How Are Finance Leaders Delivering Value With the New Wave of ERP Solutions?


Over the last 20 or so years ERP solutions have been developing to meet ever wider business needs.  Finance transaction processing has remained at the core of these solutions, but ERP vendors have grown their footprint within companies with an almost constant stream of innovation and acquisition.  ERP portfolios now cover areas as wide as planning and budgeting, HR and supply chain management – as well as the core needs of Finance such as transaction capture and month-end consolidation and closing.

Despite this spread of ERP functionality throughout organisations, the core premise has remained the same – a modular ERP structure where a central ledger is fed from sub-ledgers, with internal aggregation and reconciliation between the various components.  It’s easy to see why this structure exists – the growth from a central ledger concept as vendors have extended their offerings, and historical limitations of database capacity and speed that have dictated the need for a modular solution.  But is this the way we should be considering ERP solutions in today’s world, where storage is cheap, in memory data manipulation is rapid and users have ever-growing expectations of access to information and analyses?

By considering what Finance Leaders want from an ERP solution today compared to what traditional ERP solutions offer, it’s apparent that there is the potential for significant improvement.  Finance leaders want:

  • A focus on information - rather than a focus on transactions

  • A structure based on business processes - rather than a modular structure based on discrete functionality

  • A single source of information - rather than a structure of ledgers, subledgers, and internal reconciliation

  • Ability to drill through from top-level results to source transactions within the ERP - rather than needing to structure and build data-warehouses for simple analyses

  • Integration of planning and budget activities alongside the actuals - rather than a separate planning and budgeting solution that needs to interface with the ERP solution

  • Ability to intuitively access information, transactions and workflows with a modern interface from any device - rather than the need to use a PC based portal that requires an understanding of transaction codes

From a business perspective the needs are clear – but how are ERP solutions changing to meet these needs – and how do Finance leaders take advantage of these changes to maximise business value?

The new wave of ERP solutions (such as SAP HANA for Finance) recognise that three major structural changes in ERP architecture are needed to meet the expectations of Finance leaders and the business:

  • A single ledger capturing information, providing a single source of the truth without the need for subledgers. This will allow users to drill through from summary information down to individual transaction level – and enable faster analysis

  • A structure that recognises that processes cut across traditional ERP functionality. For instance, working capital processes flow across accounts receivable, accounts payable and cash and bank functionality

  • Interfaces that allow intuitive system use by Finance and non-Finance professionals, independent of the device they are using

These changes are a fundamental departure from traditional approaches and represent new rather than evolved ERP solutions.  But what do Finance leaders need to do to maximise business value by adopting these new ERP solutions?

As with any enabling tool, the technical implementation of a new ERP solution will not deliver maximum business value.  A Finance and business-led approach is needed taking into account standardisation of processes, structuring, and cleansing of data and clarity of roles and responsibilities within the Finance team and the business.  Typically Finance Leaders apply this business-led approach to add value by focussing on the following areas:

  • Meeting Finance and compliance needs, such as robust reconciliation and intercompany solutions integrated with the ERP solution, using BlackLine for example

  • Closing the books faster by having a single source of information and a standard process, eliminating the need for internal system reconciliations and reducing allocations

  • Considering how specific needs of the business will be met by the new solution, such as real-time product costing and inventory valuation for a manufacturing company

  • Analysing working capital to determine where value may be being lost due to non-compliant vendor payments, and how to highlight where assistance with receivable dispute resolution and credit management is needed

  • Defining a management information framework, linking top-level KPIs that drive the business through to the reports that support these KPIs. Providing analysis pathways that guide Finance and non-Finance users to root causes of variances

  • Defining the integration of a planning, budgeting, and forecasting solution within the core ERP, to allow for simple comparison against actuals

The new wave of ERP solutions allows Finance leaders to take a fresh look at the business needs and how business value can be delivered with a solution structured around business needs, rather than technology constraints – and keep the focus on delivering business value.