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 5-1
 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 5-2
 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 5-3
 Accounting Processes

• Operational
management
level
– Production of
transactions
• Paychecks,
invoices,
checks,
purchase
orders

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-4
 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 5-5
 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 5-6
 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 5-7
© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-8
 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 5-9
 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 5-10
 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 5-11
© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 5-12
 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 5-13
 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 5-14
 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 5-15
 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 5-16
 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

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