ERP Systems

My first encounter with accounting occurred in my first quarter at Santa Clara University.It was a completely new area for me and my interest in the financial world grew by leaps and bounds with each passing lecture.Recently I had another chance of exploring the link between ERP ,and Financial accounting and it was very staggering to find how the latter supports ERP systems.

SAP ERP’s Finance and Accounting solution smooth-ens the operations related to finance for any organization.It coalesces and automates the important accounting and financial procedures,hence un-complicating the process of managing resources,expenditures and financial reporting documents. ERP binds the processes spread across different functional areas to give a unique version of the financial information to everyone.SAP ERP’s finance solution,also allows anyone to have a real-time understanding of the company’s financial health.It also helps to reduce costs by providing a common platform for customers or suppliers to interact.SAP FICO ( FI denotes Financial Accounting and CO denotes Controlling ) acts as a repository for the data of the financial transactions.

I hope to learn more about the different aspects of SAP FICO modules along with their correlation to other business process.Here is my attempt to represent different SAP FI modules in a diagram.

 

This week was mainly dedicated learning about the accounting perspective of an ERP system. Accounting is called the “language of business” because it’s the only way to keep track of all the business transactions and activities

One major topic discussed was handling accounting system for any multi-national organization, where we learned about Charts of Accounts, which segregates companies in three organizational levels: Client, Company Code and Plant and gives a systematic approach to manage accounting for companies operating under different taxation bodies.

Another issue discussed was keeping a track of all the transactions through Documentation (invoice, returns, goods received) rather than just feeding them in system using transaction IDs, which provided more reliable way to record and revive information about any transaction and keep track of all business processes. Further we discovered how documentation is divides into two categories – Material Documents and Virtual Documents.

An elementary aspect of accounting is to understand how and when income or expense is incurred to the company, this concept was comprehended by understanding the Reconciliation Accounts: Accounts Receivable and Accounts Payable and their implementation. Also, how different operating nature of companies (i.e. manufacturing, service, software as service) compel their reconciliation accounts to be implemented differently.

From the previous experience that I had as an accountant, I used all kinds of accounting software, like QuickBooks, NetSuite or Intacct. It could be very confusing find the distinction between an accounting software and a ERP system. Sometimes I even thought that they were the same thing. After this week’s lecture I got curious and went online to search for the differences between them.

Accounting software is “used to strictly to refer to the financial aspect of your business operations. These include accounts receivable, accounts payable, payroll, and trial balances. (ERP VS Accounting Software http://www.mrp.com.my/difference-is-between-erp-or-accounting-software/)

An ERP system on the other hand has more features than pure accounting software It’s a resource management system that not only monitoring the business’ financials, but also “tracks the following: tangible and intangible assets, human resources, and materials. Intangible parameters include working hours, product life cycles, key performance indicators, and customer relations.” (ERP VS Accounting Software http://www.mrp.com.my/difference-is-between-erp-or-accounting-software/)

Reference: ERP VS Accounting Software http://www.mrp.com.my/difference-is-between-erp-or-accounting-software/

Accounting software is more like a subset of ERP. When the company’s size is still small the pure accounting software may satisfy its business need. But a lot people believe that ERP system will gradually replace the traditional accounting software.

My professional experience includes working in a rice industry. Typical functional areas of our industry included Purchase, Production and Operations, Inventory and Warehouse Management, Sales and Marketing. Each of these process had to be started simultaneously. Procurement began with buying paddy as raw material from the suppliers. Then accounts payable will be recorded. Once paddy is processed to rice, it will be stored in the warehouse for transportation. Now as soon as we have orders from the end customers, we deliver the goods according to order, and record the accounts receivables.

I feel it is very overwhelming to head all these business process from procurement to selling of goods by single person. This was even one of the main reason why this startup had failed. Therefore, after listening to my first class of ERP, I understand that apart from having a good idea, it is also very vital to have a effective execution strategy. So compartmentalizing and setting up a particular workforce to work on each of these process will allow them to run efficiently. Complementing these will be the integration of process through ERP systems by breaking the Silo effect between the process to allow running of the entire workflow efficiently and effectively.

During the first week of ERP system course, I started re-discovering ERPs from a different perspective. It’s different because I had a six-months internship in 2015 working on ERPs implementation. I was a consultant for an IT company working on systems implementation of Oracle Financial Management software (Hyperion) and Financial planning. The experience helped me to shape my architectural knowledge of ERP systems within different big French companies.

While enjoying learning about the infrastructural architecture of ERP systems, I was always curious about how the business process architecture looked like. luckily, the first week of the course partially answered my question. Partially because I got to know about the big picture of a general ERP system from a business perspective (main purpose, different BPs).

We also started digging deeper into interesting aspects of the of the system: The role of interfaces and the Silo effect problem (or not, according to our Professor, the silo effect helped each department to maximize efficiency). This aspect was very important on mapping my previous knowledge about ERP infrastructure and the new learned items and the following weeks will probably help me complete the picture of my architectural business perspective of such systems.

Last week, we were introduced to the basics of ERP systems and went through an interactive class activity that showed us how information gets passed through various organizational departments with the silo effect in place.

The importance of having an ERP system isn’t just to ensure faster communication between departments, but how the departments can access core data faster and with greater accuracy. Nowadays, incoming data can change rapidly and customers often times expect organizations to respond quickly to their needs. Then add the fact that business is now essentially non-stop and comes from all over the world (such as e-commerce), having a sound ERP system in place helps to keep the everyday operational business processes flowing smoothly.

The insurance industry is one type of business that can really benefit from ERP systems. In order to stay competitive with others offering similar products, an insurance company could offer a more customized policy with better rates for customers through an effective ERP system. It’s also possible to see changing purchasing trends in order to come up with new products or target specific types of people for potential new customers. These are common challenges facing the insurance industry today.

My company uses Oracle ERP, and one of the main reasons I decided to take this course was so that I could better understand the activities/roles of different departments and how they’re able to efficiently work with each other, through an ERP system.

At my job, I am involved in Salesforce development/support, so just as discussed in class, I have an understanding of how Marketing works on developing leads and eventually hands them over them over to Sales, and how Sales works with Operations. At work, I’ve also seen how the Silo effect allows end users/departments to effectively do their respective jobs without having to worry too much about working with other interfaces/forms.  However, I’m not too familiar with the general business processes other departments like Operations/Warehouse/Accounting encounter on a regular basis, and would like to learn more about how they work together. I would like to get a better understanding of the general different business processes that different departments are involved in, so I can be effective if I am ever involved in an ERP implementation in the future.

In the first week of class we learned about the different functional areas in a business process and the importance of a cross functional structure. Having no experience in the field of ERP, during the course of the week I understood the significance of an ERP system, how it can be used to track the different business processes, and also about the end to end activities that take place in a business process.

The purpose of an ERP system is to make life easier for an organization and also help save costs. The Nestle case study is a great example of how a well implemented ERP system can reap benefits and how a bad implementation can be disastrous. The consolidation of the different factories due to the ERP system helped Nestle save over $325 million and more than the costs, it helped Nestle to come together as an organization. The ERP classes made it easier for me to understand the case study, and due to which I learned what it means to implement an ERP system, functioning of an ERP system, the benefits of a successful implementation and what are the challenges faced during implementation.

References

http://www.uwosh.edu/faculty_staff/wresch/ERPNestle.htm

 

 

The first week I learned how business process runs in a company and this lets me think that different functional department works independently in a certain company. The jobs they need to do are doing their own job and update their work situation. In my opinion, business process outsourcing probably a great solution for some companies to lower human resource cost and let the works be done more efficient.

The articleIs Business Process Outsourcing Relevant For Your Small Business? discusses whether small business is suitable to adopt business process outsourcing. In spite of several disadvantages such as communication issues and underestimating costs, freedom and flexibility to choose the relevant services for company operation, quick and accurate, and Save on resources related to staffing and training are all attractive to business to adopt business process outsourcing. Moreover, cloud and ERP solutions enables business process outsourcing run more smoothly. Business process outsourcing provider and its customer can work more closely.

reference:

 

http://www.business2community.com/small-business/business-process-outsourcing-relevant-small-business-01658998#Kt2v86TkvqvZr24x.97

 

In the first week, we reviewed the basic components of an enterprise and how the business processes connect each component hence minimize the silo effect while at the same time enable collaboration within an enterprise. However, manually updating or transferring information across functional departments is not an efficient method, which can lead to time delay or overhead, and that is why ERP systems are necessary in this modern, rapid business environment.

The Internet has changed the purchase behaviors so differently. Twenty years before, people had to go to a physical store for shopping. Nowadays I can shop online for the next season IT items before the product is even produced. Although the quality is not guaranteed (you can read people’s funny preorder reviews online), it is still an improvement (or unsuccessful innovation) and I believe one day, there will be an online service that directly connects consumers and manufacturing factories across the world. No matter how this service will be implemented in the future, I believe it must be based on the current ERP design. I am looking forward to the details of ERP system and how to design an effective, optimized one.