sumner ppt05

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-1

Enterprise Resource Planning, 1st Edition by Mary Sumner

Chapter 5:ERP Systems: Accounting and

Finance

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-2

Objectives

• Examine accounting systems within ERP

• Understand ERP financial systems • Review the interrelationships among

business processes supporting finance and accounting

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-3

Case: Atlantic Manufacturing

• Inaccurate and/or incomplete paperwork produces problems

• Exchange of information between departments made manually

• Unable to supply quantity discount information to sales force

• Lack of coordination between departments

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-4

Accounting Processes

• Operational management level

– Production of transactions

• Paychecks, invoices, checks, purchase orders

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-5

Management Control Processes

• Budgeting– Analysis of allocations, expenditures, revenues

• Cash management– Cash flow analysis– What-if analysis

• Capital budgeting– Evaluation tools: NPV, IRR, pay-back period

• Investment management

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-6

Accounting Systems

• Traditional– Provide operational-level software

• Produce invoices, checks, statements

• Financial accounting– Financial statements for external reporting

purposes• Management accounting

– Information on profitability

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-7

Accounting Systems v. ERP Modules

• ERP– Information shares integrated database– Provides up-to-date information– Seamless– Creates document flow of transactions

• Accounting systems– Manual or separate transfer of information– Multiple platforms

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-8

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-9

ERP Financial Accounting Module

• External reporting– Set by general accounting standards– Legal requirements

• Includes accounts receivable subsystem– Interfaces with cash management– Monitors accounts and updates, handles

payments, creates due date lists, produces statements

• Accounts payable– Handles payments, applies available discounts to

maximize profits

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-10

Management Accounting Modules

• Internal accounting perspectives for directing and controlling operations

• Information on variances between planned and actual data• Key activities

– Cost center accounting– Internal orders as a basis for collecting and controlling costs– Activity-based costing of business processes– Product cost controlling for profitability analysis– Profitability analysis by market segment– Profit center accounting of individual areas of organization– Consolidation of financial data for accounting perspectives

• Enable management to better allocate resources, maximizing profitability and performance

• Central clearinghouse for accounting information

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-11

ERP Systems

• Provide on-line, real-time data– Operational data

• Feedback on quality and efficiency of processes• Information must be timely and specific• Used for real-time operational control

– ABC data• Information on profitability and products• Real-time data• Estimates are sufficient• Strategic information• Basis for continuing improvement to operations

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-12

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-13

Featured Article: The Changing Landscape of Computerized Accounting

Systems

• Define each of the “in-technologies and systems”.

• What is their relationship to the success of ERP?

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-14

Featured Article: The Changing Landscape of Computerized Accounting Systems, continued

• New types of accounting software– Fair pricing– Database management standardized

• Ease of mobility– PC-based

• New markets– ERPs dominate highest end– Mid-levels are SQL-based and non-SQL-based– Low-end systems range from very low end to

more robust– E-commerce and e-business drive most mid- and

high-level systems, as well as a few low-level

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-15

Featured Article: The Changing Landscape of Computerized Accounting Systems, continued

• Internet-based commerce– Hottest technology– E-business

• Quicken allows remote entries through Web• EDI and EFT

– E-commerce• Amazon.com and on-line securities trading• Dell Computer

• ERP– Internet additions– Prices decreasing

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-16

Featured Article: The Changing Landscape of Computerized Accounting Systems, continued

• Best practices– Improve bottom line– Create air of control

• Structured Query Language– Database of choice

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-17

Summary

• Most accounting processes operate at the operational management level

– Additional software enables financial and management accounting

– Each department or division may operate different software and databases

• ERP systems’ integrated database allow for seamless information sharing

– Easier reporting– Includes all operational data and ABC data– Coordinates with management accounting

modules