ENTERPRISE

RESOURCE PLANNING
WHAT IS ERP?
The practice of consolidating an enterprise’s planning,manufacturing,sales and
marketing efforts into one management system.
It combines all databases across departments into a single database that can be
accessed by all employees
ERP automates the tasks involved in performing a business process
PROBLEMS WITH
DECENTRALISED SYSTEM
Integrating the data becomes time and money consuming
In consistencies and duplication of data
High inventory ,material, and human cost
NEED OF ERP
There are many reasons stated by various companies during the survey conducted by organizations at different points of
time to understand the need of ERP.

ERP Solutions are cost effective, it reduces the cost and improve efficiency
ERP provides an opportunity to do various process improvements in business
ERP helps management in their decision making throughout the period.
ERP enables smooth and continuous flow of business processes.
ERP helps streamlining the operation
ERP improves customer satisfaction
ERP enables companies withstand market competition
ERP helps increase productivity
ERP serves as a centralized database
The dependency of ERP is there for almost every aspect of business activities like Human resource, Sales, Marketing,
Billing, Production, Inventory Management, Finance, Quality, etc.,
KEY OBSERVATIONS ABOUT
CENTRALISED SYSTEM
Data is maintained at a central location and is shared with various departments
Departments have access information/data of the other departments/BU
Eliminates the duplication, discontinuity and redundancy of data
Provides information across departments in real time
Provides control over various business process
Increase productivity, better inventory management, promotes quality,reduce
material cost and boost profits
Better customer interaction, improves customer service
WHAT ARE ERP SYSTEM
COMPONENTS?

ERP system components, also known as modules in modular ERP systems, are
specialized applications that handle specific business functions. They’re the building
blocks of a centralized ERP system database, designed to seamlessly work together to
provide a comprehensive view of an organization’s data and processes. Rather than
relying on separate software for different departments, an ERP system integrates the
various components into a single platform so that all stakeholders are analyzing the same
information.
Common ERP components include accounting and financial management, human
resources (HR), customer relationship management (CRM) procurement and supply chain
management (SCM). Each component collects data from and supports the processes of its
respective business department. The ERP system then consolidates and centralizes data
from these discrete modules. This unifies business data to improve end-to-end business
coordination, enhance organization-wide efficiency and support decision-making.
 MAIN COMPONENTS OF ERP RELATED TO
FINANCE AND ACCOUNTING

1.Accounting and Financial Management

Serving as a centralized platform for managing all financial activities, accounting and
financial management is generally considered to be the most important component of an
ERP system. Within this component are tools that businesses can use to track, store and
analyze various financial elements, including accounts payable (AP), accounts receivable
(AR), the general ledger (GL), budgets and forecasts. In some cases, an accounting and
financial management module can also perform advanced tasks, such as tax management,
fixed assets management and multicurrency reconciliation.
Given the interconnected nature of an ERP system, the accounting and financial
management component can integrate with other core ERP components to provide accurate,
business-wide financial information — a key consideration given the fact that financial
leaders need to track and use data from various departments to make informed decisions
about cash management, funding sources and financial controls.
ERP FINANCE MODULE
Accounts Payable (P2P)
Accounting all purchases / expenses supported by vendor invoice and its payment
Accounts receivable (O2C)
Accounting sale transactions and receipts of collection from sales
Fixed Asset Accounting
Accounting capitalization, transfer, retirement, depreciation, interest on capitalization etc.
Payroll
Payment to employees (including incentive payments)
Treasury operations
Purchase / sale of investments, borrowings (secured / unsecured), accounting interest & dividend
expense & its payments / adjustments, accounting interest andpayment, Interest
General Ledger Accounting
Accounting of transactions other then above heads
CHALLENGES IN
IMPLEMENTATION OF ERP
Identifying & finalizing requirement of each process is a big task
Customization takes lot of time
This will be implemented in a phased manner.
Testing and corrective action before & after implementation is a huge task
Transferring data from the existing software to ERP involve lot of work
The company may not implement all modules of ERP due to time and cost factor, in this case
integration of transactions to ERP will be big challenge and additional maintenance cost for
existing system
Huge maintenance cost
Extensive functional knowledge required
Consultation cost will be additional for the ERP expert
ADVANTAGES OF ERP

There are direct and indirect benefits for installing ERP system
The direct benefits are like efficiency improvement, integration of various processes,
decision making, quick responses to vendors and customers for their grievances/queries.
ERP contributing a vital role on the entire business cycle such as starting from Sourcing,
Payables, inventory, Sales, Receivables which enable effective working capital
management and various customized reports as per the management requirement.

Sourcing
Various Reports will help the management to do the spend analysis in terms of the
product to be sourced in conjunction with the cost to meet the periodical demand. This will
help the management to optimize the purchase process.
Payables
Invoice Processing:
ERP facilitates auto posting of invoicing by relating GRIR which automate the
invoice processing thus eliminating financial exposures which might occur due to
manual intervention.Also facilitate the pay by due date concept which helps to avail
cash discounts and better vendor negotiation.Cost per invoice is reduced due to the
above mentioned factors.
Payments
ERP enables integration of payment processing with the bank payment system
which eliminate financial exposures like fraudulent payment (Payee/amount
alternation).Reconciliation of payments get automated which leads to better control
on payments and monitoring the bank statements for any wrong debits.
Enable effective cash-flow planning with the twin objective of availability of
required funds and also deploying idle funds optimally.
Inventory:
ERP facilitates inventory turnover ratio which provides the analysis of the inventory aging
with respect to value, quantity, usage enabling decision relating to maintain optimal
inventory level with the twin objective of reducing obsolescence and cost of carrying
inventory. (Workingcapital, insurance and storage space)
Sales:
ERP facilitates various reports like product wise, brand wise, line of business wise, item
wise etc., which helps to various analyze related to sales.
Historical records also facilitate sales forecast and sales variance analysis with respect to
product mix and product value effectively.
Receivables:
Effective receivable aging analysis will help to have better control on debtors and to take
decision on credit period allowed.
 Effectiveness in ERP vs Non-ERP

Effectiveness in sales
Any company has branches across the countries can have the current status of
sales/inventory time to time and take decision on offering discounts to the customers
to improve the sales based on the sales at a particular branch and stock availability.
In olden days, all these information was maintained in manual ledger and later
converted to computer using software technology but non-ERP.
Whereas, such information will take much time to analyze in non ERP scenario will
cause delay in decision-making
Effectiveness in Productivity
Any company into manufacturing, can have the status of production at each stage of the
product at any point of time in ERP scenario will help us to take decision on production and
also to value the stock with accuracy at the time of preparing the financial statements.
Effectiveness in Book Close & Financial statements
The ERP has played a major contribution in book close and financial statements such as
setting up of Recurring Journal Entries, Various Reports used for analytical purpose for
business growth.Also profitability arrived at various lines of business and department level.
There are some indirect advantages of having ERP like maintaining corporate image,
goodwill among the stakeholders, satisfaction of vendors and customers. These are few
quantitative benefits and few non quantitative. Quantitative benefits are measured in monetary
terms and non-quantitative have momentous business Impact but not with monetary terms
QUANTITATIVE BENEFITS:

Reduction of cycle time

Low cost of products
Cost reductions of Printing & Postage
Effort & monetary saving
Productivity improvement for people and process
Reduced process timings
Reduction of inventory
NON QUANTITATIVE BENEFITS:

To take timely decision

Quicker response to Vendors & customers
Effort saving
Accuracy
Utilization of resources
Can have good control over people, process
To follow consistent reporting pattern.
INDUSTRIES COVERED UNDER ERP
SYSTEM

ERP can be introduced to any type of industry, irrespective of manufacturing or

service, few industries list where ERP can be introduced are given below.
Banking Industry
Retail Industry
Manufacturing industry
Service sectors
Textile Industry
Pharma Industry
Power Industry, etc.,
 Oracle Application

Oracle ERP
Oracle application is the largest application used throughout the world, having more
features for all the processes, it is coming with new updates and versions and rendering
services for their earlier versions also. It is developed by Oracle Corporation.
Features
 Reliability on data storage with inbuilt feature of storing large size of data
 Works on Relational Database Management Systems (RDBMS) where the data stored
cannot be deleted after it is related with the master table
 Powerful combination of technology which includes key functionality built for banking
operations.
 Applications are upgraded as per the market and business requirement
 With different security settings, administrators or IT professionals can monitor who has
access to what, so that sensitive information is kept track of in the best way.
Oracle ERP consists of various modules like Oracle Financials, Manufacturing sector, Logistics sector,
Supply chain management, etc., they have also developed customized modules for various other
industries like Healthcare, Aerospace, Life science, Health care, etc.,

Oracle Financial module consists of Order Management, Cash Application and other AR modules, AP,
GL, Treasury, Fixed Assets, Project Management, Cash Management, Lease, etc
 SAP - Systems Applications and Products

FEATURES OF SAP

Parallel Currency Concept: Transactions can be posted in two different Currencies.

 For an Example: Unilever is a UK Based Company having its operation in UK and across the Globe.
 As regards the UK Stock Exchange it has to be submit the consolidated results of all entities in
different countries in British Pound.

If Unilever uses SAP, for the Country India Operation, it can post the transaction in INR and as well in
GBP on the date of the transaction as per the exchange rate prevailing in the market.

This helps Unilever to consolidate the India Operations Figures in British Pound in Quick time.