Accounting is one component of a financial management system. An accounting system supports the booking requirements of the enterprise – general ledger (GL), the accounting apps that directly feed the GL including accounts payable, accounts receivable, and payroll. A financial management system includes tools for managing all financial aspects of the organization including treasury and cash management, cost accounting, strategic planning, analytics and financial forecasting, governance, and more.
Enterprise resource planning (ERP) is an integrated suite of business management software designed to address the broad range of functionality needed by a business. Financial applications – such as accounting, reporting, and treasury management – are a key part of an ERP suite and a good place to start if you're looking to better manage your finance processes.
Accounts receivable (AR) is the business function responsible for managing incoming revenue, typically the money owed by customers for purchases and credit extended to customers in the form of payment terms. Accounts receivable starts with billing, manages collection, and keeps records of amounts owed, receivables aging, and payment history.
Accounts payable (AP) is the business function that tracks and manages the amounts owed to suppliers, subcontractors, lenders, and other outside parties. Payable (debt) typically starts with recognition of the purchase invoice and ends with payment. Accounts payable tracks amounts owed and to whom, aging, payments, and cash requirements.
Revenue management seeks to increase revenue by accurately predicting demand and consumer behavior – and then optimizing products, pricing, promotion, and placement (distribution) to achieve the best possible financial results.
A subset of the accounts receivable process, receivables management primarily refers to the collections process – communications with those who owe the company money, and collection activities undertaken to secure payment.
Reconciliation refers to the process of matching records in two or more sources or repositories in order to identify any differences, determine which is correct, and bring the records into synch. Examples include comparing general ledger entries to source documents and matching bank records to payments received and made.
Generally speaking, an accounting system is the mechanism used to keep track of the money flowing into and out of a business. Often, the term refers to a set of software applications that tracks financial activities. Basic accounting system functions or ERP finance software modules include general ledger, accounts payable, and accounts receivable. Optional functions include payroll, cash management, credit and collections, and others.
Financial planning and analysis is a set of planning, forecasting, budgeting, and analytical activities that support a company’s overall financial health. FP&A tools help finance teams provide rapid decision support to the C-suite, build detailed financial models and forecasts, plan for multiple scenarios, identify and assess new revenue opportunities, and more.
Cash flow is the movement of cash in and out of the business. Cash coming in from sales is held in bank accounts and other liquid investments until it is spent for materials, payroll, loan payments, and other expenses. The Cash Flow Statement, one of the three basic financial reports (Income, Balance Sheet, Cash Flow), tracks changes in an organization’s cash during an accounting period: beginning balance, cash received, payments out, ending balance.
Cash management is the process of collecting and managing cash flows. Centered on cash on-hand in banking and investment accounts, cash management determines where incoming cash is placed, and how it is allocated out to working capital, investments, cash reserve, or other dispositions.
Similar to cash management, treasury management is the management of funds within the organization, focused on working capital, with the aim of maintaining liquidity and making the best use of funds to optimize company performance.
Expense reporting is a form that tracks and accounts for business spending. Most typically, an employee performing duties away from company premises will be expected to report all expenses incurred during that activity – such as transportation, lodging, and meals. Expenses are either paid directly from company funds or paid by the individual and reported for reimbursement.
When an employee pays for business-related items and cost from personal funds, they will report such expenditures to the company so that the company can repay them. This is common practice for travel expenses incurred during trips for sales, meetings and conventions, equipment installation and service, and the like. It can also apply to consumables or supplies needed to complete a project when it is more expeditious to just buy them rather than go through normal purchasing channels.
T&E stands for travel and expense. An employee traveling for business purposes will report the costs incurred for transportation, lodging, meals, and other expenses using a company T&E report (paper or electronic). Expenses may be company-paid directly (travel agency account or company credit card) or paid by the employee and reported for reimbursement.