Question

Apogee Accountants is an accounting firm located in northern New South Wales. Steve Trust is a Managing Partner in the firm and has growing concerns regarding the impact of Enterprise Resource Planning (ERP) systems has upon Apogee's future revenue. As such Steve has asked you to to undertake some research into ERP systems and how they have affected the accounting industry. He has requested you supply a five (5) minute presentation to be played at the next staff meeting using Voice over PowerPoint (VOPP) outlining: What is an ERP system? (2 marks) What are the advantages and disadvantages to Apogee if clients were to invest in an ERP system compared with a non-ERP system (note: focus your answer on Apogee's business, NOT client entities)? (2 marks) What are the types of client businesses that would be more likely to benefit from implementing an ERP? Justify your answer. (2 marks) In light of your answers above, what opportunities might Apogee find to extend their services for those clients that are seeking to acquire an ERP system? Explain why or why not. (2 marks)

Answer 1

ERP Systems,

ERP stands for Enterprise Resource Planning and refers to software and systems used to plan and manage all the core supply chain, manufacturing, services, financial and other processes of an organization. Enterprise Resource Planning software can be used to automate and simplify individual activities across a business or organization, such as accounting and procurement, project management, customer relationship management, risk management, compliance and supply chain operations.

Individual ERP applications can offer software as a service (SaaS), while a complete suite of ERP applications forms an ERP system that can be used to effectively communicate and bring together business processes to enable a flow of data between the applications, typically through common databases either on-site/on-premise or in the cloud.

ERPs connect every aspect of an enterprise. An ERP software system allows for better performance and project management that helps plan, budget, predict and accurately report on an organization’s financial health and processes.

Advantages and disadvantages of ERP

Advantages

1.Focused IT Costs

Although ERP software is often a large investment, it can unify your IT costs and improve efficiency. Instead of spending resources on multiple systems that all need dedicated staff, infrastructure, support teams and licenses, you can focus all these costs into one ERP system.

Additionally, if you spend more on disparate systems than you would on a centralized ERP, you might even save on IT costs overall. Using a single system also reduces training requirements for end-users, since they only need to learn one system rather than interacting with numerous individual applications.

While an ERP can include numerous functional areas such as customer resource management (CRM), accounting, HR management and supply chain management, the design of the system is to be modular. This lets you use only the pieces that align to your needs. At the core, an ERP is the glue that binds other systems and their data together. Some ERPs let you integrate numerous third-party systems into a unified whole.

2. Total Visibility

This benefit of ERP is one of the biggest selling points for the software. ERP software allows total access to every important process in your business by making data from every department easily accessible to you and your senior management.

For example, you can monitor inventory levels on a daily basis, including future consignments that are yet to be received and inventory currently in transit. By knowing precisely where you stand regarding inventory levels, you can control your working capital on a more precise level

3. Improved Reporting and Planning

Along with improved visibility, better insight is a major advantage of ERP software. Implementing an ERP suite across departments means your organization has a single, unified reporting system for every process. By having a single source of truth, an ERP system can readily generate useful reports and analytics at any time. This software gives you the ability to analyze and compare functions across departments, without the hassle of multiple spreadsheets and emails.

One of the most popular reports involves finances (go figure). Standard financial reports such as income and cash flow statements generally are built-in, and custom reports can be quickly generated without IT intervention.

4. Flexible Modularity

One of the biggest advantages of enterprise resource planning software in the present day is its modular makeup. Most ERP vendors offer several applications that can be implemented together according to business needs. Barring a few exceptions, each application is designed to be able to stand alone or integrate with the larger suite. This way, your company can pick and choose which components work best and can leave out what you don’t need.

Another aspect involves how the software is implemented. The two major deployments are on-premise and through the cloud. With an on-premise system, physical software must be purchased and installed on all company computers and servers. With a cloud-based system the entire software bundle is handled completely off-site by an ERP provider. Cloud-based ERP software has been on the rise in recent years and is projected to become even more popular.

5. Improved Efficiency

Along with reduced IT and training costs, an ERP can reduce the time and effort required by your workforce to carry out their daily activities. Properly implemented, an ERP solution can greatly reduce or eliminate repetitive manual processes, thus freeing up team members to focus on revenue-affecting tasks. The system likewise can aid in the adoption and enforcement of industry best-practice processes, aligning all actions across the enterprise.

Cutting-edge technologies such as artificial intelligence (AI), machine learning, robotic process automation (RPA) and others support the automation and intelligent suggestion capabilities you see in many ERP software applications. This advanced functionality can manage business activities such as demand forecasting, generating purchase orders and tracking products from manufacturing to delivery.

6. Customer Service

Your company’s clients also receive ERP system benefits, even if they don’t know it. Because client information is centralized and streamlined, your sales team will be able to focus on building and maintaining customer relationships instead of maintaining spreadsheets. At the end of the day, the number one thing a business should be concerned about is customer acquisition and retention. Through the end-to-end tracking and insight offered by an ERP system, you can provide better customer interaction from marketing automation all the way through late-phase customer service.

Most up-to-date ERP suites also support e-commerce integration. This means your business will be better able to handle web-based order processing and client interactions.4. Flexible Modularity

One of the biggest advantages of enterprise resource planning software in the present day is its modular makeup. Most ERP vendors offer several applications that can be implemented together according to business needs. Barring a few exceptions, each application is designed to be able to stand alone or integrate with the larger suite. This way, your company can pick and choose which components work best and can leave out what you don’t need.

Another aspect involves how the software is implemented. The two major deployments are on-premise and through the cloud. With an on-premise system, physical software must be purchased and installed on all company computers and servers. With a cloud-based system the entire software bundle is handled completely off-site by an ERP provider. Cloud-based ERP software has been on the rise in recent years and is projected to become even more popular.

5. Improved Efficiency

Along with reduced IT and training costs, an ERP can reduce the time and effort required by your workforce to carry out their daily activities. Properly implemented, an ERP solution can greatly reduce or eliminate repetitive manual processes, thus freeing up team members to focus on revenue-affecting tasks. The system likewise can aid in the adoption and enforcement of industry best-practice processes, aligning all actions across the enterprise.

Cutting-edge technologies such as artificial intelligence (AI), machine learning, robotic process automation (RPA) and others support the automation and intelligent suggestion capabilities you see in many ERP software applications. This advanced functionality can manage business activities such as demand forecasting, generating purchase orders and tracking products from manufacturing to delivery.

6. Customer Service

Your company’s clients also receive ERP system benefits, even if they don’t know it. Because client information is centralized and streamlined, your sales team will be able to focus on building and maintaining customer relationships instead of maintaining spreadsheets. At the end of the day, the number one thing a business should be concerned about is customer acquisition and retention. Through the end-to-end tracking and insight offered by an ERP system, you can provide better customer interaction from marketing automation all the way through late-phase customer service.

Most up-to-date ERP suites also support e-commerce integration. This means your business will be better able to handle web-based order processing and client interactions.

7. Data Security and Quality

One of the biggest advantages of an ERP system is data security. After all, at the heart of the ERP concept is data. Sharing data across functional silos such as customer service, sales, marketing and business development enhances collaboration throughout a company. The other side to widespread data access is controlling who can see and edit the information. ERP solutions have intrinsic controls to ensure the security of your data.

Further, what helps ERP platforms maintain a high level of data security is that they provide a single input system. Merging information from multiple systems often causes conflicts between sources, but having a single repository of information helps improve the accuracy, consistency and security of your company’s data.

Both on-premise and cloud-based ERP systems offer your organization a higher degree of security. The database system the ERP software runs off of also enables centralized backups of your critical and sensitive data. Cloud-based ERP systems, despite what many people think, can offer an extra layer of security. Since all of your company’s data is managed through the cloud, many vendors employ round-the-clock security experts to ensure their servers are protected. This makes it far more difficult for hackers to run test attacks like they would on a private server.

8. Improved Collaboration and Workflows

Collaboration is an essential part of a thriving business. But more often than not, companies find their teams working in silos simply because collaboration requires more time and effort. However, ERP software makes collaboration a piece of cake. An ERP platform streamlines the process of collaborating with others by providing employees with access to the data they need when they need it. They do this by providing an interdepartmental database, where information from each department is funneled into one centralized location.

This allows for real-time project updates and better communication across the whole company. With an ERP system in place, every employee has on-demand access to the entire company’s wealth of data, which allows them to see the big picture. In turn, this gives your employees the tools they need to make proactive decisions while making them feel more valued. The net effect on your business is increased efficiency and reduced operational costs associated with manual data tracking, as well as higher employee engagement.

9. Standardized Business Processes

Most ERP systems are developed according to industry best practices. These tried-and-true processes bring major benefits to the table for businesses of all sizes. It also allows businesses to standardize their own processes and systems, which further enhances productivity and efficiency.

These processes deliver consistent results that allow you to continually improve the way in which you operate your organization. And because many processes are automated, errors and costs are greatly reduced. As a result, there’s less friction and improved synergy between departments.

10. Facilitated Regulatory Compliance

One of the most difficult ongoing tasks for businesses is meeting compliance requirements. Maintaining perfect accuracy within your financial records isn’t exactly easy, but needs to be done nevertheless. ERPs aid in regulatory compliance by virtue of secure and validated data, combined with built-in reports. These reports can also be automated to reduce the cost of continual audits. Additionally, many ERP vendors take specific regulations into account such as the Sarbanes–Oxley Act (SOX) and the Federal Information Security Management Act (FISMA).

11. Improved Supply Chain Management

For companies that deal with the moving of physical inventory and production, an ERP system bolsters supply chain management in a variety of ways. This improvement results in shortened lead times, more on-time deliveries and many other benefits that enhance the overall operation and success of your business. Through a well-designed ERP platform, your supply chain can become better and more responsive via improved demand forecasting, inventory management, procurement and more. A streamlined supply chain also facilitates manufacturing innovations, which can help you reduce costs and develop exciting new products that give your business the competitive edge it needs to stay ahead.

In addition, an ERP system can dramatically improve profitability and reduce overages involving inventory and production. Unified insight into sales, production and delivery schedules permit stock levels to be optimized rather than relying on “best guess” estimates for upcoming volumes.

12. Superior Scalability

To ensure the ongoing success of your business, you have to keep an eye on the future. All too often, businesses fail to plan properly and experience serious growing pains that pose serious roadblocks to whatever progress they’re enjoying. Having a system in place that can elegantly and efficiently accommodate your company’s growth is of the utmost importance, and the right ERP system makes it easy.

Whether you’re expanding your customer base; entering new markets; rolling out new processes, departments or products; or are otherwise growing your business, adding new functionality to an ERP platform is easy with the right software vendor.

Just make sure that when you’re speaking to vendors they understand your intentions for growth in the future.

Disadvantages

1. The Cost

If you choose to invest in a traditional ERP system, for example SAP Business One, you could easily end up spending five figures for a single license. For many, this is by far the biggest disadvantage to ERP software. The upfront cost of the software alone can be prohibitively high, especially for small-to-medium-sized businesses. SMBs can avoid the upfront costs with a cloud solution, which is typically billed on a monthly subscription basis. If you’re looking for even more cost-savings and feel prepared for a project, consider an alternative: open source ERP software.

2. Cost of Implementation and Maintenance

While the software alone is a major investment, the implementation process can cost nearly four times as much. Businesses must take into account the cost of manpower and time necessary for a successful deployment. You may need to hire additional IT staff, ERP consultants, software training specialists, etc. Vendors offering traditional systems typically charge a fee for maintenance on top of the license fee. Moreover, you might need to invest in new hardware to properly support your ERP software, such as servers and compatible mobile devices. And again, you’ll need to designate individuals to maintain them.

With a typically painless implementation, no hardware and a limited need for maintenance or upgrades, cloud ERP software represents a good alternative once again. Otherwise known as SaaS (Software-as-a-Service), cloud-based software is designed to be undemanding. The implementation of these types of systems simply involves logging in on any compatible and Internet-enabled device; maintenance and upgrades are typically managed by the vendor.

3. Customization Process

Customization is one of the best aspects of ERP software, but it can easily and quickly get out of hand. Customizing your software takes a lot of time, effort, expertise and money. But too often, businesses completely underestimate how many resources are needed and either don’t finish their customization or end up going way over budget. Customization can end up diminishing the best practices built into the system and make it more difficult to upgrade in the future.

4. Complexity

ERP software solutions provide numerous capabilities, but that also means the software can be complex and difficult to use. It’s not unheard of for companies to get swept up in all the potential of an ERP solution but fail to plan properly for its implementation. Some businesses may find themselves with systems too large and complicated for their processes, leading to a poor ROI. This is especially true if you can’t convince your team to adopt the software due to the complexity.

To prevent falling victim to the complexity of ERP software,

invest in role-based user training and avoid systems with more functionality than you need.

Types of ERP Systems: Cloud vs On-Premise vs Hybrid

There are three main types of ERP systems that function with different deployment model options. The most common types of ERP systems include cloud ERP, on-premise ERP, and hybrid ERP.

• On-Premise ERP software is implemented onsite and maintained in physical office space within an organization, hosted on the company’s own computers and servers for full control, support and ownership of the entire system once implemented.
• Cloud-based ERP software is a web-based solution, known as Software as a Service (SaaS), where an organization accesses and stores data on any device with an internet connection, usually through the purchase of a subscription. Continual support, updates, training, and flexible customizations supported by the software provider.
• “Hybrid” ERP software refers to a combined implementation of cloud-based and on-premise ERP system solutions. The combination of hosting and deployment services vary by provider. These models can provide ERP users the flexibility to migrate between delivery models, or integrate benefits not available existing implementation.

Opportunities of ERP in accounting

Enterprise Resource Planning (ERP) systems help companies streamline their accounting needs through integration of data. It provides you with a better view of all areas of the business, and this enables you to make faster and more accurate decisions that affect the operations of your company.

Insight into financial data promotes cost efficiency and improves the financial productivity of the organization. This post will share with you some of the benefits you will have for using an ERP system for your accounting department.

Managing accounting needs

The accounting department of any organization is essential. There are many areas you can manage through an ERP system, and here are some of them:

• You can use an ERP system to estimate the capital requirements and for management of cash.
• You can accurately come up with a budget.
• Allocation of costs for various activities such as labor, raw material, and transportation.
• Management of payments, including those made to the vendors and paying wages to staff.

Tracking capabilities

ERP system gives you an opportunity to use it as a financial management system. It improves financial activities such as customer payment schedules, credit management, and revenue tracking.

It’s easy to manage billing, revenue, and payments as it has a high level of tracking capabilities and it’s an automated system, Even better, you can use an ERP system to track profits made by the organization, invoicing, cost analysis, and budgeting.

Quality data and financial information

With ERP technology, the accounting department has easy access to the data. Organizations have well-organized processes and resources, enabling them to maintain good financial measures. Financial information is also secured and it gives you an opportunity to co-author, manage, and edit when you have authority to access it.

Organizations that use separate systems for accounting and sales activities, they have to manage the data manually. On the other hand, for an integrated ERP system for accounting, there is an automatic transfer of data. Therefore, you don’t have to manage data manually, making it faster, accurate, and consistent.

Automated data

Organizations with automated systems are able to grow their businesses because they have the flexibility to concentrate on their core operations. An ERP system ensures that your accounting is automated.

It simplifies operations related to accounts receivable, accounts payable, improves cash flow problems, and cash management. It becomes pretty easier to manage the entire organization by generating information and compiling it.

You can use financial management modules that will keep track of accounting data that are in line with the international standards. For this reason, you have options of choosing a framework in different languages, charts of accounts, and currencies.

ERP system helps you to collect financial data from various departments to create reports and financial statements. This is the reason why the system is invaluable as it makes the processes easier to perform.

Fewer errors

There is always a chance that a person can make a mistake while manually capturing data. By losing focus and losing key entries, it can cause problems on your accounting. Incorrect accounting data will affect the quality of financial analyses and financial reports. This mistake can have bad consequences on your finances including the tax complications.

An ERP system for accounting prevents such errors from happening because the system is automated. This gives you accurate information on the financial situation of your company.

A full ERP system is also GAAP compliant. GAAP refers to the accounting standard that offers a standardized method for recording financial transactions. Therefore, a full ERP system assists you to practice financial reporting that are acceptable by various accounting standards such as GAAP.