Manufacturing Accounting Software

Manufacturing accounting software is often called MRP software  (manufacturing resource planning), or ERP software (enterprise resource planning). This software does much more than just producing financial information, and is much more complicated than normal accounting software.

MRP/ERP software can be a complete enterprise wide software that collects, stores and reports information for the following departments:

  • Materials
  • Engineering
  • Finance and Cost Accounting
  • Shipping/Receiving
  • Manufacturing floor
  • Purchasing
  • Sales

The materials and engineering departments will maintain the bill of materials for every part that is manufactured. The system tracks and moves materials at every stage of the manufacturing process, along with labor and burden costs.

The bill of material (BOM) will include each physical part used in the final product, labor used, overhead used, packing materials, etc. The MRP system captures each step in the manufacturing process occurs, as more materials, labor, etc are added to the product, until the product is complete and then sold.

Inventory transactions occur in the system when raw materials are received, production occurs, product is transferred to finished goods, and the product is sold. The MRP system will report inventory quantities and valuations as raw material inventory, WIP (work in process) inventory, and finished goods inventory. The system is also capable of making adjustments to the inventory for cycle counts, scrap product, etc.

Purchasing and sales will maintain vendor and customer information in the system, along with cost and price information. Purchase orders can be written and maintained here as well.

The finance department will use the system for invoicing and payables, as well as producing many cost and financial reports from the database of information available.

The finance department will also maintain and report product revenue and costing. A standard cost will be used to compare to the current cost of parts to aid in continuous improvement activities, inflation reporting, and profit reports.

The MRP/ERP system is very complex and requires a large amount of capital to purchase and implement. Often, the purchase of the software is the smaller amount, as implementation should take as long as needed to be certain that when the system goes live it does so with few or no issues. Implementation usually includes consultants, programmers and software specialists.

The more common manufacturing accounting software is SAP, Mfg Pro or QAD, etc. A successful launch of the software will allow the company to control and improve its processes.

A successful launch should be the main objective when thinking about adding manufacturing accounting software to your business. Be sure that every possible scenario is worked through in testing before the launch. Champions from every discipline must be given time away from their normal work duties to be part of the launch team.