An ERP (enterprise resource planning system) is the company's system of record. For finance, its centre is the general ledger, the book of accounts every financial statement is drawn from, surrounded by sub-ledgers for payables, receivables, fixed assets, inventory and cash, and by the operational modules that create transactions in the first place: orders, purchasing, projects, manufacturing.
What it does
Every other category on this site either feeds the ledger or reads from it. The ERP holds the chart of accounts and the entity structure, enforces period controls (a closed period cannot be posted to), and keeps the audit trail of every entry. It records multi-currency transactions and, in multi-entity products, intercompany transactions and the eliminations that consolidation, under standards such as IFRS 10, requires. Fixed asset and lease modules compute depreciation and, under IFRS 16, the right-of-use assets and lease liabilities a lessee records. Because the ERP is where transactions are recorded and approved, its roles, permissions and change controls are a large part of the internal control over financial reporting that the SEC's rules in Release 33-8238 ask management to report on.
Midmarket and enterprise
The products differ more by scale than by function. Midmarket ERPs and newer cloud ledgers aim at companies with one to a few dozen entities, configure quickly and rely on add-ons for planning, close and billing. Enterprise suites cover hundreds of entities, many countries and industries such as manufacturing or the public sector, include deeper operational modules, and take longer to implement. Several newer products describe themselves as AI-native ledgers built for continuous close; they sit at the smaller end of the market.
Who uses it
Everyone in accounting posts to it or reviews it. The controller owns the chart of accounts and period controls. AP, AR and payroll run their sub-ledgers in it or feed it. IT and a finance systems team administer it. Operations teams use the order, purchasing and inventory modules.
The parts a typical product has
- General ledger, chart of accounts and multi-entity, multi-currency structure
- Accounts payable and accounts receivable sub-ledgers
- Fixed assets and leases
- Cash management and bank reconciliation
- Order management, purchasing, inventory and projects
- Financial reporting and dimensional analysis
- Roles, approvals, period close and audit trail
Where it meets other categories
The close reconciles it; FP&A reads its actuals; AP automation, accounts receivable, spend and billing post to it; tax engines are called from it; treasury supplies its bank data; audit and SOX tools test its access and controls; financial reporting starts from its trial balance; and procurement often runs inside it.
Questions to ask a vendor
- How many entities, currencies and books can one instance hold, and how are intercompany transactions handled?
- Which modules are included, and which require a partner product?
- How are customisations carried through upgrades?
- What does a data migration from our current ledger involve, and who does it?
- How are roles and separation of duties configured and reported?
- What is the typical implementation length for a company of our size, and who implements it?