ERP systems have become an essential tool for managing organisations of all sizes for the past 40 years.

Initially developed for large global corporations with complex operations, these systems help manage business processes and operations in an integrated way, providing a single source of the truth for core data.

Today, ERP systems are also common in medium-sized and small-sized organisations too.

 

What ERP is 

ERP stands for enterprise resource planning. Let’s break it down further... 

Enterprise means organisation-wide, covering the entire business, including groups of organisations, no matter where they are.

Resource refers to people, money, and things.

Planning includes managing the full lifecycle of these resources—from entry, through operational use, to disposal—ensuring they are used in the best way to add value to the organisation. 

While this is a simplified explanation, the strength of an ERP system lies in its ability to view core resources through multiple lenses, such as finance, human resources (HR), materials management, operations, manufacturing, logistics, inventory, warehouse management, and project management. 

 

Evolution of ERP systems 

ERP systems have evolved from being single-provider solutions to composable solutions. This means that while the information and data flows are integrated, the software can come from multiple vendors.

This composable concept has been embraced by the traditional ERP vendors themselves as they have acquired best in class solutions and integrated these together. 

 

Financial forecasting and budget setting

In the last 20 years, systems providers have rapidly advanced the development of specialised tools for financial planning and analysis. Recently, these tools have started to incorporate innovative technologies like Artificial Intelligence (AI).  

These advancements allow organisations to forecast more accurately and quickly, using predictive analytics to uncover meaningful patterns and triggers in large data sets. 

ERP systems enable stakeholders to interact with information, perform scenario-based forecasting, and capture narrative content that explains the basis of forecasts. This information can be retained for audit purposes. 

The fundamental advantage of linking ERP to planning, budgeting, and forecasting is capitalising on the wealth of existing available information and using this to generate better insights and decision making. 

 

Service-based organisations

For service-based organisations, financial budgets are often heavily based on people costs.

ERP systems can generate workforce plans based on previous years, create zero-based budgets from scratch, or reflect potential organisational changes to compare cost impacts. Aligning HR structures with finance cost centres is key to optimising this data.  

Forecasting in service-based organisations can draw on resource allocations to projects and work breakdown, analyse availability against demand and match skills and competencies.  

 

Product-based organisations

For product-based organisations, where materials management is crucial, ERP planning tools can predict supply demand, find the best value suppliers, and schedule just-in-time deliveries. For example, shipping companies can ensure that critical maintenance parts are ready at the next port of call, reducing downtime. 

Budget setting for product-based organisations can draw upon key data such as materials consumption, price and waste trends and help identify budget requirements accordingly. 

 

Conclusion

So planning, budgeting and forecasting is a natural extension of ERP functionality, enabled by the underlying data and functionality to make the stakeholder task simpler and focussed on adding value. 

If you would like to learn more about financial forecasting and budget setting, or explore the different finance, ERP or FP&A systems, please get in touch.

Brian Mahon at Moore Insight

Brian Mahon, Director at Moore Insight