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  1. 1. PRIN. L. N. WELINGKAR INSTITUTE OF MANAGEMENTDEVELOPMENT AND RESEARCHERP Finance ModuleERPAkhila Kisara, Dhairya Thakkar, Himanshu Shukla, NikitaChaubey, Paras Sachdev, Vikram Jaiswal, Vivek Jeyakumar 1
  2. 2. Table of Contents1 Introduction ______________________________________________________________ 32 ERP finance module _______________________________________________________ 4 2.1 FI Module __________________________________________________________________ 4 2.1.1 FINANCIAL ACCOUNTING ________________________________________________________________ 4 2.1.2 INVESTMENT PLANNING ________________________________________________________________ 5 2.2 CO Module _________________________________________________________________ 5 2.2.1 CONTROLLING _______________________________________________________________________ 63 Companies with financial ERP modules ________________________________________ 7 3.1 SAP FI/CO Module includes the following sub-modules _____________________________ 7 3.2 ORACLE 11I E-BUSINESS SUITE MODULE INCLUDES FOLLOWING SUB MODULES _________________ 84 References _______________________________________________________________ 9 2
  3. 3. 1 IntroductionEnterprise resource planning or ERP consists of 3 words enterprise, resource and planning.The last 2 words are insignificant as compared to the first one .As there are many othersoftware solutions that does planning and resource management. It is enterprise part that is important and ERPs true power and potential comes from themovement from traditional business model to enterprise business model. ERP package triesto integrate all departments and functions across a company onto a single computer thatcan serve all the different departments’ particular needs. This kind of integration is difficult.Building a software program that serves needs of people in finance as well as of Hr and inware house. Each department has its own computer system optimized for particular waysthat department does its work. But ERP combines them all into single, integrated softwareprogram that runs off a single database so that the various departments can more easilyshare information and communicate with each other. that integrated approach can have atremendous payback if companies install the software .ERP replaces old standalone computer systems in finance ,reproduction etc with a singleunified software program divide into software modules that roughly approximate the oldstandalone systems. Finance, HR, Manufacturing all still get their own software’s exceptnow they are linked together so that someone in finance can look into warehouse softwareto see if an order has been vendors.ERP software is flexible enough that you can installsome modules without buying the whole package. Many companies for example will justinstall finance module or HR module and leave rest of functions for another day. 3
  4. 4. 2 ERP finance module All kind of organizations small scale, large scale organizations benefit from the implementation ofERP financial module. The financial module is the core of many ERP software systems. It can gatherfinancial data from various functional departments, and generates valuable financial reports such asgeneral ledger, trail balance, balance sheet and quarterly financial statements. Financial Module FI CO Financial Investment Controlling Accounting management2.1 FI ModulePlays a central role in an ERP system and incorporates data from other modules into generalledger accounts and financial statements. Business events from other modules, such as SDand MM, are incorporated by the FA module into the general ledger accounts and includedin the external account statements, the balance sheet, profit and loss statement, andstatement of cash flows. The FA module also includes accounts receivable and accountspayable functions to record and manage that data directly and to complete events begun inthe SD and MM modulesFI includesa)Financial Accountingb) Investment managementAnd each of this module includes sub modules.2.1.1 FINANCIAL ACCOUNTINGIntegration of financial information essential for strategic decision making. Centrally trackfinancial accounting data within international framework.Financial accounting includes sub modules like General Ledger, Accounts Receivables/Payable, Fixed Assets Accounting, Legal consolidation 4
  5. 5. Investment Management includes sub modules like Investment planning, Budgeting,controlling, Depreciation, Forecast Simulation Calculation1. General Ledger: Essential for financial accounting and decision making Serves as a centralpool of financial data and in accounting area, Origin of a transaction can be traced, Supportsall the functional needs in financial accounting.2. Typical General Ledger contains i.e. summary information of other components:Purchasing (Quantity and value) Sales (order and bill) Vendor (Payable) Customer(Receivables) Fixed assets Employees (salary and wages)3. Accounts Receivables/ Payable: These subsystems are integrated with all othersubsystems where financial data originates both with General Ledger, Sales andDistribution, Material Management.4. Accounts Receivable and Payable functions include: Internet integration Documentmanagement important support for EDI processing Enterprise-wide credit managementpayment automation5. Asset Accounting: Serves as a sub ledger to the General Ledger Manages Company’s fixassets and provides detail info about assets related transaction. Integration with plantmanagement .Management of leased assets and lease under construction.6. Legal Consolidation: serves as a tool to make a consolidated financial statement withoperational data Legal consolidation is closely integrated with Financial Accounting systempermit direct data transfer from individual statement into consolidated report.2.1.2 INVESTMENT PLANNINGWhere to invest, what is the expected profit of each ventures. Which department to needmore investment? Budgeting – Financial layout of new or existing project – Availability andcost of finance Controlling – The expenses, the overheads Depreciation - Budgeted balancesheets and cost planning are always on current values. Forecast – Speculation and forecastof market trend. Rising or declining? Simulation Calculation: Making a mathematical modeland deriving alternatives to choose from.2.2 CO ModuleHandles internal accounting, Cost center accounting, Profitability analysis for sales, Activity-based accounting Budgeting. Controlling (Overhead cost controlling, Activity based costingProduct cost Accounting Profitability analysis) Treasury (Cash Management, TreasuryManagement, Market Risk Management, Funds Management) Enterprise Controlling(Executive Information System (EIS), Business Planning and Budgeting, Profit centreAccounting) 5
  6. 6. 2.2.1 CONTROLLING Controlling includes Overhead cost controlling, Activity based costing Product costAccounting Profitability analysis, Treasury which has Cash Management, TreasuryManagement, Market Risk Management, Funds Management and Enterprise Controllingwhich has Executive Information System (EIS), Business Planning and Budgeting, Profitcentre Accounting.1. Overhead Cost Controlling: Focus on monitoring n allocation of overhead Cost CentreAccounting: Analyses where overhead occurs Overhead Orders: Collects and analysis costbased on individual internal measures Monitors and automatically check budgets assign toeach measures.2. Activity Based Costing: Goals of the entire enterprise should come before the goals ofindividual activity Product Cost Controlling: determine cost of product or services Use todetermine the lowest price limit.3. Cost Object Controlling: Helps to monitor manufacturing orders Integration with logistics,provides actual cost of the object costs Determine n analysis Variance betw actualmanufacturing cost and plan cost Profitability analysis: Examines the sources of returns.Revenues are assigned according to market segment .4. Treasury Modules. Managing long ,short, medium payment flow Managing Risk factorPlanning financial transaction.5. Cash Management: Analysis financial transaction for given period Manages cash inflowand outflow Distinction is made according to time period (short medium long) Information isavailable to make cash management decision and for analyzing purpose. TreasuryManagement: Current liquidity, Currency, Risk position Conditions prevailing on the moneyand capital market Securities and loans Treasury.6. Market Risk Management: Ensures competitiveness Complex feed back loop: from datacollection, risk management, analysis and simulation Assessing the interest rates Assessingthe currency rates Simulate market data – “what if” analysis Funds Management: Frombudgeting to payment on one side and From Billing to actual receiving on the other Enablesto control funds commitments and determine the budget utility. Helps to identify budgetbottleneck Treasury.7. Executive Information System: Provides overview of critical parameters Gets both internaland external data Drill-Down reporting to evaluated data Business Planning and Budgeting:Business targets such as Return on investment Central investment planning, budget releaseand tracking 6
  7. 7. 3 Companies with financial ERP modulesSAPOracle E-Business suiteMicrosoft DynamicsJD Edwards3.1 SAP FI/CO Module includes the following sub-modules a. General Ledger (FI-GL) b. Accounts Payable (FI-AP) c. Accounts Receivable (FI-AR) d. Bank Accounting (FI-BL) e. Asset Accounting (FI-AA) f. Funds Management (FI-FM) g. Travel Management (FI-TV) h. Special Purpose Ledger (FI-SL) SAP FI/CO Module 7
  8. 8. 3.2 ORACLE 11I E-BUSINESS SUITE MODULE INCLUDES FOLLOWING SUB MODULES a. AR accounts receivable Training b. Accounts Payable c. General Ledger d. Fixed Assets e. Procurement (Purchasing) f. Order Management g. Financial Analysis h. Inventory Management i. Reporting an using the DBI 8
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