How Does Accounting Work in a Rental ERP?

Kate Miller

A growing cohort of local and regional rental businesses are taking advantage of ERP software once used exclusively by major chains. We've looked at what ERP is and who it's for, and also explored common operations-related features. In this post, we'll look at how accounting works in an ERP.

In an ERP system, accounts receivable, accounts payable, and the general ledger are all unified. This fully integrated accounting package is what differentiates ERP and non-ERP rental software, because it means all of your data is in one place. Non-ERP rental software commonly handles the operational side but does not feature a built in accounting system. Even if you integrate with third party accounting software such as QuickBooks, this means your data is likely updated only once a day, which makes it more difficult to investigate an issue or compare reports. Without a fully integrated ERP system, it can be difficult to get a complete picture of your business at any given time.

Let’s take a closer look at some accounting features.

Receivables

With receivables, cash receipts are posted in the same system used for billing, so you don’t have to look in different places to see when an invoice was paid. If you post a customer payment and that customer wants a copy of their statement, you don’t have to wait for another process to run to find out what they owe you, since balances are live. Other common features:

• Automatically hit AR when an invoice is generated
• View complete customer history, including rental and payments histories and outstanding invoices
• Email electronic invoices and statements to customers as soon as they are generated
• Track credit history and average days to pay
• Track writeoffs by invoices
• View AR aging for 30, 60, 90, and 120 days
• Set customer credit limits

As an example, with an ERP, if a customer wants to know what they have on rent and what their outstanding invoices are, that information can be supplied instantaneously — there’s no waiting for multiple systems to update.

Payables

In a true ERP, accounts payable is tied to purchase order receipts. You can see what POs have been received but for which AP has not yet been paid. In a single system, you can see what the check number was and when the check cleared for a specific PO. Your vendor order information and payment history is all in one place. Other common features:

• Automatically enter invoices
• Cut checks
• Run bank statement reconciliations
• Print checks and distribute cash
• Setup internal security

“What makes ERP special is that these things are all a part of your rental system. When I write a purchase order and then receive it, and I run my accounts payable against it, being able to validate whether or not that purchase order has already been used or not, or whether it’s the same amount — these are things that are harder to do when your systems are separate.” Hernan del Aguila, Owner, Partner Rentals

General Ledger

With an ERP, as soon as a transaction occurs, it’s posted to the ledger. There’s no waiting until the night or the end of the month for your data to refresh. You can drill down from the GL inquiry to look at the customer or vendor invoice that generated each transaction, one of the many benefits of having all of your data in one place. Common features:

• View the source invoice that created each accounting transaction in the journal
• View, print, and enter report data
• Match invoices to proper receipts
• Perform bank reconciliation
• Perform bulk journal entry uploads (e.g. payroll)
• Automatically manage accruals

Fixed Assets

• Book depreciation using various methods
• Manage recapitalization of repairs through workorders
• Run purchase and disposal reports
• Track every asset value change

“I don’t have time to wait once a night for my data to refresh. When I need to look at something, I need to look at it now. With an ERP system, I can have everything in one system, and have it available in real time. A non-ERP would have accounting in one system and operations in another. This can cause delays and make it harder to do reporting. As one example, when I write a purchase order and then receive the item, I run my accounts payable against it. The system validates whether or not the purchase order has already been used, whether it’s the same amount — things that would be difficult when your systems are separate. Another example is if you’re looking at a certain accounting transaction in the journal, you can toggle over to the source invoice that created it, and vice versa.” Hernan del Aguila, Owner, Partner Rentals

In our next post, we'll zoom out and look at concrete benefits of an ERP to an organization using real-world examples. Stay tuned!