Computerised Accounting in an ERP System

The article discusses the benefits of SAP S/4HANA Finance for businesses and how it can help in decision-making process. It also covers the difference between SAP S/4HANA Finance and current SAP ERP FICO, overview of SAP S/4HANA Finance, and its benefits. The article cites case examples of how major companies have adopted SAP S/4HANA Finance for maintaining efficiency in the operations of the business.

Running head: COMPUTERISED ACCOUNTING IN AN ERP SYSTEM
Computerised accounting in an ERP system
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COMPUTERISED ACCOUNTING IN AN ERP SYSTEM
Introduction
The development of technology and innovation in a business are main reasons which
is responsible for enhancing the productivity and profitability of the business. It is a known
fact that development of technology has touched all field related to a business. It is the min
reason that most of the accounting operations nowadays are conducted in an accounting
software for maintaining efficiency in the operational process of the business. One of the
areas which have developed significantly is the financial reporting and data collection process
which is applied for the entity (Appiah et al. 2014). There are several factors which determine
the performance of a business and the same can be determined by analysing the financial
information of a business. The decisions of the business and also that of the users of the
financial statement depends on the nature of the financial information which is reported in the
financial report of the business (Tarmidi, Rashid and Abdullah 2017). The advent of
technological development in the field of accounting has made the process of finance
department much more systematic and efficient.
One of the key development is the use of computerised software in financial reporting
framework which involves uses of different kinds of software and it can be easily be said that
the development is more efficient than the traditional system. In relation to this, one of the
software which has become extremely popular is SAP. Most of the top businesses uses one
version or the other of SAP in order to support the financial processes of the business in an
effective manner(Sung et al. 2013). The discussion which is covered in the coming
paragraphs deals with SAP ERP FICO and SAP S/4HANA Finance which are popular
version of SAP widely used. In addition to this, the advantages of each would be covered in
the discussion. Further the discussion would be citing case examples of how major companies
have adopted SAP S/4HANA Finance for maintaining efficiency in the operations of the
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COMPUTERISED ACCOUNTING IN AN ERP SYSTEM
business. The discussion would be providing appropriate disclosures regarding the
information which is covered in the system. The assessment would be highlighting the
advantages of SAP S/4HANA Finance and the differences which exists in relation to other
systems which are used by the management of the company.
Overview of SAP S/4HANA Finance
In order to bring about more effectiveness in accounting information system, SAP
was introduced in 1972 but initially the product had been made as R/1 and the design for the
system was based on one tier system(Blount et al. 2016). However, the requirement was
much more as a three-layer ERP system was required so that the same can be supported in a
single server system. As an upgrade of the version of R/1, a better version was introduced
that have 3 layers and can be fitted in 2 servers and the version was called R/2. This version
was more effective than the previous one but there was scope for more improvement. It was
the next upgrade which introduced R/3 version which could support a three-server set and the
same was made possible because of the release of SAP GUI. One other key feature which
was associated with the R/3 version was the process of IDOC/ALE which allowed other
system flow which were not even SAP related(Appelrath and Ritter 2013). The launching of
R/3 version was a sign of the overall development in technology and the new version was
certainly better than previous two versions.
The upgradation which was made in the SAP model mainly aimed to improve the tier
system and the development was made to ensure that the new system is consistent with the
technological advancements which are taking pace in the market. Modification was being
made in SAP and ERP Central and the same initiated in 2004. The aim was to bring about
compete change in context of architectural design though developing the central component
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COMPUTERISED ACCOUNTING IN AN ERP SYSTEM
of the ERP system. The advantage of the same was that the users were able to conduct
strategic businesses operations within a short time frame. The SAP system was further
diversified judging from the nature of operations or the purpose for which the same was
being utilized. The introduction of SAP system is considered to be one of the most innovative
products which has been developed in the field of accounting.
It was noticed further that with the introduction of HANA, a majority of the people
who are engaged in business can understand the overall impact of HANA and are fascinated
by the same. A recent study shows that though people and businesses are adopting HANA
system but very few people are able the differentiate between S/4HANA and SAP S/4HANA
Finance.S/4HANA is an operating system which would be managing the operations of the
business as set out in enterprise management system while S/4HANA Finance deals with
providing financial solutions for a business and the same can be defined as an application
which is used by a business (Usmanij, Khosla and Chu 2013). The system is quite helpful in
decision-making process of a business and also in financial accounting practices in business.
The effective function of the SAP model depending on the nature of the business is
effectively portrayed in the chart below:
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COMPUTERISED ACCOUNTING IN AN ERP SYSTEM
Figure 1: (Different Functions of SAP Model)
SAP/4HANA has 2 distinct editions including the S/4HANA On-Premises and
S/4HANA Cloud. The user of the software has the option of using the software on cloud and
therefore for such a purpose proper maintenance of application is not required. The edition
which is used by a business depends on the nature of operations. But it is to be noted that
both the methods have their own advantages and key features. It is essential to liberate SAP
S/4HANA On-Premises on an annual basis; however, it accepts few rectifications along with
additional roles as the Feature Pack or Service Pack Stacks quarterly. In a similar fashion,
S/4HANA Cloud is liberated generally after a three-month period. Therefore, the analysis
which is conducted reveals that the new system effectively eliminates the need of having a
various information and also the requirement for copying data(Gal, Singh. and Best 2016).
There has also been figures which shows that the adoption of HANA system has significantly
increased over the years and the increasing trend in the application of SAP in a business
environment is shown below in graph form:
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COMPUTERISED ACCOUNTING IN AN ERP SYSTEM
Figure 1: (Different Functions of SAP Model)
The trend in adoption of the SAP software which has been recently introduced is
positive and the same is concluded by analysing the chart which is provided in figure 2. This
shows that there is high demand for the product in the market. The application of SAP in a
business is enormous and therefore the chart above shows how effectively the system is used
in a business organization to carry out different functions of the system.
Difference between SAP S/4HANA Finance and current SAP ERP FICO
The crucial aspects which can be identified in case of SAP FICO which forms a part
of the primary constituent of the SAP ERP, allows a management to effectively manage the
entire operations of the business especially the financial part. The use of the system helps the
management to manage financial information of the business for evaluation and
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COMPUTERISED ACCOUNTING IN AN ERP SYSTEM
communication. The SAP FICO system is further sub-divided into 2 modules which includes
SAP Finance (F1) ad SAP Controlling (CO) which effectively plays their own part in
controlling and managing financial operations of a business. SAP F1 has a role to play in
financial accounting process and the reporting framework which is utilized by the
management of the company while SAP CO looks after the cost planning and monitoring
area for a business(Hejazi, Halpin and Biggs 2014). It is to be further noted that there are
several sub-modules in SAP F1 which are involved in different accounting functions and also
assists the organization in preparing of the financial statements and also evaluating the
performance of the business during the period. Some of the key functions SAP CO includes
designing, monitoring and reporting of cost elements which are associated with a business. It
is to be further noted that many of the users are of the opinion that SAP F1 and SAP CO
forms part of the same module but the same is not the case as both the systems work in n
integrated manner to support the financial operations of a business.
The system of SAP $/4HANA Finance also uses ERP framework for the purpose of
assisting the business process and thereby the financial functions of an organisation. The
system involves financial planning as well role of coordination and the same is inter-
associated with the application of ERP framework in a business. The system of SAP
$/4HANA Finance is developed on S/4HANA. Therefore, there exists a link between
operations and cross-organizational roles of a business. The system of S/4HANA is
considered to be efficient for maintaining the financial operation of the business and the same
can be used by a business for taking major financial decisions for a business. It is to be
further noted that SAP S/4HANA Finance can be used in different industries for managing
the financial operations of a business. Further it is a beneficial point that SAP S/4HANA
Finance can be used either on cloud basis or on-premise and thereby the same provides
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options to the users. The application of SAP S/4HANA Finance can be used for a wide range
of reasons and how the same is applied in a business environment depends on the users of the
system.
Benefits of SAP S/4HANA Finance for businesses
The benefits which are associated with the SAP S/4HANA Finance system are numerous and
the same contributes to the financial reporting framework which is applied by a business. In
recent times, the development of technology has initiated a trend in the business environment
for using appropriate accounting systems. It has been noticed that several organizations are
incorporating SAP S/4HANA Finance in their business process so that a level of efficiency
can be maintained in the organization and also lead the business in direction of goals and
objectives of the business. In addition to this, the system is effectively used for decision
making process of a business. The information and data which can be used for decision
making process is available abundantly. In addition to this, the SAP S/4HANA Finance
system has received global recognition for its financial functions and therefore, the same is
preferred by many organization n it is one of the systems which can be used by a business or
processing information related to financial nature of a business. This enables easy access over
the information for all the individuals within organisation and which in turn allows to monitor
the finances easily.
The accounting information system effectively helps managing the data and reduces
data lay-offs and thereby this reduces the replication of data and thereby keeps the integrity
of data intact. Therefore, this also makes management process of the top officials much easier
for locating and follow-up of the cash movements of the business. The system would also
make the forecasting process of the business much flexible as the management would have
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COMPUTERISED ACCOUNTING IN AN ERP SYSTEM
access to all data. The management of the company can also move from fixed planning
method used for planning to a dynamic one which effectively meets the needs of the
organization. SAP S/4HANA Finance offers overview including predictive, historical and
actual data. The financial process of a business has numerous elements associated with the
same and the same also helps in cross checking (Richardson, Chang and Smith 2014). The
SAP S/4HANA Finance system can effectively help the management of the company to track
expenses and revenue with the help of invoices and receipts which are available to
management of organisation. In addition to this, the same can also help in decision making
process of the business and also for maintaining scrutiny in the operational process of the
business.The non-disruptive replacements for the management having moving custom
operations allow the usual continuance of operations.
The system of SAP S/4HANA Finance has a system of centralised finances which
helps the management to keep track of the monetary aspects of the business. Further the
system ensures that there is duplication of data and thereby ensures that the management of
the company has access of accurate data for the purpose of taking major decisions for the
business. Further, the SAP S/4HANA Finance provides alternatives to the management
regarding how to utilise the system to manage the operations either through using cloud or
on-premise hybrid in context of the needs of the business (Taipaleenmäki and Ikäheimo
2013). This ensures that there is a consistency maintained in the operational process of the
business. The above discussion effectively shows that system has numerous advantages and
thereby helps in decision making process of the business. The below presented paragraphs
shows different case examples which reveals how implementation of SAP S/4HANA Finance
helped the business to achieve efficiency in the operations of the business –
Case study 1 – Wal-Mart
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COMPUTERISED ACCOUNTING IN AN ERP SYSTEM
Wal-Mart Stores Inc has complicated and vast infrastructure for it’s corporate,
however that did not stop it to pursue fact based and fast decision on the basis of innovating
the technology. During the keynote that addressed at Sap Sapphire conference held in
Florida, CIO of Wal-Mart stated its approach towards data and decisions. Wal-Mart that was
using the SAP technology since 2007, at present uses SAP HANA platform as business
intelligence for carrying out the tasks including processing of the transactional records of the
entity amounting to more than half trillion (Forbes.com 2019). For its 250 million customers
over 11000 locations globally, Wal-Mart uses the HANA in-memory processing for data that
is capable of assembling the data from various parts of the entity and visualise the same in
real time. Retailer also deploys the SAP S/4 HANA. For Wal-Mart data runs from back office
to front office. Using the agile methodology for development, Wal-Mart uses HANA for
obtaining data as well as insights at the level and speed that were not available previously
(SAP. 2019).
Different challenges faced by Wal-Mart while it migrated to HANA are – (i)
execution including code optimization, downtime and cutover – with the challenges involved
in making right decisions as well as building the blocks set in proper place in context of
planning and initial steps, the challenges in next was the plan execution. Multiple challenges
were required to be defeated during the phase of execution. Further, once the requisite are
fulfilled actual migration through opted migration tool took place. For migration various
technical reconciliations were required to be fitted into the new system (ii) transfer of
knowledge –parallel to the activities of migration under production system, one more
challenge was training and educating the employees regarding the changes and operating as
well as maintaining new system (Chain Store Age 2019). This required assurance that the
Go-live properly take place among Wal-Mart and the partner. Transfer of knowledge was an
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essential challenge that required handover and training activities. Apart from that dedicated
support was also a challenge that required the partners to provide rectification and
optimization of any known issues for maintaining smooth operation of new system (iii)
Planning for implementation, infrastructure and strategy of migration –implementation of
HANA was critical for Wal-Mart as only optimizes implementation assures the expected
performances. Based on the implementation and sizing, required infrastructure were to be
obtained. Major issue here was procuring SAP certified HANA hardware that was provided
by all the leading partners for hardware. However, the major challenge here was whether to
avail on-premise or hybrid or cloud strategy (AI Trends 2018)
Case study 2 – TCS
The traditional system of ERP was not adequately flexible for adapting the processes
or changes rapidly the data explosion for delivering the data insights in context of business
opportunities, consumer preferences or the operational efficiencies. Hence, TCS required
upgrading the digital platform so that the technology will assist in business growth rather than
hindering the responsiveness. Hence, TCS moved to SAP S/4 HANA as it was designed for
addressing the said requirements (Tcs.com 2019). However, the major challenges were
expertise, right experience and supporting assets. SAP S/4 HANA enabled TCS to migrate
the legacy suite – ER, management of supply chain and management of supplier relationship
to latest platform of SAP HANA. TCS’s services address Greenfield as well as brownfield
both migrations and delivered customizable, intuitive and the user friendly interface for the
application (Tcs.com 2019).
One of the biggest challenges faced by TCS while planning for implementing SAP
HANA strategy was the flexibility of SAP S/4HANA itself. As the SAP transformed the SAP
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HANA from comparatively straightforward data warehouse based on in-memory into the
platform that is able to run various enterprise applications, selecting which product is to start
with is really mind blogging. It further required preparing the adoption plan for deploying
logistics regarding how and where the SAP HANA will run. Next challenge is related to
business that is what if the implementation of SAP S/4HANA does no result into beneficial
change in the business process. Installation of SAP HANA is risk averse and the entity waited
to see wide number of implementations before jumping for HANA. Further, the entity
discovered wide numbers of legacy codes and those were no more compatible (Tcs.com
2019). For assuring that the syntax errors will not take place it had to identify as well as adapt
its custom ADAP objects for code. Apart from that technical migration was crucial both in
context of Unicode as well as conversion and for that upgrade were required. Further,
adoption of mandatory code compliance was required. Redevelopment of code helped to re-
design as well as development of the solutions those were based on the SAP HANA platform
for deriving most value from adoption of SAP HANA. In addition, managing the SAP HANA
was tedious job as it was one of the complicated backbones of ERP system that had impact
on finance, analytics, BI, mobile and cloud. SAP delivered exceptional analytic and
transactional performances. However, the implementation was dependent upon the size and
budget of the entity (May, Böhm and Lehner 2017) .
Conclusion
It is recognized from above that SAP S/4HANA is an important innovation that is
required for running the business on latest digital platform. The reason behind the same is
that it helps the user updating data on the basis of real time which in turn helps is detecting
the errors, if any in early stages. It has number of advantages including enhancement of
functionality, make the entity prepared for application of digital system and process of
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monthly closing in rapid manner. However, various differences it has with the SAP ERP FIC
is record maintenance for asset management, account receivable and payable and general
ledger. Apart from that migrating to SAP S/4HANA associated with different challenges like
increased cost for execution and planning, justification for such costs and inconsistencies in
data. However, in spite of various challenges as it have wide numbers of benefits more and
more number of entities and customers are moving towards SAP S/4HANA.
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