Chapter 2 Enterprise Systems

Accounting Information Systems 7e

Ulric J. Gelinas and Richard Dull

Copyright 2008 Thomson Southwestern, a part of The Thomson Corporation. Thomson, the Star logo, and
South-Western are trademarks used herein under license.

Learning Objectives
Describe enterprise systems
Describe enterprise resources planning (ERP)
systems
Explain the organization value chain
Describe the relationship of the organization value
chain and an enterprise system
Illustrate the value of systems integration
Describe how an enterprise system supports major
business event processes
Enumerate the pros and cons of implementing
enterprise systems

Enterprise System
Integrates business processes and
information from entire enterprise
Helps coordinate the operation of
business functions
ERP systems are software packages
that can be used for the core systems
necessary to support enterprise
systems
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Integrate Business
Functionality
When purchasing equipment the ERP will:

Provide an electronic order form

Apply business rules
Routing the order for approvals
Sending the order to a buyer
Connecting to the supplier
Use data to receive goods, project funding
requirements, compare to budget, and analyze
vendor performance

ERP Systems Vendors

SAP
Modules

Third-Party Modules
Customer Relationship Management (CRM)
builds and maintains customer related
data
Customer Self-Service (CSS)allows
customers to complete tasks without
assistance
Sales Force Automation (SFA)automates
sales tasks such as order processing and
tracking
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Third-Party Modules, Contd.

Supply Chain Management (SCM)plans and
executes demand planning, inventory acquisition,
manufacturing, distributing and selling
Product Lifecycle Management (PLM)manages
product data from design through disposal of
product
Supplier Relationship Management (SRM)
manages the interactions with the organizations
that supply the goods and services to an
enterprise. Includes procurement and contract
management.
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Enterprise Systems Value

Chain

Enterprise systems facilitate value

chain management
The value chain is the system of
activities that transform inputs into
outputs valued by the customer
The goal of an organization is to add
the greatest value with the lowest costs
thereby increasing competitive
advantage
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Value
Chain and
System

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The Value of Systems

Integration
One of the values provided by an enterprise
system is the coordination of value activities
in the value chain.
The system performs this coordination by
sharing data across business processes.
In the following slides we describe what life
would be like without integrated systems and
then how enterprise systems solve some of
those problems.
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Inefficient Customer Service

1. Check if
the customer
exists in the
system and
has good
credit.

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Inefficient Customer Service

2. Find out if
good can be
promised from
warehouse
stock or if it
has to be
scheduled for
manufacturing.
Tell the
customer when
they would
receive
the item. The
date is known
as available to
promise or
ATP.

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Inefficient Customer Service

3. If item is not on
the shelf, when will
it be released
from
manufacturing?
Sally could review
production
schedules and add
the time required
to pick, pack, and
ship the item. This
would not,
however, tell her if
the item
had already been
allocated to
another customer.

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Inefficient Customer Service

4. In the event
that the item
must be
manufactured,
when could it
be scheduled,
and how long
will the
manufacturing
process take?

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Inefficient Customer Service

5. How long
will it take
vendors to
supply raw
materials so
that
manufacturing
can take
place?

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Inefficient Customer Service

6. What price
will be
charged to
this customer
for this
order?
The price to
charge must
be obtained
from
marketing.

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Inefficient Customer Service

7. Needs to
check AR
balance to
determine if
customer has
sufficient
credit.
Without direct
access to the
open AR data,
Sally will
have to call
accounting to
approve this
order.

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Inefficient Customer Service

8. If credit is
insufficient,
must check
with credit
department
for change in
credit line.

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Inefficient Customer Service

Do you think that Sally wants to keep
the customer on the phone throughout
this process?
Would you consider this to be good
customer service?

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Solution to Inefficient Customer

Service
Enterprise system establishes
available to promise (ATP) by
checking warehouses and scheduled
manufacturing
Price and creditworthiness
automatically determined from
database
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Enterprise Systems Store Data in

Tables

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Processing Orders Requires

Multiple Tables

23

Stored Data Used for Decisions

24

Major ERP Modules

Sales and Distribution
Records customer orders
Shipping
Billing
Connections to
Materials management module
Financial accounting module
Controlling module

Based on SAP (best selling ERP)

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Major ERP Modules, Contd.

Materials Management
Acquisition and management of
goods from vendors
Purchase order preparation
Receiving
Recording invoice

Interacts with
Sales and distribution module
Financial accounting module
Controlling module
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Major ERP Modules, Contd.

Financial Accounting
Plays a central role in an ERP system and
incorporates data from other modules into
general ledger accounts and financial statements
Business events from other modules, such as SD
and MM, are incorporated by the FI module into
the general ledger accounts and included in the
external account statements, the balance sheet,
profit and loss statement, and statement of cash
flows.
The FI module also includes accounts receivable
and accounts payable functions to record and
manage that data directly and to complete events
begun in the SD and MM modules.
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Major ERP Modules, Contd.

Controlling and Profitability Analysis
Handles internal accounting including:

Cost center accounting

Profitability analysis for sales
Activity-based accounting
Budgeting

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Major ERP Modules, Contd.

Human Resources
Recruiting, management and
administration of personnel
Payroll processing
Training and travel
Benefits
Reports
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Order-to-Cash
1. Respond to
customer
inquiries and
requests for
quotes
(RFQs).
Some
companies
add on
separate CRM
modules

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Order-to-Cash

2. Record
customer order
including:
check customer
credit; check
inventory
pricing; and
check where
and when
inventory will be
available to
send to the
customer.
Triggers picking
of goods or
purchase of
goods from
another vendor.

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Order-to-Cash
3. Pick goods
from
warehouse
and pack for
shipment.

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Order-to-Cash
4. Ship goods to
the customer.
ERP system
would choose
the appropriate
routing and
carrier, record
the cost of
goods sold
and inventory
reduction in the
general ledger.
Some ERP
systems trigger
the billing
process when a
shipment takes
place.

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Order-to-Cash
5. Billing the
customer and
recording the
sale in AR.
ERP system
ensures correct
quantities,
prices, terms,
addresses, etc.
ERP system
can be used to
analyze sales
profitability by
comparing
product costs to
selling
price.

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Order-to-Cash
6. Receive and
record payment.
Includes:
recording cash
receipts and
updating cash
and accounts
receivable.
ERP data can
then be used to
manage
customer credit
and invest
available cash.

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Purchase-to-Pay
1. Determine
requirements,
complete
purchase
requisition.
ERP system may
automatically
generate the
purchase
requisition based
on quantity onhand, quantityon-order, and
expected
demand.

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Purchase-to-Pay
2. Prepare and
record purchase
order.
An ERP system
assists the buyer
in identifying
sources of
supply for the
requested item,
preparing RFQs
to vendors,
analyzing vendor
quotes,
comparing
vendor prices,
terms, and past
performance

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Purchase-to-Pay

3. Receive and
record goods.
Compare
quantity ordered
to quantity
received.
The ERP routes
goods to the
function that
requested them
or directs them
the warehouse
for immediate
sale. It also
records vendor
performance
data.

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Purchase-to-Pay
4. Receive
vendor invoice,
match with PO
and receiving
report; record
payable.
If the three-way
match fails, the
enterprise
system notifies
the proper
personnel to
ensure timely
reconciliation of
differences.

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Purchase-to-Pay
5. Prepare and
record cash
disbursement
and update
accounts.
An ERP
system uses
vendor and AP
data to
schedule
payments in
accordance
with vendor
terms and to
receive
discounts.

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