With a modern manufacturing ERP, a manufacturing CFO can compile essential data efficiently and accurately in less time and with less effort. Kristin Christian of Algorithm details how ERP for manufacturing can improve the way you do business and how you spend your time.
As the CFO, have you considered the positive impact a modern manufacturing ERP solution can have on how you do your job? You often face many demands on your time from competing sources. You are tasked with compiling critical financial information for the leadership team or board of directors, monitoring budgets, providing historical and forecast revenue information, monitoring and adjusting controllable manufacturing expenses such as labor, overhead, and machine time, and providing leadership to the team that supports you. While all those balls are in the air, you also have to ensure you are compliant with various standards such as SOX, GAAP, and other internal checks and balances.
Being a CFO of a manufacturing company is challenging enough, but without the right tools to do the job, it can lead to long hours, little personal time, and coming under constant fire when the numbers aren’t what people want to see. Without the correct tool—a modern manufacturing ERP software system—CFOs are left with making assumptions and trying to defend those assumptions to the various entities they report to.
A CFO’s life without a modern manufacturing ERP
Without a modern manufacturing ERP solution, CFOs must spend their time locating and extracting historical data from various sources that can be used for strategy, risk management and most importantly, compliance.
Compiling this information is even more daunting. For example, at month end, you need to prepare financial statements for the bank and the leadership team. To do this, you send an email to your staff accountant to get their final numbers, the production manager to get labor hours and scrap material counts, and the warehouse or inventory control manager to get the final inventory counts. All this information is stored in an Excel spreadsheet. Suddenly, you are in a “hurry up and wait” mode, unable to complete tasks as they fit into your time, and instead, you are at the mercy of the requests being fulfilled.
To prepare your reports, you then must locate last month’s financial statements and make the necessary calculations to adjust inventory, revenue recognition, and accruals. You or one of your team members likely must log into the bank, or another software program that keeps your amortization and depreciation schedules and make more manual calculations. This is called silos of data.
Because this is all done via spreadsheets and email, there is no way to validate the numbers against the actual data. Somehow the inventory reconciliation is not going well and there is a large, material variance. How do you locate the details to find the problem? Emails are sent, paper files are referenced, and four days later this might be resolved.
If there is more than one entity to the organization, this process is repeated to compile reports and consolidate.
Year-over-year comparisons, trend analysis, budget to actual…in a spreadsheet. Can you trust this information? How can you be certain this information is 100% accurate? What happens if that version of the spreadsheet gets deleted or changed from the last time it was used? Were any numbers transposed in the data entry and the calculations are slightly off, but not enough to raise the red flag? With an ERP for manufacturing, these concerns become obsolete.
Manufacturing ERP software to the rescue
A solid manufacturing ERP software is designed to capture cross-departmental information in a timely and accurate manner. The keys to successful use of an ERP system are:
- Accountability: Users are accountable to recording transactional data as it occurs. This means production is reported, goods are received, payables are recorded, cash is applied, shipments are invoiced, etc.
- Transparency: Those who need the information can easily obtain it. From order to cash, and procurement of raw materials to completion of finished goods, the flow of costs, quantities, and status of those activities is easily obtainable.
Once that has been achieved, there are five ways modern manufacturing ERP can be a hero to CFOs:
1. Analysis: When capturing transactions as they occur, the CFO has production planning and control capabilities, including a wealth of mission critical data at their fingertips to answer questions, make decisions and develop strategy.
2. Metrics: KPIs are the pulse of the organization. The CFO can’t keep their finger on the pulse if they can’t measure what is important to the success of the business.
3. Data Validation: We’ve all heard the adage “garbage in, garbage out.” Does that receiver belong to that purchase order? Is the journal entry balanced? Is the check applied to the correct customer and invoice? Having validation routines in the data is insurance that the information being extracted is accurate and trustworthy. A good manufacturing ERP system will do some of that “heavy lifting” for the end user so less time is spent checking things that are usually correct, because the system will point out when it isn’t.
4. Compliance: Whether you need to adhere to SOX or other corporate-mandated compliance in the business, having a manufacturing ERP system will make meeting those requirements easily obtainable. From security settings, approval processes, and reporting options, staying compliant is much less work and cost effective.
5. Financial Reporting: What happens when you have timely, accurate, and validated data? Your financial numbers are correct, all the time. After analyzing data and measuring KPI’s all month, when it comes time to prepare and present the data to the board of directors or upper management, the hard work is already done. The CFO can eliminate the busy work and concentrate on the important tasks of financial statements, forecasting, consolidation, budgeting, and comparatives.
How can Acumatica help?
Being the CFO is a demanding job. When there are competing priorities, something has to give, and that is usually the desire or the time to learn an ERP system. Instead, gathering this information is delegated to staff members, who also have competing priorities.
Acumatica is a true cloud ERP system. This means the ability to access the information is easily obtained from anywhere, anytime, on any device. While an ERP system will provide solid, accurate data, it’s only as good as the data that is entered. If your staff is delayed because they are waiting on approvals for expenses or journal entries, the data is delayed. Likewise, having access to information while in meetings, traveling, or at different business locations increases efficiency and productivity. No need to keep a task list for when you return to the office.
Because of the flexibility and configurability of Acumatica, it is possible to have real-time financial data. No more waiting until the end of the day, week, or month to post the transactions to the general ledger. It can happen as transactions happen, thereby keeping track of KPIs and allowing the CFO and the business to be proactive instead of reactive.
Acumatica has mastered the art of making complex processes happen without having a complex procedure. With the correct configuration, Acumatica handles customer pre-payments, deferred revenue, milestone billing, reclassifications, budgeting and consolidation with ease. While other systems require creative workarounds to handle more complex financial transactions, Acumatica can be configured to accurately handle these types of transactions without workarounds.
Learning a new software doesn’t have to be daunting task. Acumatica has an intuitive user interface that makes navigation fast and easy. In addition, there is consistency among the applications and configurability to have quick access to the features you need most frequently. Because of this, information becomes more self-service, and extracting data to a format such as Excel is part of the core program.
In addition to the user interface, relevant dashboards that are optimized for any device that is web-enabled make high-level information front and center. Keep an eye on your KPIs, moving target accounts, gross profit, budget to actual or forecast to actual the moment you log in. Dashboards allow a quick view and the ability to drill into the transactions that are producing the information—essentially feeding you the information before you must go looking for it, or request someone to provide it to you.
Is modern manufacturing ERP software right for you?
When you’ve been operating under the same procedures for a long time, the thought of changing and implementing systems can be overwhelming. It is a careful, thought-out process that involves many business resources. However, when considering an ERP system, Acumatica’s Manufacturing Checklist can help you make the right choice. Manufacturing ERP software should be viewed as an investment and not an expense.
Calculate the hours spent on manual processes that provide busy work but not activities that add value to the business and the business objectives. Consider how strategic the business can be when key decision makers can be proactive instead of reactive. Imagine being able to measure margins and control labor and production costs armed with accurate data and what a slight improvement on those numbers could mean. How would having real-time visibility into the pipeline impact the day-to-day decisions?
With Acumatica cloud ERP and Acumatica’s Manufacturing Edition (which includes bill of material software, manufacturing production software, and more), there is a better, easier life for manufacturing CFOs out there! And because we want you to have that life, contact our experts at Algorithm—we’ll help you get there.