Enterprise Systems Learning Objectives • • • • • • • • • Describe enterprise systems Describe enterprise resources planning (ERP) systems Explain the organization value chain Describe relationship of organization value chain and an enterprise system Illustrate value of systems integration Show how an enterprise’s system provides support for an organization’s processes Summarize the major modules contained in an ERP system Describe how and enterprise system supports major business event processes Enumerate the pros and cons of implementing enterprise systems Enterprise Systems Enterprise Systems on the AIS Wheel • The enterprise system cuts across all accounting application and affects control considerations Enterprise System • Integrates business processes and information from entire enterprise • Helps coordinate the operation of business functions • ERP systems are software packages that can be used for the core systems necessary to support enterprise systems ERP Systems Vendors SAP Modules Third-Party Modules • Customer Relationship Management (CRM)—builds and maintains customer related data – Customer Self-Service (CSS)—allows customers to complete tasks without assistance – Sales Force Automation (SFA)—automates sales tasks such as order processing and tracking Third-Party Modules, Cont’d • Supply Chain Management (SCM)— plans and executes demand planning, inventory acquisition, manufacturing, distributing and selling • Product Lifecycle Management (PLM)— manages product data from design through disposal of product Enterprise Systems Value Chain • Enterprise systems facilitate value chain management • The value chain is the system of activities that transform inputs into outputs valued by the customer • The goal of an organization is to add the greatest value with the lowest costs thereby increasing competitive advantage Value Chain and System 10 Major ERP Modules, Cont’d • Materials Management – Acquisition and management of goods from vendors • Purchase order preparation • Receiving • Recording invoice – Interacts with • Sales and distribution module • Financial accounting module • Controlling module 26 Major ERP Modules, Cont’d • Financial Accounting – Plays a central role in an ERP system and incorporates data from other modules into general ledger accounts and financial statements – Business events from other modules, such as SD and MM, are incorporated by the FI module into the general ledger accounts and included in the external account statements, the balance sheet, profit and loss statement, and statement of cash flows – The FI module also includes accounts receivable and accounts payable functions to record and manage that data directly and to complete events begun in the SD and MM modules 27 Major ERP Modules, Cont’d • Controlling and Profitability Analysis – Handles internal accounting including: • • • • Cost center accounting Profitability analysis for sales Activity-based accounting Budgeting 28 Major ERP Modules, Cont’d • Human Resources – Recruiting, management and administration of personnel – Payroll processing – Training and travel – Benefits – Reports 29 Order-to-Cash Respond to customer inquiries and requests for quotes (RFQs) Some companies add on separate CRM modules 30 Order-to-Cash Record customer order including: check customer credit; check inventory pricing; and check where and when inventory will be available to send to the customer 31 Triggers picking of goods or purchase of goods from another vendor Order-to-Cash Pick goods from warehouse and pack for shipment 32 Order-to-Cash Ship goods to the customer ERP system would choose the appropriate routing and carrier, record the cost of goods sold and inventory reduction in the general ledger Some ERP systems trigger the billing process when a shipment takes place 33 Order-to-Cash Billing the customer and recording the sale in AR ERP system ensures correct quantities, prices, terms, addresses, etc ERP system can be used to analyze sales profitability by comparing product costs to selling price 34 Order-to-Cash Receive and record payment Includes: recording cash receipts and updating cash and accounts receivable ERP data can then be used to manage customer credit and invest available cash 35 Purchase-to-Pay Determine requirements, complete purchase requisition ERP system may automatically generate the purchase requisition based on quantity onhand, quantityon-order, and expected demand 36 Purchase-to-Pay 37 Prepare and record purchase order An ERP system assists the buyer in identifying sources of supply for the requested item, preparing RFQs to vendors, analyzing vendor quotes, comparing vendor prices, terms, and past performance Purchase-to-Pay 38 Receive and record goods Compare quantity ordered to quantity received The ERP routes goods to the function that requested them or directs them the warehouse for immediate sale It also records vendor performance data Purchase-to-Pay Receive vendor invoice, match with PO and receiving report; record payable If the three-way match fails, the enterprise system notifies the proper personnel to ensure timely reconciliation of differences 39 Purchase-to-Pay Prepare and record cash disbursement and update accounts An ERP system uses vendor and AP data to schedule payments in accordance with vendor terms and to receive discounts 40 ... the pros and cons of implementing enterprise systems Enterprise Systems Enterprise Systems on the AIS Wheel • The enterprise system cuts across all accounting application and affects control considerations... business processes and information from entire enterprise • Helps coordinate the operation of business functions • ERP systems are software packages that can be used for the core systems necessary... and Profitability Analysis – Handles internal accounting including: • • • • Cost center accounting Profitability analysis for sales Activity-based accounting Budgeting 28 Major ERP Modules, Cont’d