Updated: Feb 24
Hi, Welcome to Dynamics 365 tutorial from "Dynamics tutorial.com". I am Rahul Singh, a professional consultant and coach.
Understanding the ERP Definition and its Characteristics
Enterprise resource planning (ERP) is a business process management software that manages and integrates financials, supply chain, operations, reporting, manufacturing and HR activities. It enables you to run the core process of a business.
Its a critical application for business, as day to day activities rely on this application where the end user enter transaction and management is able to monitor the business performance on a daily basis and take decisions within a proper time period.
Through Wikipedia definition we can get to know about ERP Characteristics "A business management software usually a suite of integrated application that a company can use to collect, store, manage and interpret data from many business activities.
ERP is an integrated application, in the past each business area had its own application, and this led to the creation of isolated island for each department in the same organization; this cost the organization time, effort and money, led to accurate information, which directly affect management decision making because of unavailability or duplication information. for example a customer code is different in sales department from account receivable department.
With ERP the data is unified, controlled and classified. it gives the ability to transform this data into information that helps in decision making process.
Key Objective of ERP Implementation
Any Organization who want to implement ERP can have a legacy system and manual business process and they need to unified by one single integrated application to manage, operate and control business area and deliver reports to management.
Key Objectives are as follows:-
Business process automation
streamlined business process in cross function operations
Unified business process across holding and subsidiaries
Single point of contact for reducing duplicate data within departments
Get control of financial management
Improve supply chain and operation management
Segregation of duties and data access privileges
Advances workflow and approve matrix ceiling
Tracking and actual cost against budgeted
Inventory tracking and cost control
Assist with human resources management
Real time and ad hoc reports for all organization level
Dynamics and dimension reports
Key performance indicators and Indicator dashboard
Make better decisions through business intelligence and AI
Understanding the ERP Modules Integration (Finance and Operation Apps )
The Core objective of running a business is making a profit, which requires making revenue that covers the costs and adding a margin to secure a profit. ERP application gives the management the necessary business insight to monitor business performance. its manages and control day to day transactions that occur in the company and these transaction are transformed into financial information that represent the Key components of financial statement (balance sheet and income statement), which are expenditure and income, in other words cash out and Cash In.
The Cash to Cash Cycle entails two core cycles which are commonly known as procure to pay and Order to cash.
The first cycle covers the expenditure part (Cash Out), that is every aspect related to vendor management, procurement management, purchasing management, product reception, and vendor invoices, payment and settlement
The Second Cycle covers the Revenue part (Cash In) that is every aspect related to customer management, sales management, product delivery, customer invoices and settlement.
These activities could be distinguished by Financial activities, that is every aspect related to finance and accounting activities and operation activities and that all aspect related to the Company's daily operations of the supply chain.
Procure to Pay (Cash Out - Expenditure)
Procure to pay cycle link the following business functions that are accountable for company expenditure
warehouse product receipt
The Procure to Pay cycle manages and controls the business process of procuring the needed materials, receiving them and paying to the vendor. there are specific documents to handle these business process
Financial transaction related to this cycle are product receipt, vendor invoices payments and settlements. The Other Documents relate to operation activities are
A product receipt represents the physical reception of products in the company warehouse. This will increase the physical quantities in the inventory and reduces the quantity of remainder in the purchase order, in addition to changes in the inventory value according to the inventory valuation method.
The Vendor Sends a purchase order invoice either along with product reception, or after product reception. Recoding the vendor invoices to reflect the company's liabilities to the vendor result in an increase in the open vendor balance. D365 supports the company's internal control of vendor invoices by matching the invoices with the purchase order and invoice amount
D365 provides two ways for doing this. It can be either three way matching or two way matching.
A three way match is for product purchases when comparing the purchase order quantity against the quantities in the vendor invoice and also comparing the purchase price in the purchase order against the invoice amount.
A two way match is for services when comparing the purchase order amount against the invoice amount. And those vendor invoices that are not related to purchase order and recoding the vendor service invoice to reflect the company's liabilities to the vendor.
Vendor payment processing reduces the company liability to vendors. The payment can be advanced one, attached to a specific purchase order or independent of other purchase order; it is usually the responsibility of the account payable section in the finance department
The Settlement processing involves settling open invoices against payments. This process affects vendor statements by decreasing open vendor invoices, increase closed vendor invoices and aging as well
Order to Cash ( Cash In- Revenue)
The Order to cash Cycle joined the following business functions that are accountable for company's revenue
Warehousing Product Issuance
This Cycle manages and controls the business process of sales activities, customer orders, delivering goods and collection from customer. There are specific documents to handle process : Sales Order, the issuing process by packing slip, and finally the invoice document
The Related financial transactions to this cycle are packing slips, invoices, collections and settlement. the other documents are related to operation activities
A packing slip represent the physical issuance of products from the company ware house. This decrease the physical quantities in the inventory and reduces the quantites remaining in the sales order
After the delivery of goods or services to the customer, the sales team issues a customer invoice, increasing the customer open invoices. This affects the customer statements and customer aging, in addition to revenue recognition and the cost of goods sold.
The customer payment process represents a transaction of the required amount of money from the customer, whether it is against an open invoices or advanced payment collection
The Settlement process settles the open invoices against collection. this process affects the customer statement, reducing the number of open customer invoices and increasing the number of closed invoices and aging.
That's all for this article