Title: External Accounting
1External Accounting
- Chapter 8 (C L) and Chapter 5 BMW See also the
R/3 Simulation on Customer Invoice and Payment
Processing
2Introductions
- Accounting system data is used
- By decision-makers throughout a company to plan
and manage day-to-day activities - By managers to make long-range operating
forecasts - By accountants to generate a companys financial
statements and other reports
3Basic Financial Statement
- Balance Sheet shows companys financial health
at a point in time - Income Statement shows a companys sales, cost
of sales and profit or loss for a period. - Closing the books means checking to see that
financial statements are accurate and up to date.
Usually done quarterly or monthly.
4Figure 5.1 Fitter Snacker sample balance sheet
5Figure 5.2 Fitter Snacker sample income statement
6Using ERP for Accounting and Finance
- Unintegrated systems usually require research
effort by accountants to assemble required data - ERP systems capture accounting data in real time
as business transactions occur - Transfer of finished goods from assembly line to
warehouse results in changes to Accounting
records as well as Materials Management records.
7Inconsistent Record Keeping
- Companies may have divisions that keep records in
different systems or with different structures - Summarizing the data to provide management
summaries may require additional processing by
middleware systems (e.g. spreadsheets)
8ERP for Accounting Information
- Early information systems gathered data primarily
for their own functional area (sales, production,
payroll, etc.) - Data sharing with accounting did not occur in
real time - Accountants and functional area clerks frequently
had to do significant research to gather the data
needed for reports - ERP systems, with centralized databases, avoid
these problems - Materials Management module sees a goods receipt
as an increase in inventory - Accounting module sees goods receipt as an
increase in the value of inventory - A single data entry transaction provides the data
for both
9General Ledger
- A companys accounts are kept in the general
ledger - In SAP R/3, input to the general ledger occurs
simultaneously with the business transaction in
the functional module - Sales and Distribution (SD)
- Sales to customers create accounts receivable
entries - Materials Management (MM)
- Purchase orders create accounts payable entries
- Human Resources (HR)
- Payroll processing creates expense entries
10General Ledger
- Other modules also create general ledger entries
- Financial Accounting (FI)
- Manages the accounts receivable and accounts
payable items created in SD and MM - Module where general ledger accounts are closed
at the end of a fiscal period - Controlling (CO)
- Tracks the costs associated with producing
products - Asset Management (AM)
- Manage fixed-asset purchases (plant, machinery,
etc.) and associated depreciation
11Operational Decision Making Problem Credit
Management
- A company with an un-integrated information
system can have accounting data that is
out-of-date or inaccurate - Out-of-date or inaccurate data can lead to bad
operational decisions - Fitter Snacker has this problem with credit
management - Companies routinely sell to customers on credit
- Sound credit management gives customers enough
credit to promote sales while minimizing the risk
from default - Making the correct credit management decision
requires accurate and timely sales and payment
data
12Operational Decision Making Problem Credit
Management
- At Fitter Snacker
- The sales clerk uses a weekly printout of all
customer balances and credit limit to see if
credit should be granted for a new order - Sales data are transmitted to accounting 3 times
per week - Both sales and accounting work off data that is
not real-time and may be more than a week old - Customer orders that would bring them over the
credit limit may be accepted - Customers may be denied credit because recent
payments are not available to the sales clerk
13Credit Management in SAP R/3
- SAP R/3 allows for a number of configuration
options to determine how the system responds to
an order that would cause a customer to exceed
its credit limit - The system may block the sales order
- The system may prevent the sales order from being
saved - The system may issue warning messages to the
sales order clerk - Credit is a sensitive issue, so the system
response must be configured to match a companys
procedures - Typically, sales orders are blocked, with no
warning given to the sales order clerk - A credit specialist would regularly review
blocked orders and take corrective action
14Dynamic credit check
Only orders for the next two months are considered
Reaction C warning message is issued when order
is saved
Figure 5.3 Credit management configuration
15Credit limit for Health Express
Outstanding obligations
Figure 5.4 Credit management for Health Express
16Options to release, reject or forward blocked
sales orders
Figure 5.5 Blocked sales order
17R/3 and Accounting
- Internal Accounting
- profit center accounting/analysis
- management accounting
- see Chapter 10 and CO module
- Asset Management (chap 11 and AM module)
- External Accounting
- vendor/customer processing
- financial accounting (Chap 8 and FI module)
18(No Transcript)
19External Accounting
- Vendor Processing (A/P)
- Customer Processing
- A/R, credit management, dunning
- OTA Vendor Processing (one-time accounts)
- Subsidiary/Head Office Accounting
- GL Processing
- Consolidation
20Vendor Handling
- A vendor is a business partner that has an
outstanding payable - AP concerns integration of cash mgt, payment
procedures, G/L, forecasting - Automatic vs. manual
- dunning procedure for credit memo/returns
- vendor master data
- invoice processing/verification
21Vendor Processing
Vendor Master Record Processing
Direct Capitalization
Handling Fixed Assets
Travel Management
Source Administration
Invoice from Vendor has Arrived
Creditor is created
Vendor invoice processing
Invoice posted and released for payment
Vendor invoice is posted
Overheads mgt with allocation cost
22Vendor Processing (cont.)
Down Payment Release
Bank sttment for payments has arrived
Payment deadline is reached
Down paymnt is released for auto payment
Manual Payment
Automatic Payment
Payment carrier is sent
Payment is posted
Complex Proc. For investmt measure
Simple Proc for Investmt Measure
Project-related maintenance proc.
Supplier proc.
23Vendor Master Record Processing
- Vendor master has link into G/L, purchasing and
accounting function - must generate internal or external account
- 3-level structure of master record
- general data
- company code data
- correspondence, individual dunning, payment terms
- purchasing organization data
- individual RFQ, PO, and invoice verification data
24Vendor Processing
Vendor Master Record Processing
Direct Capitalization
Handling Fixed Assets
Travel Management
Source Administration
Invoice from Vendor has Arrived
Creditor is created
Vendor invoice processing
Invoice posted and released for payment
Vendor invoice is posted
Overheads mgt with allocation cost
25Vendor Invoice Processing
- Invoice can be sent in a variety of ways.
- Manual
- EDI
- Web-based EDI
- This triggers invoice processing
- entered into system
- check vendor master
- tax checked and posted
- allocated to a CC
- either fixed asset or current asset account
- balance check
26Vendor Processing
Vendor Master Record Processing
Direct Capitalization
Handling Fixed Assets
Travel Management
Source Administration
Invoice from Vendor has Arrived
Creditor is created
Vendor invoice processing
Invoice posted and released for payment
Vendor invoice is posted
Overheads mgt with allocation cost
27Down Payment Release
- Generates down payments to vendors
- Stored as a separate document
- referred to at final settlement
- May include tax or not
- important for posting to G/L
28Vendor Processing (cont.)
Down Payment Release
Bank sttment for payments has arrived
Payment deadline is reached
Down paymnt is released for auto payment
Manual Payment
Automatic Payment
Payment carrier is sent
Payment is posted
Complex Proc. For investmt measure
Simple Proc for Investmt Measure
Project-related maintenance proc.
Supplier proc.
29Automatic Payment
- May take months and involve multiple currencies
- 3 Basic steps
- create payment proposal list
- based on customer master and invoices
- process payment proposal list
- document changes in banks, etc.
- monitors due dates latest possible preferred
- post payments
- items cleared and linked to payments
30Manual Payment
- Many businesses still choose to make payments
manually - Must enter following information
- G/L account no. for bank
- payment amount
- any charges or fees
- document number
31Vendor Processing (cont.)
Down Payment Release
Bank sttment for payments has arrived
Payment deadline is reached
Down paymnt is released for auto payment
Manual Payment
Automatic Payment
Payment carrier is sent
Payment is posted
Complex Proc. For investmt measure
Simple Proc for Investmt Measure
Project-related maintenance proc.
Supplier proc.
32Customer payment processing
- Major FI scenario (see R/3 Customer Invoice and
Payment Processing simulation) - Provides data for credit management
- Supports traditional AR functions
- manual or automatic processing supported
- built in dunning procedures
- integrated with SD, MM and FI
33OTA Vendor Processing
- Do not require individual master record
- simplifies master data processing
- one-time accounts created
- provides one-step invoice processing
- down payments not supported
34Vendor Processing
Vendor Master Record Processing
Direct Capitalization
Handling Fixed Assets
Travel Management
Source Administration
Invoice from Vendor has Arrived
Creditor is created
Vendor invoice processing
Invoice posted and released for payment
Vendor invoice is posted
Overheads mgt with allocation cost
35Vendor Processing (cont.)
Down Payment Release
Bank sttment for payments has arrived
Payment deadline is reached
Down paymnt is released for auto payment
Manual Payment
Automatic Payment
Tax Calculator
Paybase
Payment carrier is sent
Payment is posted
Complex Proc. For investmt measure
Simple Proc for Investmt Measure
Project-related maintenance proc.
Supplier proc.
36Summary of External Accounting
- Scenarios
- Vendor Processing
- OTA vendor proc.
- Customer proc.
- OT customer proc.
- Consolidation
- G/L processing
- Special purpose ledger processing
- Core Processes
- G/L account proc.
- Vendor master
- Customer master
- invoice proc.
- clearing
- payment
- dunning
- closing