ERP for Cash Management

Cash management is a fundamental application that allows you to manage your accounts. It includes banks, savings institutions and charge cards. All the appropriate functions are conveniently centralized in one location. The application provides facilities for accounting staff to receive payments, make deposits, print checks, record manual checks, record funds transfer and card charges, pay off charges and reconcile your cash accounts.

Cash management with ERP offers two options for making payments. First, the quick check feature allows you to print a check for a vendor immediately, but not against a specific bill, which is comparable to the bill centric payment cycle found in accounts payable.

You may substantiate the transaction by attaching a support document. Secondly, you can record and post checks you write through a checkbook. The application also smoothly handles the transfer of funds from one cash account to another.

You can examine the cash balance report to verify the balances of your account to determine if you need to make a transfer, and you can also check to see if there are sufficient funds.

Through ERP, the received payments can be deposited in two ways. If you have deposited the payment already, the receipt function records both the receipt of payment and its deposit.

However, you may also receive payments, accumulating them in an account for later deposit, at which point you can create a “deposit slip” on the system, which posts the amounts of the deposits.

Reconciliation facilities are provided for all checking, savings and charge card accounts. Upon your first reconciliation, you enter the initial items, the statement ending balance and Bank charges, and then select all the items that have cleared. The register allows you to drill through the details quickly and conveniently.

ERP and Workstations

Do you know the best way to integrate cash management activities with an ERP system? ERP vendors claim that treasury workstations are unnecessary and even dilute integration, while workstation vendors affirm that ERP systems keep running into essential activities they cannot perform.

For years vendors of enterprise resource planning systems and workstations helped each other. After all, their clients wanted to use both software packages and wanted them to work together smoothly. So the two camps made strategic alliances and built elaborate interfaces to link their applications.

Nowadays vendor groups are debating about the best way to integrate cash management activities with ERP. Workstation vendors suggest that companies now have three options in cash management: They can use basic cut and paste functionality to move data from their workstation into their ERP system (this type of integration avoids major programming but requires manual action every time data moves between the systems) or they can use new interfaces between the software systems that automatically import data from one into the other. The third option is to use an ERP package that includes a cash management module.

ERP Strengths for Cash Management

With a growing number of installations and new power to perform cash management tasks, ERP vendors are arguing that workstations are redundant attachments that dilute integration and increase maintenance costs.

Bankers are generally neutral in this debate. Some companies are willing to accept less functionality if they gain easier installation; they manage cash within their ERP systems. Others prefer to sacrifice integration for additional functionality, so they stick with a workstation. But banks do not care, as they make the same information available in whatever format – or over whatever network – their customers need. The transaction data is the same. This is true whether the information is flowing from the bank to the company, or from the company to the bank.

A workstation can handle the various components of treasury and cash management, including foreign exchange and debt and commercial paper, but it cannot do what an ERP system does: bring in accounts payable, accounts receivable, sales order and purchase order information.

ERP helps you to have much more information available when you need to set your cash position and determine your thirty days debts. It builds the funds flow by just pushing a button, and the funds flow automatically does the accounting entries.

Customization is Really Important

Because moving cash management to an ERP system does not eradicate the need for integration with the outside world, it does not eliminate compatibility problems. Integration is complicated by the industry’s lack of standards. You can plug in a standard interface along the line and have it work, but they almost always have to be customized.

Treasury workstations come with a general ledger interface, but you need a different interface for each ERP system, and then you have to customize the interface. This is because every company has its own idea of how things should be done.

ERP systems run an internal world in which the parts communicate instantly and seamlessly with each other. It offers treasury components to manage cash, deals and risk. The move of cash management into an ERP system might come as part of a reengineering project that goes after inefficiencies in accounting practices.

The ERP system allows Business units to access banking data at any time. Before ERP they could request information and they might be receiving it before the end of the day. With ERP employees can come in on their own any time and query against the data. It’s all self-service.