Finance-led Administrative ERP
Every business needs to buy and sell things, and keep track of how much money is going out and coming in. These core tasks are covered in a set of business processes from the Finance, Sales, and Sourcing and Procurement lines of business (LoBs) referred to as Administrative ERP.
Procure to Pay
Within the Finance LoB, organizations forecast their estimated purchasing needs for upcoming quarters to determine the necessary budget allocation. In the Sourcing and Procurement LoB, the organization identifies what they need from suppliers, purchases the items (such as laptops for new employees), pays the supplier, and receives the goods.
Order to Cash
In the Sales LoB, the process begins when an organization receives and confirms customer orders, followed by the delivery of goods. When payments are received, they are posted within the Finance LoB to accounts receivable, which automatically adjusts the company's revenue.
If a customer returns a product, the Sales LoB manages the return process by inspecting the item to determine if it can be returned to inventory for future sale. In cases where a customer submits a claim under a product warranty, the Service LoB initiates additional business processes to create a service order and fulfill the specific service requirements outlined in the warranty agreement.
Record to Report
In the Finance LoB, teams perform period-end closing at the end of each month. During this process, accounts are reset to a zero balance. Key financial accounting tasks include recording transactions, reconciling bank statements, and managing tax payments to ensure the accuracy of all financial statements. These activities support ongoing planning, budget maintenance, and scenario-based forecasting for future business requirements.
Service-Centric Industries
Beyond core administrative operations, organizations often provide specialized services to their customers. These are categorized based on the nature of the delivery:
- Professional Services: This LoB covers the end-to-end process of selling and delivering consulting expertise to clients.
- Technical Services: This LoB manages field-based support and repairs. For example, when a technician visits a customer location to replace a faulty modem, the activity is captured within Service LoB processes.
The following example demonstrates a typical scenario within the Professional Services LoB, specifically focusing on selling consulting services.
Sell and Plan
The sales process begins in the Sales LoB, where teams focus on lead generation and nurturing. These activities identify potential customers and build the pipeline required to drive service sales.
Setup and Staff
Following the sale of a consulting service, the Professional Services LoB manages the project setup and execution. This involves searching the organization for qualified personnel who possess the necessary skills for the project tasks. Once identified, these resources are formally staffed to the project to ensure successful delivery.
Deliver and Recognize
If a project requires external services or materials, the Sourcing and Procurement LoB manages the end-to-end purchasing process. This includes identifying requirements, acquiring items from suppliers, and processing payments.
Within the Professional Services LoB, the focus shifts to project execution and delivery. Staffed resources record their activity by submitting time and expense reports for work-related travel.
To ensure financial health, the project manager monitors the project margin—the difference between the price charged to the customer and the total cost of consultant time and expenses. This oversight ensures the project remains profitable as the customer pays the agreed-upon installments.
Bill and Manage
Once the project is finalized and the final customer payment is received, revenue recognition processes are executed within the Finance LoB. To close the lifecycle, the project manager leverages analytical applications to perform a comprehensive evaluation of the project's success and financial outcomes.
Product-Centric Industries
Beyond the core processes of an administrative ERP, many organizations also manage the sale of physical goods. Depending on how much of the design, production, and delivery is handled in-house, several operational Lines of Business (LoBs) may be involved. These LoBs manage the complex tasks required to manufacture and distribute products to customers.
Manufacturing typically follows one of two methods: process or discrete.
Process manufacturing is used for products like pharmaceuticals or baking mixes, where ingredients are combined into a mixture that cannot be separated into its original components.
Discrete manufacturing is used for items such as cars or mobile devices, where materials are assembled into semi-finished or finished goods that can potentially be disassembled. The example below is based on a discrete manufacturing scenario.
Idea to Market
Product development begins within the R&D Engineering LoB, where teams forecast demand and design the product specifications. This phase results in a Bill of Materials (BOM), which is transferred to the Manufacturing LoB to initiate production.
To ensure resource availability, Material Requirements Planning (MRP) is executed to determine which components are available in-house and which must be acquired through the Sourcing and Procurement LoB.
Procure to Pay
Within the Sourcing and Procurement LoB, the organization identifies and sources materials from third-party suppliers. This process includes placing purchase orders, processing payments, and receiving the materials into the warehouse for inventory management.
Plan to Fulfill
With the necessary materials available, the Manufacturing LoB schedules and executes the production process. This begins with staging materials from the warehouse to create various sub-assemblies, followed by the final assembly of the finished good.
To ensure operational efficiency, any machinery used during production is maintained through the Asset Management LoB. Once assembly is complete, the finished goods undergo a quality inspection before being stored in the warehouse.
All movement of materials between warehouses, locations, and plants is managed by warehouse management processes within the Supply Chain LoB.
Order to Cash
The Sales LoB manages incoming sales orders, whether they originate from direct-to-consumer channels or third-party platforms.
Once an order is placed, the Supply Chain LoB coordinates the outbound delivery. This involves transportation management—planning and orchestrating the movement of goods from the warehouse to the final destination.
After the customer receives the product and payment is processed, the organization handles any necessary follow-up activities. If a customer returns a product, it undergoes a quality inspection. Ideally, the item is returned to stock for future sale. However, if a product is defective, the organization must perform a root-cause analysis to determine if the fault lies with an internally manufactured component or a supplied part. This triggers corrective actions and salvage processes to ensure responsible disposal of non-recyclable materials.
Finally, if a product is under warranty, the Service LoB manages any subsequent claims or guaranteed service delivery.