Finance Module

Modern organizations work in a closely integrated business ecosystem. Data flows seamlessly across the organization. Use of integrated ERP solution has eliminated need of multiple data entry. Conventional end of period accounting function is being replaced with online integrated finance and accounts function that presents management with real time information to help take well informed decisions. Technology is helping all business stakeholders work collaboratively with more transparency. Cloud based solutions are more of a norm rather than an exception allowing users to work at any time, from anywhere and from any device.
In a typical integrated ERP set up, accounts related data flows into finance module from all other modules – core or peripheral. Finance user is now relieved of re-entering accounts payable and accounts receivable data. He / she can thus focus on banking, taxation and other core finance activities.
Typical finance function includes
Accounts Receivable
Accounts Receivable is the most important function in an organisation. It allows the user to take finance receipts and perform related tasks.
1. Receipts against invoice:-
When sales invoice is generated and goods are dispatched to customers, accounts receivable is created. A good integrated software solution should keep track of receivables & their ageing. On receipt of payments, the amount posted in receivable account should be squared off. If any debit or credit notes are issued to customer, they should be adjusted in receipt along with invoice amount.

2. Miscellaneous Receipts:-
In normal business scenario, some payments are received without invoice reference. These could be loan recoveries from employees, receipts on sale of scrap or receipts from government departments. All such receipts are classified as Miscellaneous Receipts. A good accounting module in ERP should have provision to identify each receipt type.

3. Advances:-
Requesting advance payment along with purchase orders from customers is a common business practice. These advances can be in the form of either security deposits of fixed amount to be held with organisation for specific period or against specific purchase orders as percentage of order amount that are adjusted against invoices when goods are dispatched. Keeping a track of all such advances is crucial as any unadjusted advances will give incorrect picture of a customer’s payment history.

4. Cash and Bank accounts:-
For carrying out day to day activities, petty cash books are maintained. These cash transactions are similar to bank transactions but are maintained by creating separate account codes. At the end of the accounting period, these entries are transferred to final accounts.

5. Handling debit / credit notes:-
5.1. Invoice related debit / credit notes
Some situations may arise during day to day running of business which call for creating debit or credit notes against invoices raised. This may happen due to under / over invoicing caused due to difference in quantity dispatched. These are to be handled by generating invoice line wise debit / credit notes, thereby giving better control.

5.2. Miscellaneous (Non invoice related) debit / credit notes
Any money, that is to be recovered from the customer / any credit to be given to the customer which is not related to the sale of goods or services, are handled through miscellaneous debit / credit notes. Miscellaneous debit notes are required to be issued to recover expenses incurred on behalf of customer. Miscellaneous credits notes may be required to be issued to a customer, who is requested to sell goods at discount to another customer on the instructions of the organisation.

5.3. Credit notes against sales return
Sometimes good are returned by customers due to various reasons like in-transit damage, shelf life expiry or non-movement of stock. In such cases, credit notes are required to be issued, which are normally adjusted either against next invoice or adjusted against payments. These credit notes are to be generated only against confirmed sales returns, which have reference to sales invoice.

6. Receipt Dishonor:-
The cheque presented by customer may be rejected sometimes by bank due to various reasons like technical faults, insufficient funds or signature mismatch. In such cases, receipt dishonor entries are made. This should reopen ‘Payment voucher’ against which original receipt was allocated and fresh receipts should be allowed to be taken against it. On confirming ‘Receipt Dishonor’ transaction, all account related entries need to be reversed automatically.
Accounts Payable
Accounts payable module handles all the payments that an organisation is required to make to its supply side partners. These could be suppliers of goods and services, employees, government authorities or any other miscellaneous sources. To safeguard a company's cash and other assets, the accounts payable process should have internal controls. A few reasons for internal controls are:
* To prevent paying a fraudulent invoice
* To prevent paying an inaccurate invoice
* To prevent paying a vendor invoice twice
* To be certain that all vendor invoices are accounted
1. Purchase Voucher:-
Goods from supplier are received against the purchase order. Goods receipt note is generated at the time of receipt of material and has reference of purchase order. On confirmation of goods receipt note, a purchase voucher is created. At this point of time, creditors should be created in the accounts. System starts keeping a track of payables with due date. All these transactions are performed by purchase and stores department. The accounts department in turn gets intimation of payables on creation of purchase voucher as all the modules are tightly integrated in an ERP solution. Taxes applicable are calculated automatically based on the inputs in purchase order. Advances, if given to suppliers, can be adjusted against payment vouchers.

2. Expense Vouchers:-
Payments to utility companies, tax authorities or employees are made without purchase receipt references. These payments are routed through Expenses vouchers, sometimes referred to as miscellaneous vouchers.

3. Payments:-
The payments are released on due date, based on the confirmed vouchers. In an integrated solution approach, this is one of the few activities in accounts payable cycle that an accounts person is required to perform.

4. Payable Debit / Credit notes:-
During the course of business transactions, a situation may arise where a difference between transacted value and document value is observed. Also either of the party may incur expenses on behalf of other and these expenses are required to be recovered / reimbursed. Such situations are handled through payable debit / credit notes.

4.1. Payable side debit notes are required to be generated in following cases
* When error of under invoicing error is committed by supplier. (Supplier will raise debit note on organization)
* Goods received are less in quantity than goods invoiced.
* Goods are returned to supplier due to various reasons like in-transit damage, rejection in quality check or non-moving stock.
4.2. Purchase receipt creation and confirmation process can be workflow enabled
* Payable side credit notes are required to be generated when forex rate fluctuation is to be booked party wise. In such case, internal credit note can be raised.
* While handling these debit / credit notes, taxes as mentioned in purchase vouchers against which these documents are being generated should be considered.
* Proteus ERP handles all these accounts payable transactions seamlessly. Purchase receipt creation and confirmation process can be workflow enabled. User friendly screens provide all necessary information at one place thereby reducing transaction time. Debit notes are mapped to the purchase payable line by line to trace the product against which the debit note are being issued by the supplier, thereby giving better control.
General Ledger
1. Journal Voucher:-
These are rectification entries required to be passed due to errors that creep in the accounts record keeping. JVs can be passed for correcting errors in transactions related to purchase order, sales orders, receipts, miscellaneous receipts, miscellaneous debit note receipts, debit note receipts, credit notes, invoice, other JVs, credit note receipts & payments, miscellaneous credit note receipts and vouchers.

2. Bank Reconciliation:-
The system balances and actual bank balances are required to be reconciled periodically as a good accounting practice. This period can vary as per organizational need. Bank reconciliation can be done either manually (by entering bank book details manually and squaring them off against system entries of payments and receipts) or through automated mode. (Uploading excel file received from bank and running an automated process). Proteus ERP allows the user to perform manual bank reconciliation.

3. Credit notes against sales return:-
Sometimes good are returned by customers due to various reasons like in-transit damage, shelf life expiry or non-movement of stock. In such cases, credit notes are required to be issued, which are normally adjusted either against next invoice or adjusted against payments. These credit notes are to be generated only against confirmed sales returns, which have reference to sales invoice.
Tax Management
1. The most crucial function an accountant is required to perform is to manage taxation – right from defining correct taxes, associating them with various transactions and / or goods, keeping a check on tax collection from various involved parties and on time payment to government authorities.

2. Proteus ERP has a dynamic taxation module that creates required tax environments automatically based on list of applicable taxes entered by user. These environments are to be applied through assisted menu while creating various transactions.
Inventory Management
Inventory, in any organisation, is a major area where working capital is locked. Periodic inventory checking and reconciliation between system inventory and physical inventory has to be done and difference to be adjusted through appropriate entries – either adjustment issue or receipt. Routing all transactions through system also helps in knowing live inventory status at any given point of time. Liquidating first expiry inventory first, finding innovative ways to consume slow moving items, rationalizing inventory buying pattern help reduce inventory carrying cost thereby adding to bottom line.