When choosing a leasing / credit management system, the question should naturally arise: what about financial accounting? here are two possible solutions: integration or two systems in one, i.e. leasing/credit management and financial accounting are in single system.
In cases where leasing/credit contracts are managed in two separate systems, there is a need to develop integration – a periodic (possibly automatic) transfer of data from leasing/credit management system to the financial accounting system. The transfer may be at aggregate level (e.g. general ledger account level) or at contract level, and data exchange itself may take place at the end of each day, or less frequently.
This integration may seem not very complicated at first glance, but let‘s not forget that effective contract management requires not only sending data to the accounting system, but also receiving it. For example, managers need to know in a timely manner whether a payment has been received from a customer or made to a supplier. This data are primarily stored in the accounting system and managers have to either log into the accounting system or ask the accountants to extract this information, but they do not have the ability to see these data in real time next to the contract information. This challenge is covered by those systems, where leasing/credit management and financial accounting is carried out in the same system. This means that contract management operations (actions) automatically create records in the accounting system. And on the contrary, certain actions in the accounting system change the attributes of contracts, etc.
Let‘s summarize these benefits:
- All contract management operations (contract activation, transfer of assets, contract ending/termination) are automatically reflected in the accounting system, i.e. in the General ledger, Fixed Assets module, Accounts Payable and other analytical boards.
- Accordingly, accounting operations can automatically tag contracts, e.g. initial downpayment received, administrative fee paid, purchase invoice posted, thus ensuring that contract managers are aware of payments received/completed in real time and without contacting the accounting department.
- At the end of the day (or month), there is no need to transfer/import transactions from the Contracts ERP to the Financial Accounting Module; all transactions are reflected in real time. This reduces operational risk and the workload of closing the day/month in accounting.
- The architecture of the system ensures that entries in the General Ledger and other accounting modules are created at the contract level, thus providing analytics at the balance contract level and reporting at the most granular level.
- Traceability of accounting transactions back to the original document is ensured.
Once you have assessed your business processes and how much flexibility you need, you will decide which way is better for you – integration or two systems in one. If the latter fits your business model better, we suggest you learn more about our leasing/credit management system.
Aušra Urbonienė
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