SAP Financial Accounting

SAP Financial Accounting

Overview
Overview
 Session Takeaway
1) What is SAP
2) What is ERP
3) Short History of SAP
4) What makes SAP different
5) SAP R/3 Architecture
6) SAP Modules
 SAP Introduction
SAP is a neatly integrated business ERP software to process all
functionalities of an organisation in order to obtain a UNIFIED solution.
It is the market leader when it comes to easy integration among all the
departments.
SAP stands for System, Andwen dungen, Produkte in der
Datenverarbeitung which means Systems, Applications, Products in Data
Processing.
SAP ERP Central Component (ECC) is one of the most recognized assets
thatSAP owns. It is an enterprise resource planning software which
consists in several modules that provide the organizations with great
control over their key business processes.
 ERP
Enterprise Resource Planning (ERP) term is used for software that controls
whole organizations different departments. For example_ SAP, Oracle,
People soft, JD Edwards are some of the top ERP software systems.
Consider a large enterprise like PepsiCo, which has number of divisions
under it. There is a _
Finance & Accounts,
Logistics Section,
HR,
Warehousing,
Sales and Distribution etc.
All these need to be integrated together, for effective functioning. This is
done by a specific software known as Enterprise Resource Planning or ERP
Use of this package makes it possible to track and manage, in real-time,
sales, production, finance accounting and human resources in an
enterprise
 History of SAP
SAP the company was founded in Waldorf, Germany in town of Heidelberg in 1972
by five ex-IBM engineers. The full name of the parent company is SAP AG. SAP has
subsidiaries in over 50 countries around the world from Argentina to Venezuela.
The first releases were R1 and R2 which were mainframe only applications. The "R"
was for "Real-time data processing"
SAP started as R/2 that is Real time architecture with 2 servers
In 1979 SAP released SAP R/2 into the German. The first integrated, enterprise
wide package and was an immediate success.
This got changed in later years as R/3 that is Real time architecture with 3 servers.
Towards the end of the 80s, client-server architecture became popular and SAP
responded with the release of SAP R/3 (in 1992).
Each functional division within an organization is divided into modules.
SAP started with financial application.
Modules such as Logistics, HR were added later on.
3 Tier Architechture
 What Makes SAP Different:
Traditional computer information systems used by many businesses today
have been developed to accomplish some specific tasks and provide
reports and analysis of events that have already taken place.
SAP has a total different approach. There is only one information system in
an enterprise, SAP. All applications access common data. Real events in the
business initiate transactions.
Accounting is done automatically by events in sales and production. Sales
can see when products can be delivered.
Production schedules are driven by sales.
The whole system is designed to be real-time and not historical.
 SAP Application Modules
SAP has several layers.
The Basis System is the heart of the data operations and should be not evident to higher level
or managerial users.
Other customizing and implementation tools exist also.
The heart of the system from a manager's viewpoint are the application modules.
These modules may not all be implemented in a typical company but they are all related and
are listed below:
1. Financial Accounting
2. Financial Supply Chain Management.
3. Controlling.
4. Material Management.
5. Sales and Distribution.
6. Logistic Execution.
7. Production Planning.
8. Quality Management.
9. Plant Maintenance.
10. Project system.
 Introduction to FICO
SAP FICO module has the capability of meeting all the accounting and
financial needs of an organization.
In this module the Financial Managers can review the financial position of
the company in real time as compared to Legacy systems which often
times require overnight updates before financial statements can be
generated and run for management review.
The real-time functionality of the SAP modules allows for better decision
making and strategic planning.
The FICO Module integrates with other SAP Modules such as MM, PP, SD,
PM, PS, HR.
 FI and CO comparison

FI CO
Legal or external Internal management
reporting reporting
Reports by accounts Reports by cost centers and
Balance Sheet cost elements
Income Statement Cost Center Reports
 Organizational Units for FICO
Financial Accounting (FI)
Client
Company Code
Profit Center
Business Area
Chart of Accounts
Financial Management Area

Controlling (CO)
Controlling area
Cost Centers
Operating Concern (PA)
 FI Enterprise Structure
Client (mandatory)
A commercially, organizationally, and technically self-contained unit within
an SAP System. Clients have their own master records and set of ables.

Company (optional)
A company is an organizational unit in Accounting, which represents a
business organization according to the requirements of commercial law in a
particular country. A Company can include one or more company codes.

Company Code (mandatory)

Smallest organizational unit of external accounting for which a complete,
selfcontained set of accounts can be created. i.e. legal individual financial
statements, such as the balance sheet and the profit and loss statement.
 FI Enterprise Structure
Business Area (optional)
A business area is an organizational unit within accounting that represents a separate
area of operations or responsibilities in a business organization which can be assigned to all
company codes defined in this client. (for example, product lines, branches).

Segment
A segment can defined based on different parameters such as geographical locations,
verticals or as per statutory requirements for independent reporting. It can be defaulted in
Profit Center.

Financial Management Area (optional)

The financial management area is an organizational unit within accounting which
structures the business organization from the perspective of Cash Budget Management and
Funds Management.

Profit Center:
An organizational unit in accounting that reflects a management-oriented structure based on
responsibility of the organization for the purpose of internal control. Benefits are Trial Balance can be
derived at each Profit Centre/ Profit Centre Group, return on Investment can be calculated on all
revenue generation units, location/Product Line wise Profitability can be worked out etc.
 CO Enterprise Structure
Operating Concern:
Represents a part of an organization for which the sales market is structured in a uniform
manner. By setting off the costs against the revenues, you can calculate an operating profit for
individual profitability segments. The market segments of each operating concern are displayed
as profitability segments.

Credit Control Area (optional)

The credit control is an organizational unit that specifies and checks a credit limit
for customers. A credit control area can include one or more company codes. It is not
possible to assign a company code to more than one credit control area.

Cost Center:
Its a Departmental Breakdown of your Legal Entity Structure and the lowest Level of
Organization where you want to Collect and Analyse Costs/Departmental Performance. It helps in
departmental Budgets and Expense Analysis of P & L Accounts and also interdepartmental Cost
Allocations. Each Cost Center is Assigned to a Company Code, Business Area and Profit Centers.
Integrated Organizational Units for FI & CO
Client

Operating Concern

Controlling Area

Chart of Accounts

Co Code

Business Area

Production Finance Sales Procurement

Crushing Filling Packing R&D

Cost Centres
 SAP Systems
SD FI
Sales & Financial
Distribution Accounting
MM CO
Materials
Mgmt. Controlling
PP AM

R/3
Production Fixed Assets
Planning Mgmt.

QM
Quality
Client / Server TR
Manage-
ment PM
ABAP/4 WF
Treasury

Plant Main- Workflow

tenance
HR IS
Human Industry
Resources Solutions
 SAP R/3 Data Flow
Accounts Treasury Management Product
Product Costs
Costs
Receivable
Accounting General Ledger Overhead
Overhead Costs
Costs
Balance Sheet Profit & Loss Financial
Financial
Accounts Statement
Statement
Payable
Accounting Profit
Profit Center
Center

Asset
Accounting

Human
Human Resources
Resources

Inventory
Inventory Mgmt
Mgmt

Purchasing
Purchasing

Sales
Sales
Solution Overview
 Major Processes
Finance Management Accounting - CO

General Ledger
Profitability analysis
Fixed Asset Accounting
Plan vs. actual comparison
Preparation of ledgers and tirals
Product costing
Inventory accounting
WIP management and settlement
Vendor bill processing
Creation of cost center budget and expenses and actual
monitoring
Bank reconciliation
Customer invoicing
Cheque processing and printing
Manufacturing
Revenue expense budgeting
Production master data BOM, Recipe
Inventory
Planning Shop floor control
MIS related to shop floor control
Demand management
Purchase and stores
Material requirement planning
Master production scheduling Procurement planning
Purchase order management
Sales and Distribution Vendor evaluation
Service procurement
Annual sales planning Invoice verification
Sales order management Inventory management
Sales order planning and execution Stock Transfer
Pricing and taxation
Customer credit management
Sales and returnaand warranty management
 Major Processes

Quality

Inbound quality management

QM Masters-plans inspection characterstics
In-process quality management
Finished quality management

Plant Maintenance
Maintenance order management
Preventive maintenance
 Financial Accounting Overview
CO

FI- FI- FI-

BL TV AA

FI- FI- General FI-

MM SD
AP GL ledger AR

Balance sheet
... ...
P&L
...
FICO Integration with other Modules
One Solution Addressing all Financial Roles
One Solution covering all Financial Processes
Order to Cash Process
Purchase to Pay Process
 Accounts Payable Flow
Invoice
Purchase Goods Receipt/
Order Receipt Invoice
Verification

Cash
Cash Mgmt
Mgmt & &
Forecast Date
Forecast Date

Payment Transactions
Cash Payment Program
Management

Balance
sheet
Profit
& Loss
(P/L)
 Accounts Receivable Flow
Invoice/
Incoming A/R
Orders Delivery Accounting
Document

Cash
Cash Mgmt
Mgmt & &
Forecast Date
Forecast Date

Payment Transactions
Cash Dunning Notice
Management

Balance
sheet
Profit
& Loss
(P/L)
 Asset Accounting Flow
Chart of
Assets Asset Class Depreciation 1 Company Code
House < Land >
Building
Trade
Trade Law
Law
Forklif
Vehicles Taxation
Taxation Law
Law
Controlling
Costing
Costing Area

Company
Asset: Forklif Code 1000

Cost center Vehicles

Order Cost Center
Vehicles
Trade law Depreciation
Actual
Actual Plan
Plan
Taxation law Order
Interest
Costing Actual
Actual Plan
Plan

29
Operational Effectiveness
 FICO Features
Supports Complex organizations
Common Chart of Accounts
High Integration
Minimal Reconciliation
Reporting of Accurate Data
Strong control capabilities and Audit Support
World class functionality
Multi-Currency/Multi-National
Real-time daily world wide P& L Reporting
Intercompany transactions
Management Consolidation
 Contd
Providing better information to support the business
Controlling costs in the business
Improving risk management and internal controls
Streamline Financial Processes
Decrease Cost of Finance
Centralize Finance Operations
 Abbreviations
FI Financial Accounting
CO - Controlling
SD Sales & Distribution
MM Materials Management
GL General Ledger
AP Accounts Payable
AR Accounts Receivable
BL Bank Accounting
AA Asset Accounting
TV Travel Management
THANK YOU