may be stored in different repositories across various departments of your company. It is essential to retain crucial information and delete duplicate data to save expensive memory space in the new ERP.

d. Change management can easily be touted as the toughest of all ERP implementation challenges. Front-line users resist the change as they find it extremely difficult to learn the functioning of the ERP system. As the leader of your company, you need to motivate different business stakeholders by communicating the merits and features of ERP implementation.

What challenges can ERP solve for an organization?

Now that we have a complete picture of ERP implementation challenges, it is time to look at how an ERP solution can help your organization.

On-Cloud ERP suites are rapidly being adopted by companies worldwide. The following reasons explain why:

1. They are way cheaper than their On-Premise counterparts, which makes it easy for small and medium enterprises (SME) to purchase them.

2. Their implementation and upkeep are also very easy. It is because SMEs don’t have to worry about paying extra money for the ERP installation. The third-party vendor takes care of buying expensive servers and managing the network issues. Thus, a lack of financial resources is not a significant challenge anymore.

3. On-Cloud systems make change management a piece of a cake because employees no longer have to stay in the office for extended periods. Third-party vendors provide technical training that helps to ensure that employees can learn on the go.

4. Companies have to mull over data security challenges during an ERP implementation. The best part about On-Cloud ERP systems is that the third-party vendor takes care of all cybersecurity challenges for your company. You don’t need an in-house IT team to provide round-the-clock protection for the new ERP.

5. An ERP implementation requires numerous version updates and technology upgrades periodically in order to brainstorm market-specific strategies as well as to provide tough competition to other market players.

6. The implementation of the On-Cloud ERP suite is a boon for your sales team. Remember we touched upon this topic previously and had promised to give you a valid explanation later. Well, here it is. With an On-Cloud ERP solution, your salesperson can collect all the important documents from the client’s place itself. They don’t have to return to the office to upload the documents. In short, it allows working on the go and saves a lot of time.

7. On-Cloud ERP solutions can be integrated with the employees’ smartphone to ensure that they can access critical business documents 24/7 as well as take the managers’ assistance from anywhere and at any time.

8. Have you ever considered what is the deployment time of an On-Premise ERP solution? It extends somewhere between six to twelve months. On the other hand, the implementation of the On-Cloud ERP system takes not more than 72 hours. Some of your employees might resist the implementation of On-Premise ERP only because they take a lot of time. If you are dealing with a similar scenario, then On-Cloud ERP is the best choice for your company.

9. Do you have a full-fledged IT team? Are they doing low-value activities like collecting data from various sources? Lack of an On-Cloud ERP solution can waste a lot of time of your IT team. On the other hand, by implementing one you can offload trivial jobs to the ERP suite that will free up time for your IT employees who can then focus more on strategic tasks.

10. On-Cloud ERP suites allow you to be more environment-friendly. Third-party vendors provide ERP capabilities to numerous companies on a shared infrastructure that reduces the need to maintain separate servers and also saves electricity.

Conclusion

ERP solutions have become the backbone of all businesses across industries. It’s because they support each business operation and also help build robust and long-lasting customer relationships. Their ability to collect critical business data from multiple sources and how they build unique customer personas makes them extremely useful for different business scenarios. This article has given you a complete picture of ERP benefits and the challenges associated with ERP implementation.

If you desire to get a better understanding of ERP, please refer to the following guide by clicking on the picture below.

The Ultimate ERP Guide 2021

At Sage Software Solutions (P) Ltd., we are home to world-class On-Cloud ERP software and CRM software that will solidify your business tech support fundamentals and enable you to build a customer-centric organization. You can also write to us at sales@sagesoftware.co.in. We will provide you all the required support to implement a Cloud-based ERP solution in your company. Book an appointment today!

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Disclaimer: All the information, views, and opinions expressed in this blog are those of the authors and their respective web sources and in no way reflect the principles, views, or objectives of Sage Software Solutions (P) Ltd.

 

Explained: Why employee training programs are the backbone of successful ERP implementation.

Reading Time: 8 minutes

Summary: Employees are the backbone of each business operation. Without their wholehearted involvement, you cannot think of achieving the desired output. But you also need to focus on developing their skills and making them capable of delivering excellent results within the desired timeframe. An employee training and development program plays a significant role in developing unique skills for the successful implementation of ERP. Simply put, training programs provide a systematic workflow and the required motivation to deal with problems and achieve the pre-decided milestones within a definite duration.    

First, let’s understand why companies need ERP software for conducting their everyday operations.

How ERP software plays a significant role in companies?

Companies across industries have realized the significance of Enterprise Resource Planning (ERP) software in conducting business operations smoothly and conveniently. The main reason why ERP software has become the backbone of businesses is that they automate several critical business functions like finance & accounting,  sales & marketing, supply chain, inventory & warehouse, vendor management, and building robust and evergreen customer relationships.

ERP implementation provides multiple benefits to companies. Firstly, as explained above, they automate business operations that reduce/eliminate human errors. Secondly, employees get more free time to focus on mission-critical tasks instead of doing trivial jobs. Thirdly, businesses develop a strong bond with their clients as CRM-enabled ERP software provides concrete data about changing customer preferences and marketing trends that help create unique customer personas. Lastly, ERP software helps companies stay compliant with government policies and norms and keeps a tab on any new circular issued by the government.

Want to gain a comprehensive understanding of ERP software? Click on the picture below to learn about the different types of ERP, how they work, their benefits, and the various stages in ERP implementation.

The Ultimate ERP Guide 2021

But ERP implementation will not fetch you any results if you don’t impart rigorous training to your employees. But first, let’s gain a deep understanding of the challenges associated with ERP implementation. The next section will talk about this topic in detail.

What are the challenges associated with ERP implementation?

ERP implementation is a complicated process that requires collaboration between all business departments. Information silos act as a major impediment here. They restrict the free flow of information and don’t allow business stakeholders to work in unison, thereby limiting the impact your business can make as a united entity.

challenges associated with ERP implementation

The following points list the challenges in great detail:

1. Legacy ERP systems acquire a lot of office space. You may have to rent a new room for installing On-Premise ERP systems. However, you can circumvent this problem by opting for a Cloud-enabled ERP system.

2. Legacy ERP systems don’t allow salespeople to collect customer data on the go. They need to do a lot of back and forth between the client’s place and the office that wastes a tremendous amount of time. On-cloud ERP systems provide an easy solution to this challenge as sales teams can collect critical customer details and upload necessary documents while working from their office.

3. Employees have to work for a longer duration as some projects might be called off and others would be temporarily put aside. They have to align themselves with the new workflows as decided by the senior management.

4. Data migration is another challenge that employees have to deal with. Normally, different departments have different data repositories to store critical data. On the other hand, a full-fledged ERP software will act as a single source of truth combining all data repositories into one. This means that different teams will have to learn to collaborate and work as a united force.


Also Read: Data Security Risks during ERP Implementation: Playing Safe

5. Change management is yet another challenge that not many companies focus on. Usually, the frontline workers with no technical background face immense challenges in learning how to operate a new ERP system. This is why they resist ERP implementation and are less motivated to work.      

An employee training and development program provides a 360-degree understanding of how to operate the new system. Gradually, as the employees gain the relevant skills, the effectiveness of operations improves which helps to stay ahead of the competition.

The next section will shed light on the challenges associated with employee training and development programs. It will provide you a complete outlook of the challenges that your employees will face during the ERP implementation and how to develop a concrete strategy to counter them.  


Also Read: Top challenges in ERP implementation.

What are the challenges associated with employee training and development programs during ERP implementation?

The ERP implementation ratio has significantly increased since the 1990s. Today, companies of all sizes have ERP software that helps them increase their productivity, reduce their operational expenses, automate their business operations, and build long-lasting customer relationships. But still, companies have to face numerous challenges while creating employee training and development programs.

challenges associated with employee training and development programs during ERP implementation

Let’s understand them one by one:

1. Lack of senior management commitment.

New projects require the undying spirit and the motivation of a dynamic leader to reach completion. Usually, the senior management in a company lacks the skills and the incentives to create a comprehensive learning and development training program.

2. Ineffective communication with users.

ERP implementation is a long and complicated process that requires a lot of time. Normally, it takes somewhere between 6-12 weeks for On-Cloud ERP implementation. On the other hand, it takes about 6 months to 2 years for On-Premise implementation. Remember that many of your company’s operations may get delayed that may cause a bad impact on customer experience. Unfortunately, the senior management in many organizations fails to develop a comprehensive communication plan and loses a big chunk of their clients.

3. Lack of effective project management methodology.

A project management methodology defines the steps, procedures, and frameworks to attain a specific goal. Choosing the correct methodology depends on various factors, such as flexibility in the workplace, adopting measures that deliver the most value, leveraging organizational goals, and developing team values. Unfortunately, most organizations lack managers who have the ability to create effective project management methodology.


Also Read: The 4 Stages of ERP Implementation Life Cycle

4. Conflicts between different departments.

Each company has multiple departments that have their own data repositories and follow their own set of processes. They don’t like sharing critical business information to stay ahead of others. One of the biggest challenges to address while brainstorming a training and development program is to develop a sense of collaboration instead of competition.

5. Failure to redesign business processes.

Redesigning business processes is one of the core tenets of employee training programs. ERP implementation has several stages and each of them has its own set of challenges and requirements. Senior managers often fail to design an appropriate strategy to counter these challenges that leads to confusion and inefficiency.

To learn more on why your company should implement an ERP software, what goals can your organization achieve by implementing it, and how to implement it, read our comprehensive guide “The A to Z of ERP systems” by clicking on the picture below.

ERP Full Form

After getting a firm grip on the challenges associated with ERP implementation, it’s now time to see how your employees can counter the challenges posed by ERP implementation. 

Why are employee training programs the backbone of successful ERP implementation?

The most significant challenge of companies is that they don’t give enough importance to employee training. They think that employees will grasp the required skills with time by themselves, which usually doesn’t happen. The reality is that without proper hand holding and employee training programs, the learning curve flattens. If the senior management fails to motivate the end-users to learn using the ERP system, they will not have any incentive to master it and resent the implementation of the new tool.

employee training programs the backbone of successful ERP implementation

Let’s get a concrete understanding of why a training and development program is the backbone of successful ERP implementation, and why it’s necessary for the success of your employees.   

1. Increased employee productivity.

Employees fail to take any initiative without efficient employee training programs. Instead, they wait for those who understand the nitty-gritty of the ERP software. On the other hand, the end-users can solve challenges without any external help if your organization creates employee-centric training programs. Moreover, they wouldn’t be required to refer to complicated documentations and training programs to remember every single function. A combination of these factors will result in increased employee productivity.

2. Makes the workforce more cost-efficient.

The best use of employee training is that your workforce will not have to always devise new ways of troubleshooting technical problems or wait for someone else to solve the issue. When your workforce is sufficiently trained to solve the challenges efficiently, you can rest assured that you are paying them for dealing with mission-critical issues instead of finishing trivial jobs. Initially, employee training programs might seem to be an extra overhead, but they help increase the employee cost-effectiveness substantially.

3. Makes the workforce more time-effective.

Learning and development programs are designed in a manner that enables employees to grasp skills for operating an ERP system. When your workforce will be able to use an ERP system to solve their daily challenges, they will save time and multiply their productivity. Learning programs are designed to help your workforce save time in troubleshooting technical faults by sticking to a particular blueprint.

4. Reduces the risk potential.

The critical benefit of using ERP software is that each department uses the same data repository to access crucial business data. This system provides dual benefits. Firstly, it allows each business department to be on the same page, making data redundancy and duplication error a thing of the past. Secondly, the fewer data repositories you have, the lower your exposure to cyber threats will be. Employee training is the surest way to lower your risk potential.

5. Helps retain the existing workforce.

Companies often look for recruiting new employees after implementing an ERP system. It’s because the existing workforce resists using the ERP system and avoids training sessions. But companies must remember that it takes time for new employees to blend in with the company’s Mission, Vision, and Values (MVV) and align themselves with the organization’s future goals. Also, old employees are more loyal to the organization and have a deep understanding of its functioning, processes, and objectives.

The main purpose of training programs is to implement proven tactics to motivate existing employees to learn how to operate ERP software. It has several benefits like:

a. No need to recruit new employees.

b. Retaining an existing workforce that is loyal and aligned to the organization’s goals.

c. Recruiting new employees every now and then puts immense pressure on the HR team and you might also have to shell out extra bucks in the process.

Conclusion

Employee training programs allow companies to develop core skills in their workforce to operate the ERP system efficiently. Employees often resist attending training sessions, which obstructs the company from achieving its long-term goals. Without an efficient training program, your company cannot draw significant benefits from the newly installed ERP software. All those months and efforts in implementing an ERP software will go in vain. So, it’s the responsibility of the senior management to brainstorm an effective training program and motivate the workforce to hone their technical skills and understand the nitty-gritty of the ERP system. Remember, that employees are the most essential part of your organization and without them, you cannot even think of surviving for long, let alone competing with other sharks in the industry. Also, keep in mind that retaining the existing workforce is better than recruiting new employees because they are more loyal and better aligned to your company’s long-term objectives. So invest in developing the core skills of your existing employees and get ready to draw significant benefits from your ERP system.

At Sage Software Solutions (P) Ltd., we are home to world-class ERP software and CRM software that will solidify your business tech support fundamentals and enable you to build a customer-centric organization. You can also write to us at sales@sagesoftware.co.in.

If you liked this article, don’t forget to share the link with your friends. Also, follow us on:

LinkedIn

Twitter

Facebook

Disclaimer: All the information, views, and opinions expressed in this blog are those of the authors and their respective web sources and in no way reflect the principles, views, or objectives of Sage Software Solutions (P) Ltd.