Lecture 4- Enterprise systems

Enterprise systems- A large [blank_start]organisation-wide[blank_end] information system which processes the [blank_start]majority[blank_end] of [blank_start]business transactions[blank_end]

The three business processes within a typical enterprise system are [blank_start]procurement[blank_end], [blank_start]fulfilment[blank_end] & [blank_start]production[blank_end]

One general feature of an enterprise system software is that it is a [blank_start]standard software package[blank_end]

Another general feature of an enterprise system software is that it [blank_start]offers[blank_end] a high [blank_start]level[blank_end] of [blank_start]functionality[blank_end]

Third general feature of an enterprise system software is that it [blank_start]provides[blank_end] a [blank_start]standardised[blank_end] graphical [blank_start]user interface[blank_end]

Fourth general feature of an enterprise system software is that it [blank_start]utilises[blank_end] a single [blank_start]enterprise-wide database[blank_end]

Fifth general feature of an enterprise system software is that [blank_start]data access[blank_end] is [blank_start]real time[blank_end]

Best of breed- An information technology [blank_start]strategy[blank_end] which adopts the [blank_start]best software[blank_end] available to meet business [blank_start]process[blank_end] requirements rather than a [blank_start]single software[blank_end] product

Three main modules of SAP ERP are [blank_start]production planning[blank_end] (APO), [blank_start]financial accounting[blank_end] (FI) & [blank_start]business intelligence[blank_end] (BI)

Another three main modules of SAP ERP are [blank_start]materials management[blank_end] (MM), [blank_start]sales and distribution[blank_end] (SD) & [blank_start]management accounting/controlling[blank_end] (CO)

Chart of accounts- A [blank_start]list[blank_end] of ledger account [blank_start]codes[blank_end] organised in a [blank_start]logical[blank_end] fashion

An example of an additional audit risks posed by an enterprise system is [blank_start]online[blank_end], real-time data [blank_start]processing[blank_end] increases the need for [blank_start]systems-based controls[blank_end] as auditors may be unable to assess [blank_start]data[blank_end] volumes or be allowed to use [blank_start]test[blank_end] data

Another example of an additional audit risks posed by an enterprise system is [blank_start]organisational changes[blank_end] & new controls are required to [blank_start]match[blank_end] the [blank_start]business process[blank_end] of a typical [blank_start]enterprise[blank_end] system

Main focus of enterprise systems is on providing [blank_start]accounting[blank_end] information which helps [blank_start]control[blank_end] business, i.e. [blank_start]management[blank_end] accounting information

Most important part of term ES is ‘[blank_start]enterprise[blank_end]’ ([blank_start]single[blank_end] system which attempts to [blank_start]support[blank_end] all key [blank_start]areas[blank_end] of an organisation)

Enterprise systems overcomes common problem of larger organisations, namely [blank_start]information fragmentation[blank_end]

There are [blank_start]two[blank_end] contrasting views about the origin enterprise systems whether their origin is MRP or not. One view is that it originates from [blank_start]MRP (material requirements planning)[blank_end] & [blank_start]MRPII (manufacturing resource planning)[blank_end] from 1960s. Another view is that it [blank_start]did not[blank_end] evolve fully from [blank_start]MRP[blank_end] or [blank_start]MRPII[blank_end]

Klaus et al. suggest that fact enterprise systems evolved from MRP/MRPII is misleading as enterprise systems does not [blank_start]focus[blank_end] on [blank_start]resources[blank_end], but on [blank_start]business processes[blank_end]. Also, [blank_start]planning[blank_end] resources is not necessarily main [blank_start]focus[blank_end]. Finally, term ‘[blank_start]enterprise[blank_end]’ is too narrow as [blank_start]enterprise systems[blank_end] can [blank_start]span[blank_end] customers, suppliers and banks

Business process- [blank_start]Sequence[blank_end] of tasks or [blank_start]activities[blank_end] that [blank_start]produce[blank_end] desired outcome

Sixth general feature of an enterprise system software is that it is [blank_start]off-the-shelf[blank_end] application [blank_start]software[blank_end]

Seventh general feature of an enterprise system software is that [blank_start]core[blank_end] business [blank_start]process[blank_end] solutions are [blank_start]provided[blank_end]

Eighth general feature of an enterprise system software is that it is [blank_start]designed[blank_end] for firms with [blank_start]operations[blank_end] in [blank_start]multiple[blank_end] regions & dealing with [blank_start]multiple[blank_end] countries

Ninth general feature of an enterprise system software is that it [blank_start]integrates[blank_end] majority of [blank_start]business processes[blank_end]

Tenth general feature of an enterprise system software is that [blank_start]transaction[blank_end] processing can be [blank_start]integrated[blank_end] to [blank_start]planning[blank_end] & [blank_start]scheduling[blank_end] activities

SAP ERP enables company to [blank_start]support[blank_end] & [blank_start]optimise[blank_end] its business processes. It ties together [blank_start]different[blank_end] business [blank_start]functions[blank_end] (integrated business solution). Also, it helps organisation run [blank_start]smoothly[blank_end], [blank_start]real-time[blank_end] environment & [blank_start]scalable[blank_end] & [blank_start]flexible[blank_end]

SAP has [blank_start]client/server[blank_end] environment. [blank_start]Client[blank_end] (hardware/software [blank_start]environment[blank_end] that can make request for [blank_start]services[blank_end] for [blank_start]central[blank_end] repository of resources) & [blank_start]server[blank_end] (hardware/software combination that can provide [blank_start]services[blank_end] to group of [blank_start]clients[blank_end] in [blank_start]controlled[blank_end] environment)

SAP has [blank_start]three-tier[blank_end] structure. It includes: [blank_start]user interface[blank_end] (graphical [blank_start]user interface[blank_end] or web interface), [blank_start]application server[blank_end] (one or more which help [blank_start]distribute workload[blank_end]) & [blank_start]database server[blank_end] (one single data [blank_start]repository[blank_end])

Main features of production planning module of SAP include: [blank_start]demand[blank_end] planning, [blank_start]supply network[blank_end] planning, [blank_start]production[blank_end] planning & [blank_start]detailed[blank_end] scheduling & [blank_start]available[blank_end] to promise

Main features of materials management module of SAP include: [blank_start]perform[blank_end] requisitioning of [blank_start]materials[blank_end] & purchase order [blank_start]management[blank_end], enable employee [blank_start]self-service[blank_end] procurement of [blank_start]material[blank_end] & [blank_start]services[blank_end], [blank_start]integrate[blank_end] with business partners, [blank_start]track[blank_end] quantity & value of all [blank_start]materials[blank_end], [blank_start]manage[blank_end] all warehouse resources & [blank_start]track[blank_end] goods receipts & issues & physical inventory transfers

Main features of sales and distribution module of SAP include: [blank_start]billing[blank_end] & [blank_start]invoicing[blank_end], [blank_start]pricing[blank_end], [blank_start]availability[blank_end] check (linking to MM module), [blank_start]credit[blank_end] management, processing [blank_start]returns[blank_end] & processing [blank_start]customer[blank_end] enquiries & quotations

Main features of financial accounting module of SAP include: [blank_start]comply[blank_end] with global financial reporting standards [blank_start](IFRS)[blank_end], [blank_start]integrate sub-ledgers[blank_end] to main [blank_start]general[blank_end] ledger, generate standard [blank_start]financial statements[blank_end], integrate with other [blank_start]non-SAP[blank_end] financial accounting [blank_start]software[blank_end] at period & maintain [blank_start]single ledger[blank_end] which reduces cost & complexity of multiple sets of books

Main features of management accounting/controlling module of SAP include: [blank_start]forecasting[blank_end] & [blank_start]planning[blank_end], [blank_start]distributing[blank_end] management accounting information to [blank_start]managers[blank_end] & other [blank_start]users[blank_end] based on their defined organisational role, collecting, assigning & [blank_start]analysing[blank_end] costs for many [blank_start]cost object[blank_end] types & [blank_start]evaluating[blank_end] profitability of markets, channels, products & customer segments

Two tools of business intelligence module of SAP include: [blank_start]SAP Crystal Reports[blank_end] (provides users with [blank_start]customised[blank_end] operational [blank_start]reports[blank_end]) & [blank_start]SAP BusinessObjects[blank_end] (offers similar customised reporting, but is part of [blank_start]larger[blank_end] group of software products which [blank_start]offers[blank_end] more [blank_start]complete[blank_end] business intelligence solution)

Best-of-breed strategy may be beneficial if [blank_start]standard enterprise[blank_end] system cannot meet all (possibly complex) organisational requirements. However, from [blank_start]IT[blank_end] perspective, it may give [blank_start]rise[blank_end] to [blank_start]interface[blank_end] problems, i.e. [blank_start]links[blank_end] to other software

One role of accountants in enterprise systems implementation is [blank_start]organisational data[blank_end]. Enterprise systems must reflect [blank_start]organisational/group[blank_end] structure. Also, from accounting viewpoint, [blank_start]legal[blank_end] & business entities must be defined in [blank_start]enterprise systems[blank_end]. Finally, there may be [blank_start]local[blank_end] accounting requirements to be defined at legal [blank_start]entity[blank_end] level

Another role of accountants in enterprise systems implementation is [blank_start]chart of accounts[blank_end]. SAP permits three [blank_start]chart of accounts[blank_end] which include: [blank_start]operative[blank_end] (used to record daily [blank_start]business transactions[blank_end]), [blank_start]country-specific[blank_end] (used for [blank_start]country specific[blank_end] reporting requirements) & [blank_start]group[blank_end] (used for preparing [blank_start]group financial statements[blank_end])

Third role of accountants in enterprise systems implementation is [blank_start]responsibility centre structures[blank_end]. To facilitate more [blank_start]control[blank_end] & enable different [blank_start]areas[blank_end] of organisation to track & trace [blank_start]resources[blank_end] they’re using, accountants need to define [blank_start]cost[blank_end] & [blank_start]revenue[blank_end] centres

Third example of an additional audit risks posed by an enterprise system is [blank_start]more users[blank_end] (both internal & external) have [blank_start]access[blank_end] to use of an enterprise system, which poses [blank_start]data entry[blank_end] & other [blank_start]security risks[blank_end]

Fourth example of an additional audit risks posed by an enterprise system is [blank_start]single integrated[blank_end] database, which [blank_start]share[blank_end] common data, means [blank_start]auditors[blank_end] need to appreciate [blank_start]interactions[blank_end] between [blank_start]various[blank_end] parts of enterprise systems

After using enterprise systems there has been more [blank_start]automated[blank_end] regular accounting tasks. Also, there have been changes to some regular accounting processes such as [blank_start]payment processing[blank_end] & [blank_start]devolved[blank_end] accounting [blank_start]information[blank_end]. Finally, there has been some new [blank_start]controlling[blank_end] roles such as interfaces/data from other (best-of-breed) systems & [blank_start]risk management[blank_end] (single key information system, business continuity risk)