At some point, every manufacturing company must start using production software like for example MRP system. Likely, by this time the accounting software is already in use, but it has no longer met the needs – it does not provide the necessary answers and limits the growth of the company.
Therefore, a decision is made to start using special software for production. Each time the question arises: how to integrate old and new systems?
In this article, we describe how to add a production system to an existing accounting system and how some internal procedures change.
In general, the main objectives of accounting are to monitor the company’s financial position and prepare financial statements.
Purpose Of Bookkeeping
About inventory management, the financial statement should answer the question: “What is the cost of inventories and what is the change from the previous period?”
However, it certainly does not have to correspond to how many specific items were sold, how the purchase price of the raw material has changed, how much the finished product is expected to cost or what the actual cost of the individual product was.
However, as financial statements were the only reports available for a long time, many solutions have been developed to obtain this information from accounting software.
For example, in addition to the main accounts (general ledger accounts), it is now possible to create sub-accounts. Subaccounts can be selected manually for each operation, where the program itself can select the correct account. Although this may not seem complicated at first glance, in reality, when there is a lot of data and the system employs not only a professional accountant but also other employees, the accounting process is much more complicated.
These complications are artificial and not necessary.
Management Versus Finance Reports
Accounting is not just bookkeeping. In addition to financial statements, there are also management statistics and reports. Namely, information that provides the necessary basis for making business decisions and evaluating the company’s efficiency.
- How profitable is the product?
- How big is the demand?
- Are employees invested in the work?
- What is the load on the equipment?
- What are the opportunities to increase efficiency and reduce costs?
All these issues are very important for the development of the company. But they are not related to bookkeeping. bookkeeping can be greatly simplified if there is no need to answer these questions.
These questions still need to be answered. The MRP system is much better for this.
More about Material Requirements Planning (or MRP).
How Should MRP Software And Accounting Software Work Together?
Given The Above, Proper Integration works as follows:
- The MRP software is the main tool of the company’s work. Data entry takes place in this system.
- Only the summary data required for accounting purposes shall be entered in the accounting program.
- Management reports are generated from the production software into which the raw data is entered, i.e. the MRP system.
This Approach Has Several Advantages:
- Because management reports are generated through the same system as the master data, they are the most flexible to configure. Another big advantage is that the reports are immediately available, even in real time.
- Simplified bookkeeping.
- As integration is easier, it is easier to change it if necessary.
- Because the MRP system contains all the original data, it is easier to find the causes of changes or problems.
In Conclusion, We Would Like To Reiterate The Main Points:
The main software system of the manufacturing company should be the MRP system.
Accounting is not the core business of a manufacturing company, an accounting program is a tool just for the accountant, it is not for operations. The simpler the accounting, the better.
Management statistics should be collected from production software.
The management of the manufacturing plant should be able to obtain the necessary reports independently and without delay, without the assistance of an accountant, or accounting software.