Accounting, finance & taxes with a merchandise management system
Imagine a retail company that sells its goods via an online shop and on marketplaces such as Amazon or eBay. Orders are received daily and returns must be processed promptly. Each transaction generates documents that need to be booked correctly. While Managing Directors must not lose sight of their own liquidity, the accounting department tries to keep track of open items, discounts, refunds and tax rates. Added to this are the special tax features associated with international sales.
In this complex web of orders, returns and payments , errors can quickly occur – for example in the allocation of incoming and outgoing invoices or the application of VAT rates. This is where a modern merchandise management system comes in: it takes over a large part of the administrative tasks and automates important processes. It also ensures that financial and tax data is recorded completely and correctly at all times. This allows companies to maintain an overview and concentrate on strategic tasks.
This guide highlights the role of merchandise management in accounting. It looks at how an ERP system supports companies in fulfilling their tax obligations and which interfaces are essential for collaboration with accounting programs and tax advisors. It also deals with aspects such as compliance, legal requirements and data security in finance.
The role of merchandise management in financial accounting
A modern ERP system fulfills several important tasks in financial accounting.
Central data hub for all business transactions
Merchandise management records all business transactions such as orders, sales, returns and payments. It processes data in real time and makes it available in full. This prevents loss of information and ensures that all departments have access to the same consistent database.
Efficient and error-free processes through automation
A merchandise management system can automate many processes relevant to accounting. For example, the system automatically assigns income and expenses to the corresponding accounts and ensures that postings are correct and traceable. We present further examples of automation in the next chapter.
Support with the fulfillment of tax obligations
Once the necessary settings have been made, the system automatically assigns the correct tax rates to transactions. It records all tax-relevant transactions and prepares data for the VAT return. Companies, tax consultants and tax offices can exchange information via interfaces.
Advantages over manual accounting processes
Compared to manual processes, a merchandise management system is characterized by important advantages for accounting.
Less effort
Time-consuming and monotonous tasks such as manually entering invoices and payments are no longer necessary. Employees can concentrate on their core business and complex challenges.
Fewer errors
Automation increases accuracy and reliability, as human error sources are largely eliminated. With a merchandise management system, there are hardly any incorrect postings or the allocation of incorrect tax rates.
Well-founded decisions
Decision-makers benefit from data in real time and automatically generated reports. This makes it easier for them to make well-founded decisions.
Efficient data exchange
Interfaces are used to create networked systems. This allows valuable data to be exchanged internally and with external partners in real time.
In summary, an ERP system reduces the workload in accounting, speeds up processes and prevents errors. It therefore makes an important contribution to the economic success of companies.
We will now outline what this contribution looks like in detail.
Automated accounting with merchandise management
Automation is a central component of merchandise management systems. Depending on the software, many processes that are relevant to accounting can also be automated. These include the following tasks in particular:
Creation and dispatch of invoices
The merchandise management system automatically creates invoices directly after a sales transaction or goods issue. It takes customer data and item information from the central database.
Payment reminders and dunning runs
Outstanding invoices are continuously monitored. If payment deadlines are exceeded, the merchandise management system automatically creates and sends payment reminders and dunning letters. Even multi-stage dunning processes can be mapped without manual effort.
Integration of payment service providers
Modern merchandise management systems offer interfaces to payment service providers such as PayPal, credit card providers or SEPA direct debit schemes. They record incoming payments directly and assign them to the corresponding postings. Manual matching is no longer necessary.
Further examples of automation
- Posting of goods receipts and stock movements for precise stock valuation
- Processing of returns and refunds
- Automatic sales tax statements
- Conversion of transactions in foreign currencies
- Regular financial reports and analyses
- Automated payment transactions
A practical example
A medium-sized retail company sells shoes via its own online store and various marketplaces. As soon as a customer places an order in the online store, the following processes take place:
1. order acceptance and stock reconciliation
The merchandise management system records the order in real time and checks the stock level. If the goods are available in sufficient quantities, the sales order is confirmed immediately and order preparation is initiated in the warehouse. If an item is in short supply, the system triggers a notification to the purchasing department or initiates a repeat order from the supplier.
2. invoicing and dispatch
As soon as the goods have been commissioned and prepared for shipping, the system generates an invoice. It accesses stored customer and item data, calculates the correct tax rate (including for international shipping addresses if necessary) and creates a PDF document. The invoice is then sent to the customer by email and archived in the system in an audit-proof manner.
3. receipt of payment and allocation
Incoming payments from payment service providers are automatically transferred to merchandise management via integrated interfaces. The system compares the incoming payments with the open items and automatically posts them to the correct accounts in financial accounting. Possible differences (e.g. from cash discount deductions) are recognized and reported immediately.
4. payment reminders and dunning process
If a payment remains unpaid for a certain period of time, the merchandise management system creates a friendly payment reminder according to predefined rules. If the customer does not comply, the next dunning run starts. In the background, the software continuously checks due dates and, if necessary, carries out multi-stage dunning processes before a case is transferred to receivables management.
5. returns and refunds
When a customer returns goods, the system recognizes the return based on the purchase order ID. It updates the stock and generates a refund, which in turn is transferred to the accounting department. Additional manual intervention is only necessary in unusual cases (e.g. damaged goods).
By setting up digital workflows, companies can adapt automation to their goals and needs. Scalable solutions grow with the company.
Merchandise management and taxes: managing tax obligations
Fulfilling tax obligations is an important part of day-to-day work in commercial enterprises. It not only causes a lot of work. Mistakes can have serious consequences.
Companies that work with an ERP system also benefit from automated processes in this area. To do this, they first make basic settings. For example, they create tax classes and assign items. They define tax zones for international shipping.
On this basis, merchandise management systems can independently map many processes relevant to tax issues and help to manage tax obligations. Here are some examples:
Automated recording of sales tax data
The merchandise management system automatically records all tax-relevant transactions. Sales, refunds and returns are included in the VAT calculation without the need for manual entries.
Preparation of the advance VAT return
The system collects all relevant data and prepares it for the advance VAT return. They can then be exported directly to tax consultants and/or the tax office in various formats.
Support for international business
Powerful merchandise management systems also record international transactions and complicated delivery routes correctly for tax purposes. They automatically calculate VAT rates for different countries and regions and take into account tax-free deliveries, customs duties and import taxes for third countries.
Preparation of annual financial statements and business analyses
Powerful ERP systems automatically prepare financial data and make it available for financial statements and evaluations. Some ERP systems even automatically create balance sheets or profit and loss accounts.
Documentation and archiving
All tax-relevant documents, invoices and postings are archived in a GoBD-compliant and audit-proof manner.
As merchandise management systems record all business transactions seamlessly and clearly, companies are prepared for tax audits. They also have relevant data to hand when they need it.
We have already mentioned it: Modern merchandise management and ERP systems are not isolated systems. They can be linked to online stores or marketplaces such as Amazon via interfaces, for example. Companies also have the option of integrating accounting software and tax consultants. In this way, the ERP system can further simplify accounting and tax processes.
Integration with accounting programs
Thanks to the seamless integration of merchandise management with software such as DATEV, Lexware or SAP, accounting data can be synchronized automatically. Documents such as invoices are exchanged directly between the systems, accounts are automatically reconciled and incoming and outgoing payments are assigned to the respective accounts.
Such integration has the following advantages:
- Time savings through automation: financial postings are transferred directly from merchandise management to accounting.
- Up-to-date financial data in real time: stock levels, sales and costs are synchronized at all times.
- Reduced error rate: Manual bookings are no longer necessary and all transactions are traceable.
Interfaces with tax advisors and the tax office
If tax consultants have direct access to the necessary documents via interfaces, paper documents are no longer necessary. Advance sales tax returns, income statements or annual financial statements can be retrieved at any time.
The exchange of information with the tax office can also be simplified in this way. For example, companies can transfer VAT data directly from the ERP system to ELSTER.
A practical example
A trading company uses a merchandise management system with a DATEV interface.
It benefits from this in the following ways, among others:
- Sales and purchase documents are automatically transmitted to DATEV on a daily basis.
- Open items and incoming payments are automatically reconciled.
- The tax advisor can call up reports and documents at any time, which simplifies the annual financial statements.
These comprehensive integrations ensure optimized accounting, shorter handling times and a high level of data quality in financial management.
Compliance: fulfill legal requirements through merchandise management
Finally, an ERP system supports companies in complyingwith legal financial and tax requirements and facilitates legally compliant accounting.
The following points are particularly important in this regard:
Merchandise management, accounting and taxes: technological trends
Artificial intelligence (AI) and machine learning (ML) are changing the financial processes in modern merchandise management systems. They offer additional potential for optimizing accounting workflows, simplifying tax processes and reducing costs:
Automated accounting processes through AI
- Intelligent document recognition and posting: AI algorithms automatically recognize content on invoices, receipts and delivery bills and assign them to the correct accounts.
- Automated error detection: With the help of machine learning, systems analyze large amounts of data and detect irregularities such as double bookings or incorrect amounts.
Improved financial planning and liquidity management
- Forecasting cash flows: Machine learning enables precise forecasts of income, expenses and liquidity based on historical data and current transactions.
- Optimization of payment flows: AI suggests the best time for payments and reminders to secure liquidity and take advantage of cash discounts.
Digitization of tax processes
- Automated tax calculations: AI automatically takes into account changes in tax law and adjusts calculations accordingly.
- Preparation of tax reports: Systems independently generate complete tax returns and prepare the data for tax audits.
The integration of AI in merchandise management systems is still in its infancy. But in all likelihood, artificial intelligence will become an integral part of merchandise management and help to automate further processes and create precise analyses.
Consider the topic of accounting when selecting an ERP system
Accounting plays an important role in the selection of a merchandise management or ERP system.
Companies can use questions like the following to determine whether a system meets their requirements :
- Do I need advanced features of comprehensive ERP systems, for example integrated payroll accounting or integrated financial reports?
- What options do I have to automate processes that are relevant for accounting and tax optimization?
- How do I set up digital workflows?
- What interfaces does the system offer and how does communication with accountants, tax advisors and the tax office work?
- How can the software be scaled and adapted to new requirements?
Conclusion: merchandise management systems make financial processes more efficient
A merchandise management system provides comprehensive support for retailers in accounting, tax compliance and compliance. Automated invoicing, reliable VAT calculations and interfaces to accounting software ensure efficient financial management. The central recording of all business transactions and compliance with legal requirements not only simplifies financial accounting, but also makes it more secure and transparent.
However, merchandise management systems differ in their range of functions. We recommend that companies consider accounting and finance when making their selection. In this way, they benefit from time savings, reduced errors and better data quality – an indispensable basis for sustainable success in retail.
