SAP Adoption in Finance and Accounting
Introduction
The report sets out to critically evaluate the adoption of SAP (Systems Application Products)
within a business setting. SAP is anything but an Enterprise Resource Planning (ERP) system
that offers a unified business operation to the company by integrating the core developments.
The report goes ahead to deliberate on the pros and cons associated with the adoption of SAP in
finance and accounting. Furthermore, the report talks about the SAP’s significance of decision-
making processes and proficiency of a business transaction in terms of planning, forecasting and
dissemination information across various departments. On the dark side of it, the report talks
about security and cost among other factors. Moreover, a justification of SAP and its
functionalities are not only discussed but compared between Epicor Enterprise and SAP as far as
the financial management solution is concerned. Based on the review of the literature, the report
will propose a few recommendations on the merits of SAP integration in Finance and
Accounting. In the end, the report will wrap up with a summary and synthesis of relevant points.
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SAP Overview
The business has been evolving requiring high-speed processing of business transaction due to
changes in its internal and external environment. The most significant technological changes in
the business setting have been applied in accounting and finance. One of this technological
changes witnessed is the development of System Application Products (SAP) to help enhance
the proficiency of a business transaction (Shang & Seddon, 2007). ERPs such as SAP are critical
in terms of decision-making processes since they provide accurate and timely information and
also increase transaction effectiveness. SAP system provides the most detailed and accurate
information about the business operation an aspect that makes the system dependable in the
business world. It also increases business accessibility by the customers due to the development
of different modules and different access levels.
SAP provides a range of modules sales, distribution, and financial accounting. Apart from
managing accounting processes, it has provisions that enable an organization to analyze data,
monitor product cost, and compare the figures with the budgeted figures. This helps the
organization to get a clear assessment of the profitability and the interior operations. In a
nutshell, the SAP system allows organizations to integrate management processes of the business
for efficient reasons (Chand, et al., 2005). The SAP system executes all operational activities
such as product management, production process, marketing and sales. The SAP system collects,
distributes and manages information across boundaries within the supply chain organization. The
system breaks down organizational data into various units, reducing the time required to process
product information (Shang & Seddon, 2007).
Some of the characteristics of SAP include:
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Integration: SAP is made up of different application modules that work together to provide
comprehensive information and it covers most of the business needs of an organization it also
creates an integrated information system.
Standardization: It is a step by step system that can be followed by anyone involved in an
organization including the customers.
Routinization: SAP reduces the amount of routine work undertaken by accounting as well as the
labor and money by the administration.(Hughes & Beer, 2007).
Centralization: All the information from all departments of is contained in one central database.
Challenges and benefits
The need for system applications that manage different components of today’s business world is
eminent. Indeed, many technology organizations have endeavored to structure a management
system that would holistically meet the demand for management. SAP (System Application and
Products) is designed to monitor the operations of an organization without reference to the
industry of operation. The primary modules that SAP has include; Production Planning, Sales
and distribution, material management, human resource, and finance to name just but a few.
These major modules allow for adoption even in the most diverse business endeavors. Industries
that engage in production find solace in the system abilities to connect to the different
departments involved in the production process. Furthermore, SAP provides real time
information a factor that ogres well with production industries (Chand, et al., 2005).
With reference to finance, SAP has managed to provide even tailor made solutions meeting the
needs that the clientele demands. The increased preference to SAP finance module has been
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encouraged by the tenets that the system provides. SAP allows users to transfer, manage and
analyze data with a higher sense of security. Indeed, accounting and finance transactions have
increased in volume over the years. The amount of data and documents’ that accounting has been
associated with is voluminous in nature hence cannot be handled manually (Gaa-Frost, Krimmel,
& Pulkowski, 2011). SAP finance module allows the management and control of the financial
data within pertinent security measures. The accounting module further automates most of the
accounting functionalities like calculating profit and loss, management of customer ledgers, and
maintenance of balance sheets. The latest addition to SAP finance module is asset management
in the enterprise.
It is also noteworthy that the management of enterprises has seen significant changes and the
target system has taken root in management. The finance module in SAP allows for planning to
achieve pertinent objectives that the organization aims to achieve. Further, with the realization of
economic globalization most of the enterprises have ventured into different markets that operate
under different currency regimes (Shang, & Seddon, 2007). Currency strength provides
accounting difficulties especially with its volatile nature. As earlier highlighted SAP allows for
real-time control of data and with the finance module in place SAP allows ease in accounting
through automatic conversion calculation. It is also equally important to highlight that although
the rules of operation and accounting are universal financial execution and operations are unique
to the different enterprises. SAP is aware of this fact and further allows for customization to the
financial needs of the organization in order to ease management of information.
In order to equally grasp the tenets of the finance module it is important to highlight some of the
financial components that the module offers. SAP general ledger provides the management of
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external accounts that the organization has. Most of the enterprises have suppliers and debtors in
their books of accounts. SAP allows ease in the management of their ledgers as it provides
synthesized information to on the ledger while still identifying pertinent details about the creditor
or debtor. SAP accounts payable and receivable (Shang, & Seddon, 2007). This component deals
with information about customers and vendors. The element serves as a critical contributor to the
creation of balance sheets and account statements. SAP helps to manage banking and cash
accounting transactions in financial institutions. Through these components, enterprises can
engage in economic activities like auditing of statements and bank reconciliation.
SAP funds management is quite essential to any enterprise as earlier emphasized. Most
enterprises have realized the power of budgeting. This component allows the company to create
and manage budgets. With pertinent automated calculators, the component benchmarks gray
areas in budget execution while still merging revenues and expenditures. Indeed, SAP provides
relevant accounting solutions to enterprises around the globe. The abilities that the system
provides have further attracted utility by various enterprises around the world.
As earlier identified information technology, management has the inclusion of new innovative
products EPCOR Enterprise being one of them. In the spirit of competition and scholarly
interrogation different schools of thought exist on which is superior to the other. In addition, both
systems are designed to offer entrepreneurial management support. However, with reference to
the finance module various comparison points are a reality. SAP through the earlier discussions
provides a more detailed interrogation into the entry and analysis of data. It lays more emphasis
on the various points of user interface and the daily transactions that the enterprise. This fact
provides an advantage to enterprises such as banks that handle large transactions on a daily basis.
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EPCOR ERP, on the other hand, capitalizes on financial analysis, it has a robust edge in the
extrapolation of economic data and finite analysis (Gaa-Frost, Krimmel, & Pulkowski, 2011).
Hedge funds adopt a preference to the system due to its deductive capabilities. Indeed, these
management systems attract merit in their right and heavily contribute to the robust financial
system enterprises enjoy today.
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When an organization implements SAP, there are many benefits that come along. This benefits
could be commercial, technical or social. This numerous benefits of using SAP in your business
also include delivering a modern system that is highly efficient. The organization also gets a
comprehensive, as integrated cross-functional business processes.
SAP assists the organization to align strategies and operations this is because before it is
implemented, there is a thorough inspection of the existing environment is undertaken; it is
referred to as the ASIS analysis. All the problems are identified and corrected before
implementation of the system. This is when all the organization strategies short term, medium
term and long term are identified, clarified and prioritized. All internal tasks are organized so
that SAP system can be used effectively. This assists the organization to put together their
financial statements and their state of accounts (Gaa-Frost, Krimmel, & Pulkowski, 2011).
SAP increases productivity this is because data is only entered once for all after that the data is
passed throughout the organization eliminating redundancy. After the information has been given
every accountant, and financial officer can analyze the information on their terminals. This will
enhance the reporting and analysis of the business environment is increased in the financial and
accounting. SAP also helps in minimizing the cost and increasing flexibility; the enterprise
architecture helps to promote process standardization efficiency and adaptability.
It also helps to reduce accounting errors hence reducing risks in the business, because it can
solve the different business problem in different organization sizes. It helps to improve the
financial management and corporate governance it helps the organization to assess the financials
of an organization. It also helps in business controls and management risk.
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SAP optimizes the business transaction by eliminating the high cost of integration because there
is no need to buy any other software that improves cash flow reduces borrowing (Search.SAP,
2015). Moreover, the company gets a higher (ROI) return on investments when they use SAP in
their daily running of the organization by using Rapid Application Development, which is less
costly.
SAP has a consolidated system with few interfaces underpinned by a single recording system,
this allows persons using the system to work with a familiar interface that has terminologies that
are associated with accounting.
Another advantage that is associated with SAP is its flexibility. It permits the organizations to
customize the system depending on their rules and structure. The rules define what is allowable
and not allowed into the system. The organization can also decide which employees will access a
particular area within the SAP system environment this will restrict the access to only the
allowable employees only (Search.SAP, 2015). It also ensures that the SAP data attains
flexibility in different databases since one can export the information on a spreadsheet to be
analyzed. That aside at time SAP is inflexible reason being at times supplier package doesn’t
meet the company needs.
SAP system permits the organization to manage it accounting and financial activities creating a
chain of activities with the product life cycles and supply chain activities. SAP system also has
analytical features on its own that is used for evaluating, reporting and decision making in both
simple and complex organization
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Challenges of SAP
With all the benefits associated with the SAP, the system is a not without challenge some of the
challenges are structural and others technical.
High cost is one of the disadvantages associated with SAP because purchasing and implementing
the software is not a cheap task. In order for the company to be able to use this software, there
must be the necessary hardware required to run the program this increases the cost further. The
SAP system is not only composite but also laborious to be installed by the average IT people in
the organization, so the business is forced to hire installation and maintenance labor. In order for
the organization’s employees to be able to work, they have to be trained this increases the cost
further.
SAP systems are also known by their complexity this is a challenge for it takes ages for the
implementation of the SAP system to be completed this is because Sap features are implemented
a portion at a time.
In reality, such security holes ate used a wage an attack on a given system (Valverde, 2013).
Business establishments that embrace Enterprise Resource Planning are faced with this threat.
However, to the use of Information Systems (IS) Security Framework has been critical in
fighting off malware attacks on ERP system (Hughes & Beer, 2007).
Recommendations of success factors for SAP approval in Finance and Accounting
Systems Application and Product (SAP) data processing Enterprise Resource Planning (ERP)
implementation has had had its share of failures and successes. In a study by Bhanwani (2009)
asserts 30% and 10% of SAP implementation failed due to lack of efficient planning and
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technology driven reason, respectively. However, SAP implementation has had its success as
determined by grouped into organizational and technological perspectives.
Success factors from the firms perspective include; Good Scope management, project team
composition, and sustained management support. Efficient Organizational Change (OCM) and
Business Process Engineering (BPE), Project Championing, and firm communication are also
critical variables. Besides, user involvement and testing, a formal project schedule, and trust
among partners involved as well as an efficient training program, appropriate consultants, and
empowered decision makers. Technological success factors include relevant SAP version,
avoiding customization, efficient software configuration, and sufficient legacy system
knowledge (Bhanwani, 2009).
Good Scope Management: where the top management ascertains that any changes in the original
design are under control. The Project Team Composition is properly planned to constitute of a
manager, SAP external consultants, project leads, testing and technical teams.
Sustained Management Support: Support from top management should percolate from rolling
out the project, assessing the benefits, determining the mission and scope as well as provide
adequate resources. Efficient OCM and BPE involves determining the blueprint and a well-
documented process.
Project Championing: It is a role of the sponsor to ensure full support in advancing the project
and availing the required resources.
User Involvement and Testing is essential in defining requirements, provide assistance in
assessing the configuration, as well as the transition of data and the final system testing. Firm
Communication is vital amongst top management, project team and end users in permitting
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easier adaptation of the system. A formal project schedule of implementation defines time frames
during which each phase is implemented without exceeding the scope of the project. Trust
among partners involved in the project is essential (Bhagwani 2009: Fang et al. 2005). On one
hand the client, the SAP provider and the external consultants on the other must sustain trust
during the implementation of the project. An efficient training program involving the company
management and the end users is necessary. Preventive troubleshooting is essential to enable
tracking and fixing of problems before they advance to cause damages. Having the appropriate
consultants who are experienced and properly accustomed to the SAP modules being
implemented, helps in making the project a success. Empowered decision makers must be
involved. This is a team of company personnel well informed to double check that the provider
of SAP and consultants has met the required standard of the implementation (Bhagwani 2009:
Fang and Patricia 2005).
Relevant SAP version that falls within the providers support or avoid rushing for the latest
version that is yet to satisfactorily tested. To avoid customization by acquiring SAP that falls
within the industry standards, in this way evading the expensive tailoring or customization
processes. Efficient software customization –the SAP configuration should match the
requirements and pitched towards producing seamless and integrated value chain. Sufficient
legacy system knowledge – prior understanding of the legacy systems is pertinent to reduce the
necessity of configuration and accelerate the transition of data as well as making of interfaces
(Bhagwani 2009: Fang et al. 2005).
Fang et al. (2005) further suggests having monitoring and evaluation in places eradicates system
defects in the computer system. Performance should be compared against project goals. A
project management criterion is applied to assess implementation timings of each stage,
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realization expenses, and the quality, whereas the operational criteria analyze the production
system.
A consistent monitoring and evaluation of stress level of the project team members helps to
determine the need to inject motivation to boost morale. An interactive environment in an
organization enables personnel to be innovative and, therefore, participate in the implementation
process. By entertaining shared values and popular objectives, creates an atmosphere conducive
to acceptance of a new technology. Such an organizational culture is a critical success factor.
Finally, acknowledging cultural diversity is another key success factor. In the same way, a
corporate culture defines values within the scope of the organization. Likewise, cultural diversity
eliminates the defects of cultural differences among clients, consultants and end users and
therefore presenting a national culture.
Conclusion
It becomes apparent from the report that ERP systems such as SAP have many benefits. The
collection and distribution of data across various departments of the organization, executing of
all business operations such as; product planning and management, production process,
marketing, and sales just to name but a few. As the business plan to acquire a SAP system, they
should keep in mind the associated benefits and challenges associated with the program. The
challenges are relatively negligible as compared to the benefits (Chand, et al., 2005). SAP covers
all the fronts of the business so it a good package while considering one for accounting and
financial analysis. However, the security issue must never be under-estimated because of the
adverse damage that the malware can do not only to the system but the colossal losses associated
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with security lapse. In the end, modern organizations can only leave out the implementation of
SAP at their peril.
Bibliography
Bhagwani, A. 2009. Critical Success Factors In Implementing SAP ERP Software
Bos.com.np, 2015. Benefits of Using SAP for Your Business
Chand, D., et al. 2005. A balanced scorecard based framework for assessing the strategic impacts
of ERP systems. Computers in Industry, 56(6), 558-572.
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Fang, L. and Patricia, S. 2005. Critical Success Factors in ERP Implementation
Gaa-Frost, B., Krimmel, S., & Pulkowski, S. 2011. U.S. Patent No. 8,046,755. Washington, DC:
U.S. Patent and Trademark Office.
Hughes, R, & Beer, R, 2007. A Security Checklist for ERP Implementations,
Search.SAP, 2015. Benefits and drawbacks of a SAP implementation.
Shang, S., & Seddon, P. B. 2007. Managing process deficiencies with enterprise
systems. Business Process Management Journal, 13(3), 405-416.
Valverde, R, 2013. Cybercrime Prevention in Bahrain via IT Security Audit Plans, Proceedings
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