This chapter discusses accounting and finance systems within ERP. It examines traditional accounting systems, ERP accounting modules, and the benefits of ERP like integrated and real-time data sharing across departments. The case study of Atlantic Manufacturing highlights issues with separate accounting systems like inaccurate paperwork and lack of coordination. ERP provides management with tools for budgeting, cash flow analysis, and profitability reporting to help maximize profits.

1. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-1
Enterprise Resource Planning, 1st
Edition by Mary Sumner
Chapter 5:
ERP Systems: Accounting and
Finance

2. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-2
Objectives
• Examine accounting systems within
ERP
• Understand ERP financial systems
• Review the interrelationships among
business processes supporting finance
and accounting

3. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-3
Case: Atlantic Manufacturing
• Inaccurate and/or incomplete
paperwork produces problems
• Exchange of information between
departments made manually
• Unable to supply quantity discount
information to sales force
• Lack of coordination between
departments

4. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-4
Accounting Processes
• Operational
management
level
– Production of
transactions
• Paychecks,
invoices,
checks,
purchase
orders

5. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-5
Management Control Processes
• Budgeting
– Analysis of allocations, expenditures, revenues
• Cash management
– Cash flow analysis
– What-if analysis
• Capital budgeting
– Evaluation tools: NPV, IRR, pay-back period
• Investment management

6. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-6
Accounting Systems
• Traditional
– Provide operational-level software
• Produce invoices, checks, statements
• Financial accounting
– Financial statements for external reporting
purposes
• Management accounting
– Information on profitability

7. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-7
Accounting Systems v. ERP
Modules
• 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

8. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-8

9. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-9
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

10. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-10
Management Accounting
Modules
• Internal accounting perspectives for directing and controlling
operations
• Information on variances between planned and actual data
• Key activities
– Cost center accounting
– Internal orders as a basis for collecting and controlling costs
– Activity-based costing of business processes
– Product cost controlling for profitability analysis
– Profitability analysis by market segment
– Profit center accounting of individual areas of organization
– Consolidation of financial data for accounting perspectives
• Enable management to better allocate resources, maximizing
profitability and performance
• Central clearinghouse for accounting information

11. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-11
ERP Systems
• 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
• Estimates are sufficient
• Strategic information
• Basis for continuing improvement to operations

12. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-12

13. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-13
Featured Article: The Changing
Landscape of Computerized Accounting
Systems
• Define each of the “in-technologies
and systems”.
• What is their relationship to the
success of ERP?

14. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-14
Featured Article: The Changing Landscape of
Computerized Accounting Systems, continued
• New types of accounting software
– Fair pricing
– Database management standardized
• Ease of mobility
– PC-based
• New markets
– ERPs dominate highest end
– Mid-levels are SQL-based and non-SQL-based
– Low-end systems range from very low end to
more robust
– E-commerce and e-business drive most mid- and
high-level systems, as well as a few low-level

15. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-15
Featured Article: The Changing Landscape of
Computerized Accounting Systems, continued
• Internet-based commerce
– Hottest technology
– E-business
• Quicken allows remote entries through Web
• EDI and EFT
– E-commerce
• Amazon.com and on-line securities trading
• Dell Computer
• ERP
– Internet additions
– Prices decreasing

16. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-16
Featured Article: The Changing Landscape of
Computerized Accounting Systems, continued
• Best practices
– Improve bottom line
– Create air of control
• Structured Query Language
– Database of choice

17. © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 5-17
Summary
• Most accounting processes operate at the
operational management level
– Additional software enables financial and
management accounting
– Each department or division may operate
different software and databases
• ERP systems’ integrated database allow for
seamless information sharing
– Easier reporting
– Includes all operational data and ABC data
– Coordinates with management accounting
modules