Applied Management Research Project

Managing the changing environment of finance function in organization: SAP as an enabler

Student: Devdut SahaRoll: 09BM8083MBA 2nd Year Vinod Gupta School of Management, IIT Kharagpur

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Objective

Studying Changes affecting finance function of organization IFRS and its effects. IFRS vs Indian GAAP Taxation and regulation (Goods and Service Tax) SAP handling the finance function and changes SAP Packages (ECC and BO)

Formulating Change management plan (Linear programming

model)

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Scope

Indian organizations The ERP considered in the study is SAP Taxes and regulations in consideration are

those applicable in India

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What is making the environment of finance function to change?

Automation & Transparency Regulatory compliance Changes in regulations:

Accounting and reporting Taxation

Management reporting Financial planning & strategy Communication with shareholders

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International Financial and Reporting Standards (IFRS)

Companies Target Date

Companies with net-worth of Rs 1000 crore and those which are part of BSE, NIFTY and listed in overseas exchanges

April 2011

All companies with a net-worth between Rs 500-1000 crore April 2013

Banks and non-banking finance companies April 2013

All listed companies with a net-worth of Rs 500 crore or less April 2014

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IFRS

Historical cost and fair valuation: revaluation of intangible assets, investment property

Financial statements: SoRIE Financial report presentation: Consolidated report Distinction of current and non-current

assets/liabilities Business combinations: Everything is acquisition,

purchase method of accounting Functional currency Cash flow statements

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Goods and service Tax (GST)

Single tax replacing indirect central and state taxes Exports- Zero rated, imports & domestic goods Destination principle Wider tax base Elimination of multiplicity and cascading effect Likely to increase exports Reduction in prices of goods Not applicable for real property, alcohol, petroleum

and natural gas, and electricity

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SAP Applications

Enterprise Central Component FI CO Extended financials: VIM, Treasury, T&E, FI-CA

Business Objects Strategic enterprise Management (SEM) Enterprise Performance Management (EPM) BI, BW, XBRL Governance, Risk and compliance (GRC) Financial Supply Chain Management (FSCM)

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Activity Sub-Activities SAP Solution

Strategy and execution Influence corporate strategy through financial insight, Encourage enterprise-wide adoption of Strategy, Execute Finance strategy

SEM: BPS,CPM, BCS, ERP financials (CO-PA)

Regulation and governance Monitor regulation and ensure compliance,Operate and monitor internal controls over financial

reporting, Rationalize and manage required governance bodies

GRC, BI, ERP financials, SEM:BPC, XBRL

Risk & Capital Identify and manage enterprise risks, Ensure access to capital, Optimize capital structure

GRC, FSCM, Treasury, ERP financials (collections, credit mgmt, AR, AP, invoice mgmt, cash-bank mgmt)

Performance & decisions Define and monitor enterprise performance metrics, Deliver information needed to make after-tax business decisions

EPM, SEM: CPM,BPS, ERP (CO-PA)

Close, consolidate & report Capture, summarize, analyze & report financial results and related disclosures to management and external stakeholders

BI, BW, XBRL, SEM: SRM

Transaction processing Process financial transactions efficiently and effectively

FSCM, FI-CA, T&E mgmt, ERP (new GL), VIM

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Sector Analysis - Manufacturing

Challenge SAP Package Remarks

Reaping benefits of globalization

SEM:BCS, SEM:BIC, BW There is more than one package that can handle the same challenge. The choice of the package depends on the type of industry, organization and the objective to achieve.

Profitability Analysis CO-PA, BI, BW, XBRL, SEM: CPM

Mergers and acquisitions BI, BW, SEM:BCS

Managing and controlling financial risks

GRC, FSCM, Treasury, ERP financials (collections, credit mgmt, AR, AP, invoice mgmt, cash-bank mgmt), SEM:CPM, EPM

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Sector Analysis - Retail

Challenge SAP Package Remarks

Mergers and acquisitions BI, BW, SEM:BCS There is more than one package that can handle the same challenge. The choice of the package depends on the type of industry, organization and the objective to achieve.

Profitability analysis CO-PA, BI, BW, XBRL, SEM: CPM

Financial consolidation SEM:BCS, BIC, BI, BW, XBRL, EPM

Forecasting (sales, profit etc)

SEM:BPS, CPM

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Change Management Plan

Drafting the AS-IS finance function

Drafting expected finance function

GAP Analysis(Effort estimation)

Prioritizing Activities/Events

To-be finance function

Execute in-house or

outsource?

Selecting External Consulting Company

outsource

Project Implementation

plan

In-house

Change Management plan

Formation of Project Team

Project Execution and monitoring

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Change Management Model

Changes in organizational structure (OT) Changes in the finance processes (FP) Training the people as per their roles (TP)

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Change Management Model

Objective: Maximize Value addition∑ (BOT(i) – COT(i)) + ∑ (BFP(j) – CFP(j)) + ∑ (BTP(k) – CTP(k))

for all i, j and k

Prefix “B”= Benefits, “C”= Costs

Constraints ∑ CTP (k) ≤ TB for all k. TB is the training budget ∑ COT (i) ≤ OTB for all i. OTB is the budget for costs of

organizational change ∑ TFP (j) ≤ ET for all j. TFP =Time reqd for change in

financial process, ET= Overall Expected time for change

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References

Report of GST Task force: E&Y Similarities and differences- A comparison of

IFRS, US GAAP and Indian GAAP: PwC Responsive Finance: Deloitte www.sap.com Change Management Strategies for

successful ERP implementation: Adel M Aladwani

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Thank You