How ERP has modified corporate governance for better?

How ERP has modified corporate governance for better?

INTRODUCTION

With technology taking the world by storm and rightfully so, the ease of doing business has increased manifolds. ERP is one such boon been given to the business houses to reduce the level of tensions and alleviate their productivity as well revenues and achieve economies of scale. ERP is a business management tool that integrates the in-house working of various departments in an organization. Generally, there is lot of chaos within an enterprise and a lot of filtration with how the information travels. This leads to ambiguities and at time loss of factual work proofs, which consequently results in declining profits and maligned goodwill.  

To overcome such hurdles, ERP integrates all the facets of an organisation – namely Procurement, Service, Sales and Finance in one socket and helps maintaining a base which is much transparent and trustworthy. What you punch is what you get? The facts and figures registered by the users from different heads and subheads in an organisational hierarchy contributes to the database and the management retrieves a balanced report of what is happening within a company.

Though it ensues a lot of resistance to change from staff and personnel point of view, but once accepted, it works wonders for any organisation. It is an indispensable tool for any well managed business house.

It might seem like a complex tool but truth be told, ERP simplifies complexities, and for better.  It reduces confusions and allow peers and seniors to be aware of what is happening within the organisation. It is not something to be done in one single day as it is not a mere application of a software to the working of business. It is a well fetched process that quintessentially endows a regime to the corporate systems and take affair amount of time to be implemented. It collaborates people within a company and streamlines the information to be further disseminated to the stakeholders at large.

It brings together important processes of a company namely manufacturing, marketing, personally, inventory, sales, & CRM under one roof. It becomes one unified package that reflects efficiency and projects true and fair presentation of working of an entity.

In this context, ERP has often been related to MIS (Management Information Systems). ERP ensures that the data disbursed to managers and employees of an organisation is done in a chronology. The format in which such reports are been allocated to the staff is called an MIS. It ensures the correctness of data and to the point information to the person in question. Hence, MIS is quintessentially an output of ERP. It is done through proper integration of systems and departments across all the sections of the company. The interrelation within various departments of an enterprise results in seamlessness and accuracy in depicting the true picture of the working of an entity.

ERP systems are the information backbone of a company, ERP system serves as the central nervous systems of the company. It runs through the veins of an enterprise and meets the organisational goals by strictly integrating all functions.  

THE MODULES:

As stipulated in the introductory paragraph above, let’s have a detailed look on the different modules of the ERP and how they work. These modules are more or less common to almost every ERP and form premise of every business enterprise.

ENGINEERING MODULE:

This module is set up to define base and data points for an ERP system. It includes defining item master, i.e. setting codes for all the procurement material used by a certain organisation in its production/manufacturing. It also includes laying out an appropriate procedure to and putting an alarming stage to reorder the required raw material to replenish diminishing stocks.

PURCHASE MODULE:

This takes care of the procurement department of any company. In any ERP system, purchase module consists of functionalities like supplier/vendor listing, supplier and item linking, quotation sending and receiving and recording the quotations from the suppliers. This all works on code mechanism where every item and suppliers is given a specific code so as to do away with any kind of duplication. The purchase module is generally integrated with in Inventory module where incoming and outgoing of stocks so purchased id being recorded. The periodical picture of the progress is being watched by the management at any point of time and corrective actions, if any may be taken up likewise.

The benefits of Supply chain management module of ERP are:

  1. Boosted Sales
  2. Better track of stock/inventories
  3. Systematic order processing
  4. Decreased mistakes/flub ups
  5. More accuracy
  6. Better Vendor relationship Management
  7. Better customer support

MANUFACTURING MODULE:

The manufacturing module is essentially company specific and the implementation may vary as per the process devised and followed by an organisation. Hence, this module must, likewise, be designed so as to fit the purpose of a certain company. As the essence of an ERP system is planning its resources, this module provides one of the key reasons why company switch over to ERP systems. This module help companies to plan the requirement of Materials, staff and machinery.

The basic steps included in this procedures are:

  1. Planning the list of Materials
  2. Finished Goods Plan
  3. Production Plan
  4. Raw Material Plan
  5. Machine Capacity Plan
  6. Loading/Unloading Plans, also known as Gantt chart
  7. Manpower Planning
  8. Production Module
  9. Taking Work Order (Designing the format, section and layout)
  10. Designing auto-generated production reports with decided data points
  11. Quality Control
  12. Inspection Report

SALES AND DSITRIBUTION MODULE:

To let the sales take place and recorded on a continual basis, The sales and distribution module  of an ERP system ensures the revenue is regularly punched in the system to reflect the performance of the company.  This Module encompasses generation of Customer Master (Customer code creation) and mandating few polies and procedures for its creation. The steps included can be enlisted as follows:

  1. Creation Customer Master
  2. Creation of Dealers and Distributors Region wise (in cases where the number of customer is too large to directly engage with the company to order items)
  3. Price List – on the bases if prices agreed in a purchase order or Agreement (in case of service
  4. Enquiries
  5. Quotations
  6. Order Acceptance & acknowledgement
  7. Packing List
  8. Dispatch Challan
  9. Proforma invoices – Draft invoice to be sent and finalised by customer
  10. Invoice
  11. Sales Return notes: In case the item sols are return on account of damage and perishing.
  12. Return Goods notes

INVENTORY MODULE:

An inventory means the stock. Stock of goods that is manufactured, maintained with an intent to sell off to the buyers for an agreed price, with a view to earn a revenue. The task of maintaining inventory is bifurcated into separate areas and stores are maintained for each. In a large company the stores would be like: Raw material and receipt stores, work in progress, Assembly components stores and finished goods stores.

The various aspects of Inventory module has been listed as below:

  1. Material Requisition
  2. Material issue Slip
  3. Material Return note
  4. Stock Amendment Notes

COSTING AND FINANCE MODULE:

As the name suggests, finance module in any company record the transactions pertaining inflow and outflow of cash. It basically and essentially keep a track record of Revenue and expenditure which are further sub divided into capital expenditures and revenue expenditure & Gross revenue and Revenue from Operations.

It produces statements of income and expenses that indicate the true and fair representations of financial state of the company. It is therefore much requires that the other modules should aptly and accurately be mapped to the account heads, so it produces a precise and correct statement, which may further be used as a referral point to combat any sort of shortcomings and decide on remedies to overcome them.

The transactions used in this module are:

Cash and Bank transactions

  1. Cash and bank receipts
  2. Advance Payments
  3. Bank Reconciliation

Sales and Purchase

  1. Sales Invoice
  2. Sales Returns
  3. Purchase bills
  4. Purchase Returns
  5. Credit and Debit Notes

-Other Transactions/reports

  1. Journal Vouchers
  2. Outstanding statements for customer
  3. Outstanding statements for suppliers
  4. Cash flow statements
  5. Fund Flow statement
  6. Profit and loss statements
  7. Balance Sheets
  8. Budgetary control statements
  9. Departments wise division wise expenses/revenue statement
  10. Cost centre wise expenses-revenue statement.

Over the years ERP has evolved to a great extent. What initially started as MRP (materials requirement planning) in 1960’s has now come a long way. We have Industry specific ERP’s, ERP for small businesses and Web based ERP (also knows an cloud computing). It has changed the 360 degree view of an enterprise and efficiency in terms off better staff performance, ease of accessing and assessing information and using it to business proficiency.The advantages of ERP are manifold. In 2017, it has become a large scale business itself manoeuvring profits, both tangible and intangible.

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