Advantages of SAP ERP in producing financial statements – Sample

Advantages of using SAP (Enterprise System Application Software) in producing the legally required financial statements

Enterprise systems (ES) are referred to as business usage application software packages that help various business processes, information flows, analyzing the data collected and also reports on the analysis made. Enterprise system application software of financial modules is available both in readymade and customized form. SAP is the typical form of ES application software that can be used in solving various business needs.

The financial accounting module of SAP is made in such a way that it shows the enterprise business transaction in such a manner that complies with the external reporting requirement (SAP Service and Support Expert in the Center of Expertise, Active Global Support, 2010). This module of Sap can track and report on multiple enterprises across many countries and it also supports multiple languages and currencies to make the work easy.
The financial module in SAP also has the facility to integrate with the sale and distribution, purchasing and management of raw materials, which helps the user to locate the original transaction more easily whether it is a sales order or purchase order. It has been said that SAP FI (Financial Module) is the central point of the integrated SAP system as there is a financial impact on all other business processes that results in some flow of information to the financial module (O’Brien, 2011).
The biggest advantage of using the SAP financial module is its system integration with other application modules of business information systems. Using SAP, one can easily read, appraise, and respond to the changing business situations and helps to prepare legally required financial statements.

In addition to the above benefits SAP also allows better transparency while preparing the financial statements that increase the corporate governance. The main advantage is that SAP financial module comes with preloaded accounting standards and federal regulations that help in improving the administration of internal controls. The SAP FI has the unique ability to manage the cash across the countries, locations and companies (Khoshnevis, 2009).
The benefit of using the SAP is endless. SAP Fi deals with a wide range of governance practices and also the supported compliance issues like compliance to the Sarbanes-Oxley, segregation of duties, IFRS, countries GAAP and other legal regulations of respective countries. On analyzing the benefit of using the SAP FI (ES application software) it can be said that it can help in producing the legally required financial statements.

Issues faced by the global firms while using an ES for the production of the group and/or entity financial statements

Many problems have to be faced while using the SAP for the recording, analyzing and recording of the financial transaction to produce the financial statement of the entity or company. As it is the main requirement that the financial statement of the company or entity must be according to the domestic GAAP that has compliance with the IFRS (International accepted accounting standards). There is individual GAAP for the respective countries and it is very hard to make adherence to these separate GAAP while making the SAP software.

Therefore module makes lets the provision for the user to make required changes as their requirement (BEng, 2004). The main challenge is the SAP installation in the organization. There are some basic requirements in the SAP installation, if not fulfilled lead to complete failure of the enterprise resource planning. There is inflexibility in using the SAP module in the company as the vendor software packages may or may not fit the company’s business module and it is true that customized software leads to high expenditure.
SAP indeed comes with a very total cost of ownership that includes the acquisition cost, deployment cost and other maintenance cost. While integrating SAP financial module with other modules of the enterprise may lead to errors as it cannot be possible for readymade software to be easily integrated with the available resources of the company. Legally correct financial statements required full compliance with the domestic GAAP and IFRS but the truth is that it is not possible through using ant ES application software.
The entity has to bear the regular updating cost of the SAP application software which leads to an increase in the overall cost (ERP Workshops, 2011). There is also the risk of a steal of data as all the information has been made available online that can be accessed from anywhere connected to the server of the company. To make data under protection company has to bear the additional cost of implementing various internal and external control measures to avoid the risk of data steal.

References

2011 ERP Workshops. [Online]. Available at: https://big.computing.dcu.ie/information/sap_workshopmay2011.pdf [Accessed on: 1 December 2014].
BEng, A.M. 2004. A Framework for Adaptive Monitoring and Performance Management of Component-Based Enterprise Applications. [Online]. Available at: https://doras.dcu.ie/18093/1/Adrian_Mos_20130116123408.pdf [Accessed on: 1 December 2014].
Khoshnevis, S. et.al. 2009. Model-Driven Approach to Service-Oriented Enterprise Architecture. [Online]. Available at: https://www.computing.dcu.ie/~pjamshidi/PDF/APSCC2009-1.pdf [Accessed on: 1 December 2014].
O’Brien, T. 2011. Creating and Sustaining Data Quality within diverse Enterprise Resource Planning and Information Systems. [Online]. Available at: https://dataquality.computing.dcu.ie/thesis/OBrien_Tony_2011.pdf [Accessed on: 1 December 2014].
SAP Service and Support Expert in the Center of Expertise, Active Global Support. 2010. [Online]. Available at: https://www.dcu.ie/alumni/job_spec/vacancy_sap1.pdf [Accessed on: 1 December 2014].