FINANCIAL MANAGEMENT AND ERP

Chetna Chugh (2)Surabhi Tandon(16)A.P.- VI

Financial Management can be defined as:

• The management of the finances of a business / organisation in order to achieve financial objectives

OBJECTIVES:

The key objectives of financial management would be to:

• Create wealth for the business

• Generate cash, and

• Provide an adequate return on investment bearing in mind the risks that the business is taking and the resources invested

FINANCIAL MANAGEMENT CYCLE

• Traditional– Provide operational-level software

• Produce invoices, checks, statements

• Financial accounting– Financial statements for external reporting

purposes

• Management accounting– Information on profitability

Accounting Systems

• Accounting software should access information in each area of organisation from R&D and market research through manufacturing, distribution and sales.

• Financial solution must provide management with information for strategic decisions, in order to achieve comprehensive advantage.

Financial Data and Solutions

•The objective of a good financial accounting system is to provide companywide control and integration of financial information that is essential to strategic decision –making .

•The financial accounting module of an ERP system, gives you the ability to centrally track financial accounting data within an international frame work of multiple companies , languages , currencies and charts of accounts .

• Provide on-line, real-time data– Operational data

• Feedback on quality and efficiency of processes

• Information must be timely and specific

• Used for real-time operational control

– ABC data• Information on profitability and products

• Real-time data

• Strategic information

• Basis for continuing improvement to operations

ERP Systems

• ERP– Information shares integrated database– Provides up-to-date information– Seamless– Creates document flow of transactions

• Accounting systems– Manual or separate transfer of information– Multiple platforms

Accounting Systems v. ERP Modules

ERP Finance and Accounts subsystems

• Gives the ability to centrally track financial accounting data within an international frame work of multiple companies , languages , currencies and charts of accounts

ERP Financial Accounting Module

• External reporting– Set by general accounting standards– Legal requirements

• Includes accounts receivable subsystem– Interfaces with cash management– Monitors accounts and updates, handles payments,

creates due date lists, produces statements

• Accounts payable– Handles payments, applies available discounts to

maximize profits

ERP Financial Accounting Module

• General Ledger

• Financial Reporting

• Costing

• Budgeting

• Accounts Payable

• Accounts receivables

ERP Financial Accounting Module

• Shows balances in all liabilities, assets and equities

General ledger

• Keeps record and reports financial results to investors, creditors and other agencies ( government, local body etc.)

Financial Reporting

• Determines, for internal users, how much it costs the company to provide specific products or services

Costing

• Assists management in specifying goals for revenues and expenses

• Tracks progress towards meeting these goals

Budgeting

• Tracks money the company owes to its suppliers

• Schedules payments

Accounts Payable

• Tracks money owed to the company by its customers

• Manages collections

• These sub-ledgers are integrated ,both with the general ledger with the areas in sales and distribution and Materials Management, where financial data originates.

Accounts Receivable

MANAGERIAL FINANCE

• It is the branch of finance that concerns itself with the managerial significance of finance techniques.

• It is focused on assessment rather than technique.

• Overhead Cost Controlling– Focuses on the monitoring and allocation of

overheads.

• Cost Centre Accounting– Analyses where overheads occur within the

organization.

• Overhead Orders– Can monitor and automatically check budgets

assigned to each measure

Management Accounting Modules

• Activity- Based Costing– Is a response to the growing need for

monitoring and controlling cross-department business process, in addition to functions and products

• Product Cost Controlling– Determines, the costs arising from

manufacturing a product,or providing a service.

Management Accounting Modules

CORPORATE FINANCE

Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions.

The primary goal of corporate finance is to maximize shareholder value while managing the firm's financial risks.

• Provides extensive support for investment processes right from planning through settlement.

• Allows to distribute budgets, which are used during the capital spending process.

• The system helps to monitor, and thereby avoid, budget overruns.

Corporate Finance Management

Relative ERP Module Use

Module Use reported - US Use reported – Sweden

Financial & Accounting 91.5% 87.3%

Materials Management 89.2% 91.8%

Production Planning 88.5% 90.5%

Order Entry 87.7% 92.4%

Purchasing 86.9% 93.0%

Financial Control 81.5% 82.3%

Distribution/Logistics 75.4% 84.8%

Asset Management 57.7% 63.3%

Quality Management 44.6% 47.5%

Personnel/HR 44.6% 57.6%

Maintenance 40.8% 44.3%

R&D Management 30.8% 34.2%

FINANCIAL MANAGEMENT AND ERP

• Background and Necessities

• Understand available options for ERP and financial management systems and how they can best support their organization’s strategies and business objectives

• Select a new ERP system and related components that best fit the organization’s business needs and IT infrastructure

• Adapt or implement ERP platforms and change related business processes to meet evolving business needs

• Manage complex implementation and integration activities – functional, technical, and process-related – while minimizing the impact on customers and day-to-day operations .

ERP SOLUTION AND VARIOUS ORGANIZATION

SAP(SYSTEM ANALYSIS AND PROGRAM DEVELOPMENT)

FEATURES & FUNCTIONS OF SAP ERP FINANCIALS

• SAP applications help streamline receivable management activities.

• Support accounts receivable, credit, and the collection teams can coordinate communication and processes to manage receivables,

• Analyze root causes of late payments, and proactively handle customer disputes

• SAP applications are used to reduce days sales outstanding, and improve customer services

SAP FINANCIAL SOLUTIONS

• Accounts receivables (customer-to-cash process) – Gain the value of managing the working capital through world-class, customer-to-cash processes.

• Budget planning and forecasting – Develop timely, accurate, flexible corporate and departmental plans and budgets that align with current strategic business goals.

• Cost and profitability reporting – Ensure that cost and profitability reports are accurate and detailed enough using the SAP ERP Financials and SAP

• Financials fast close – How the organization can benefit from quickly and accurately closing the financial books.

• Financial consolidation – Balance the needs for precise financial reporting and corporate governance

• Invoice to pay – Establish an efficient, coordinated invoice-to-pay process to maintain a competitive edge and reduce costs by automating, integrating, and standardizing invoice-cycle processes.

• Shared services – Enable shared services that will help to turn administrative functions into a service for the business – improving control, visibility, and compliance, while freeing valuable resources for strategic tasks.

• Treasury and risk – Analyze and manage the credit, market, and portfolio risks and exposures, along with compliance requirements, to determine the overall success, stability, and future of the company.

SAP SUCCESS STORY –FINANCIAL MANAGEMENT AND ERPPantaloons Retail (India)

FINANCIAL EXCELLENCETHE CASE STUDY

• ACHIEVE SUPERIOR FINANCIAL PERFORMANCE IN A WORLD

• DOW CHEMICAL RUNS BETTER WITH SAP

• With the help of SAP Financial Closing Centre and SAP Central Process Scheduling , this leading chemical company consolidated its global close schedule into one template and thus gaining the financial stability

Financial Management and the World

GAIN CONTROL. GAIN INSIGHT. CREATE VALUE. The world of finance and accounting is radically changing –there is greater expectation fortransparency, more demand by the line of business partners for clarity. SAP ERP and theothers can help.

MANAGE GLOBAL RISK WHILE OPTIMIZING DEBT AND INVESTMENTSTRATEGIES Business and finance is extremely volatile, especially in today's economy. How we analyzeand manage the risks and exposures – credit risk, market risk, portfolio risk – can determinethe overall success of any quarter, year, or affect the overall stability and future of thecompany. Furthermore, effectively managing the transactions, securities, foreign exchanges,and commodities can no longer be handled through manual systems or spreadsheets.

Financial System-V ERP

• Automatic invoicing for regular billing, recurring, Report generation, Inventory management, Customized reminders and alerts, Export invoice billing documents, Payments,

• User management, Estimates creation, Databack-up. 

• It has provided ERP solutions to institutions like:-o Indian Armyo Surendranath Law Collegeo SAILo W.B. Govt. Health Dept.

A MODULE OF V ERP SOFTWARE

• The module contains:

– Branch Management,

– Product Management,

– PO Management,

– Fund Management,

– Member Management,

– Loan Processing Management,

– Loan Security Management,

– Loan & Portfolio Management,

– Accounting System Management and

– Reports analysis, etc. 

V ERP Software Module(Financial management)

Branch Management:-• Features include: New Division Office, New Regional Office, and New Branch Office &

Portfolio-Backlog Transfer.

Product Management:-• Features include: Create Loan Product, Assign Service Tax, Create Survey Field, Loan

Gradation, Registration Fee & Written-Off Master.

PO Management:-• Features Include: Outstanding Settlement & Reclaim Rejected Claim

User Management:• Features include: Create User, Change Password and User data entry status. 

Insurance Management:• Features include: Death Document From Branches, Claim Observed, Claim Insurance, Claim

Received, Death Outstanding Settlement & Reclaim Rejected Claim.

• Financial Accounting:

• Features include: Account Register, Opening Balance Register, Account Contra Entry & Journal Entry.

• Fund Management for Head Office:

• Features include: Fund Type Master, Fund Master, Fund Received, Fund Payment & Fund Allocation.

•  

• Fund Management for Branch:

• Features Include: Fund Received By Branch, Fund Payment By Branch, Fund Transfer & Branch To Branch Payment.

•Loan Disbursement:

• Features include: Disburse Loan, Return Security Amount, Drop Out Member & Death Settlement.

Loan Recovery:

• Features include: Loan Recovery, Sick Payment, Written-off & Bad Debt Analysis.

Financial System

It comes with three main softwares:-

•Accounting Software

•Fixed Asset Management

•Payment Management

The benefits of using NETSUITE are:-•Improve business performance with real-time metrics and role-based dashboards •Shorten days sales outstanding (DSO) with automated billing and collections management•Accelerate financial close and improve revenue recognition processes•Ensure accountability and compliance with comprehensive, auditable accounting•Streamline order-to-cash and procure-to-pay business processes•Eliminate errors and streamline processes with seamless integration between financials, and CRM and Ecommerce•Customize and extend the software to meet customer’s exact needs. 

Accounting SoftwareNetSuite online accounting software seamlessly couples core accounting functions such as

general ledger, accounts receivables and accounts payable with strong compliance

management; flexible revenue recognition capabilities; sophisticated expense management;

a detailed, always-on audit trail; and multi-currency transactions and revaluation

capabilities.

Benefits

• Streamlining of business processes with the most complete online accounting software available

• Immediate access to comprehensive reporting and analytics that deliver the latest financial information about the business

• Accelerates financial close and significantly improve revenue recognition processes

• Ensure accountability and compliance with comprehensive, auditable accounting practices

• Eliminate potential errors and streamline processes with an online accounting system that automatically integrates with NetSuite CRM and ecommerce processes.

• Fixed Asset ManagementNetSuite Fixed Asset Management provides you with an easy-to-manage single version of

the truth for your assets. It enables you to maintain and control the complete asset lifecycle

across depreciating or non-depreciating assets from creation to depreciation, revaluation and

disposal. NetSuite Fixed Asset Management supports detailed asset management including

maintenance schedules and insurance, while providing tight integration that creates

accounting entries and fixed assets from purchases ensuring that no equipment slips through

the cracks.

Benefits:-

• Eliminate Excel spreadsheets and manual effort from the fixed asset management process

• Manage the complete fixed asset lifecycle from acquisition to depreciation and disposal

• Tightly weave your asset acquisition process into your accounting processes

• Quickly report on all assets, current valuations, asset types and more.

• Payment Management• NetSuite SuitePayments is the smart way to meet all of ones payment processing needs

directly from within NetSuite. Whether one istaking payments through online self-checkout or for the settlement of an outstanding invoice, with SuitePayments, one can accommodate all of ones customers' preferences. And because it seamlessly integrates with NetSuite, one gets updated accounts, inventories and customer records in real time.

Benefits:-

• Make it easier for customers to do business with you by accepting a variety of payment options

• Unlock productivity by streamlining order-to-cash and cash-to-reconciliation processes

• Simplify your financial operations with a single system and single set of records for all payment processing, whether web order, phone order, cash sale or invoice payment

• Improve cash flow and shorten time to payment with cost-effective credit card, business card and purchasing card acceptance.

FINANCIAL MANAGEMENT

• Openbravo ERP are designed to minimize manual data input on behalf of the user, thereby freeing them from tedious, routine tasks and allowing greater focus on other, more value added tasks

Receivables and Payables

Generation of debt payments (from invoicing) and Issue of debt payments

Management (cancellation, merging and division) of accounting documents.

Remittances (according to bank records) and Issue of cash accounts. Multi-cash account and

Cash account journal (cash audit).

Cash account entries by type Expenses, Receipts, Balance, Deposits, Bills, Order (for cash payment on delivery note: possibility of recovering expenses before invoicing. Automatic generation of entries for cash

Bank statements. Portfolio issues selection assistant

Manual liquidations. Other expenses (payroll, taxes, etc.)

Accounting Solution• Default charts of accounts• Definition of charts of accounts• Fiscal year and year to year management• Budgeting• Tax categories• Tax brackets. Determining flexible taxes

based on regions, products, or business partners

• Linked accounting. Direct navigation from accounting entries to documents and vice versa

• Manual entries. • Journal entries• General ledger• P&L statements (income statements)• Balance sheets• General accounting plan statements• Accounting tabs for transactions module• Custom accounting

AssetsDefinition of the assets, fixed assets, acquisition price, and accounting valuation

Advanced asset management module

Internationalization Support for multi-currency

Support for multi-schema accounting, which enables the same transaction to be accounted in different rules, different charts of accounts, in different base currencies and with a different accounting calendar

Support for international bank account numbers and Support for multiple languages, defined at user level

Comparative Modules

SAP ORACLE PEOPLESOFT

Financial Accounting General ledger General ledger

Controlling Payables Analysis

Asset Management receivables Consolidation

Asset management Expenditure managements

Cash Management Billing and Cash collection

Projects Cash management

Budgets Asset management

Expenses

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