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Managing changing environment of finance with SAP

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  • 1. Applied Management Research Project Managing the changing environment of finance function in organization: SAP as an enabler Student: Devdut Saha Roll: 09BM8083 MBA 2 nd Year Vinod Gupta School of Management, IIT Kharagpur
  • 2. Objective
    • Studying
    • Changes affecting finance function of organization
    • IFRS and its effects. IFRS vs Indian GAAP
    • Taxation and regulation (Goods and Service Tax)
    • SAP handling the finance function and changes
    • SAP Packages (ECC and BO)
    • Formulating
    • Change management plan (Linear programming model)
  • 3. Scope
    • Indian organizations
    • The ERP considered in the study is SAP
    • Taxes and regulations in consideration are those applicable in India
  • 4. What is making the environment of finance function to change?
    • Automation & Transparency
    • Regulatory compliance
    • Changes in regulations:
          • Accounting and reporting
          • Taxation
    • Management reporting
    • Financial planning & strategy
    • Communication with shareholders
  • 5. International Financial and Reporting Standards (IFRS) April 2014 All listed companies with a net-worth of Rs 500 crore or less April 2013 Banks and non-banking finance companies April 2013 All companies with a net-worth between Rs 500-1000 crore April 2011 Companies with net-worth of Rs 1000 crore and those which are part of BSE, NIFTY and listed in overseas exchanges Target Date Companies
  • 6. IFRS
    • Historical cost and fair valuation: revaluation of intangible assets, investment property
    • Financial statements: SoRIE
    • Financial report presentation: Consolidated report
    • Distinction of current and non-current assets/liabilities
    • Business combinations: Everything is acquisition, purchase method of accounting
    • Functional currency
    • Cash flow statements
  • 7. Goods and service Tax (GST)
    • Single tax replacing indirect central and state taxes
    • Exports- Zero rated, imports & domestic goods
    • Destination principle
    • Wider tax base
    • Elimination of multiplicity and cascading effect
    • Likely to increase exports
    • Reduction in prices of goods
    • Not applicable for real property, alcohol, petroleum and natural gas, and electricity
  • 8. SAP Applications
    • Enterprise Central Component
      • FI
      • CO
      • Extended financials: VIM, Treasury, T&E, FI-CA
    • Business Objects
      • Strategic enterprise Management (SEM)
      • Enterprise Performance Management (EPM)
      • BI, BW, XBRL
      • Governance, Risk and compliance (GRC)
      • Financial Supply Chain Management (FSCM)
  • 9. FSCM, FI-CA, T&E mgmt, ERP (new GL), VIM Process financial transactions efficiently and effectively Transaction processing BI, BW, XBRL, SEM: SRM Capture, summarize, analyze & report financial results and related disclosures to management and external stakeholders Close, consolidate & report EPM, SEM: CPM,BPS, ERP (CO-PA) Define and monitor enterprise performance metrics, Deliver information needed to make after-tax business decisions Performance & decisions GRC, FSCM, Treasury, ERP financials (collections, credit mgmt, AR, AP, invoice mgmt, cash-bank mgmt) Identify and manage enterprise risks, Ensure access to capital, Optimize capital structure Risk & Capital GRC, BI, ERP financials, SEM:BPC, XBRL Monitor regulation and ensure compliance, Operate and monitor internal controls over financial reporting, Rationalize and manage required governance bodies Regulation and governance SEM: BPS,CPM, BCS, ERP financials (CO-PA) Influence corporate strategy through financial insight, Encourage enterprise-wide adoption of Strategy, Execute Finance strategy Strategy and execution SAP Solution Sub-Activities Activity
  • 10. Sector Analysis - Manufacturing GRC, FSCM, Treasury, ERP financials (collections, credit mgmt, AR, AP, invoice mgmt, cash-bank mgmt), SEM:CPM, EPM Managing and controlling financial risks BI, BW, SEM:BCS Mergers and acquisitions CO-PA, BI, BW, XBRL, SEM: CPM Profitability Analysis There is more than one package that can handle the same challenge. The choice of the package depends on the type of industry, organization and the objective to achieve. SEM:BCS, SEM:BIC, BW Reaping benefits of globalization Remarks SAP Package Challenge
  • 11. Sector Analysis - Retail SEM:BPS, CPM Forecasting (sales, profit etc) SEM:BCS, BIC, BI, BW, XBRL, EPM Financial consolidation CO-PA, BI, BW, XBRL, SEM: CPM Profitability analysis There is more than one package that can handle the same challenge. The choice of the package depends on the type of industry, organization and the objective to achieve. BI, BW, SEM:BCS Mergers and acquisitions Remarks SAP Package Challenge
  • 12. Change Management Plan
  • 13. Change Management Model
    • Changes in organizational structure (OT)
    • Changes in the finance processes (FP)
    • Training the people as per their roles (TP)
  • 14. Change Management Model
    • Objective: Maximize Value addition
    • ∑ (BOT(i) – COT(i)) + ∑ (BFP(j) – CFP(j)) + ∑ (BTP(k) – CTP(k))
    • for all i, j and k
    • Prefix “B”= Benefits, “C”= Costs
    • Constraints
      • ∑ CTP (k) ≤ TB for all k. TB is the training budget
      • ∑ COT (i) ≤ OTB for all i. OTB is the budget for costs of organizational change
      • ∑ TFP (j) ≤ ET for all j. TFP =Time reqd for change in financial process, ET= Overall Expected time for change
  • 15. References
    • Report of GST Task force: E&Y
    • Similarities and differences- A comparison of IFRS, US GAAP and Indian GAAP: PwC
    • Responsive Finance: Deloitte
    • www.sap.com
    • Change Management Strategies for successful ERP implementation: Adel M Aladwani
  • 16.
    • Thank You