Over the past years, transactions in businesses have been increasing at a larger pace. To manually have its accounts and finance sorted was very difficult. Hence companies went for basic accounting software's like Tally for managing its accounts. But as the companies expanded both in size and geographically it became difficult to integrate the companies separated by distance. Hence, came an era where major information technology companies developed information systems which helped them not only to integrate the company whose various divisions were separated geographically but also helped in integrating various departments a company like integration of the sales and production departments and such other departments.
Hence came the different information systems like:
Window on Organizations
Finance and Accounting Systems
Sales and Marketing Systems
Human Resources Systems
Manufacturing and Production Systems
Why Use Information Systems?
Helps in Inter organization communication.
Very fast execution of Business processes.
Maintain H.R. records easily.
Helps in Assets protection, copyrights and patents & trademarks.
Helps in Time- Sharing that makes it possible to work 24 X 7.
Helps in achieving strategic Business objectives.
FINANCE AND ACCOUNTING INFORMATION SYSTEMS:
The finance department of any company is one of the most important departments. It basically deals with
All the financial matter of the company and is also responsible for managing the firm's financial assets, such as cash stocks, stakes, share, bonds and other investments to maximize the firm's financial assets.
The finance department is also in charge of managing the capitalization of the firm.
To determine whether the firm is getting the best return on its investments, the finance function must obtain a considerable amount of information from sources external to the firm.
The accounting function at any firm is responsible for
Maintaining and managing the firm's financial records-receipts, disbursements, depreciation, payroll-to account for the flow of funds in a firm.
Finance and accounting share related problems-how to keep track of a firm's financial assets and fund flows and prepare balance sheets
They provide answers to questions such as these:
What is the current inventory of financial assets?
What records exist for disbursements, receipts, payroll, and other fund flows?
Doing all the above financial tasks manually without the help of work integrating systems is a very tedious task and hence large Organized Retail Companies like Pantaloons which is spread out all over the country had to opt for such financial information systems.
Fig. 1
Shown above are the different modules of an Accounting and Financial systems and the levels at which they work in an organization.
For example: A company normally aims of having goals set for a year of achieving a specific growth rate or of having a certain amount of profit for a year. This cannot be done overnight. This needs a longer period of time involving different types of strategies. Hence to make such strategies a Profit Planning system is used.
Invoice and Customer Data To Generate Ledger
Accounts Master File
Reports
Systems
Online Queries
Fig. 2
AT PANTALOONS
In about the year 2003, the systems at Pantaloon were running on a custom built platform, with Retail Enterprise Manager (REM) as the central application. The company was also running other standard applications like Tally, etc. But this infrastructure did not lend itself to the meteoric growth scale envisaged by the company. That's when things needed a bit of twist. The Information Technology chief Mr. Deshpande and his team started evaluating the options at hand.
After much detailed analysis, Pantaloon zeroed in on SAP. It deployed all the major SAP solutions, namely, mySAP CRM, mySAP SCM, SAP NetWeaver, etc. As quoted- "We are extensively using these applications and have over 3000 users on the system. In the past 15 months that we have gone live on SAP, we have already crossed 9 million purchase orders in the system and are paying our vendors through 167 banks integrated in our system," says Deshpande.
What is SAP?
SAP is leading Information Systems provider all over the world with one of its main customers being Pantaloons. SAP makes many kinds on Information Systems which include Sales and Marketing systems, Finance and Accounting Systems and HR systems also.
Why SAP systems were needed?
SAP was basically selected because:
Pantaloons basically wanted to improve financial tracking and also wanted to improve reporting for all retail locations.
Pantaloons officials wanted more real- time information for better decision making.
The accounting was very difficult without any system in such a rapidly expanding environment.
Speed up the reconciliation and closing processes.
Why was SAP selected?
Pantaloon's successful track record with SAP® software
The software's scalability and ease of integration
The software's ability to meet company needs (a "perfect fit" for an enterprise wide implementation)
Complete data integrity and real-time updates
Expert support during migration effort, including support for document splitting
Ability to close books 15 to 20 % faster.
Initially to manage Pantaloons was much easier but as it started diverging into more and more sectors then the real difficulty came out. To manage such a diverse and wide spread enterprise Pantaloons needed a much clear view of its Financial Status which included profit centres and other retail outlets. But this was a tedious task.
Initially the company used SAP ERP financial solutions. This served the purpose for the company for some time. But later the efficiency of such a system went much down as the number of retail outlets were increasing. When the retail outlets exceeded 2000, the company decided to move to another application which was SAP General Ledger Application. The new system had the advantage of Document Splitting and Real time integration of the Finance and Controlling departments.
The migration was much easier than expected by the Pantaloons officials. With the help of the SAP General Ledger Migration Service it became very easy to update the previous system to the new one. As quoted by the CEO - "SAP Consulting did a great job in helping us execute this critical project". The project was completed only in just four months.
The Basic Processes that SAP General Ledger Application performed were:
Fig. 3
Systems and Internal Controlling: The internal controlling of Pantaloons was greatly enhanced due to Information Systems.
Management Accounts: The incomes and the expenses of such a large organization were simplified.
Working Capital Management: When the incomes and expenses were found out, it was relatively easier to calculate the Capital that can be invested in day to day working.
Budgeting: The systems help the company to construct a proper budget.
Indentify and Reporting KPI's: SAP General Ledger Application helped the company to identify the Key Performance Indicators and helped in making better use of them. This would enhance the efficiency of the company.
Financial Management: The software helped Pantaloons in maintain its financial accounts and also helped the company to prepare balance sheets and the end of year auditing reports.
Also checked the amounts received and the amounts payable.
Working Of SAP General Ledger Application
In the initial stages when the ERP solution was used all the modules were diversified. Hence to compare data at the same time was a very difficult task. Hence with the new General Ledger Application the system was much integrated and comparing data was much easier. Thus the new system eliminated the use of using more components.
Fig. 4
Since Pantaloons is distributed all over the country the systems at every individual site were connected to a central server-client called as the Leading Ledger.
Fig. 5
Then all the Individual Leading Ledgers and the subsidiary Ledgers would integrate for form a final General Account Ledger. Now from this Ledger the system prepared its balance sheet.
Fig. 6
This is the way integration of all the outlets of the country is possible. Here it is seen that the Financial Information Systems at different locations of the country were merged into a single Accounting ledger application from where the final Financial Status could be obtained easily.
TAX ASSESSMENT:
The new general ledger application allows Pantaloons to map tax assessments in separate non leading ledgers, which are then combined to produce a final tax assessment for the year of the whole company. That is after integrating all its outlets.
THE FLOW OF A DOCUMENT IN A SAP GENERAL LEDGER APPS:
Fig. 7
Shown above is a path by which the document flows in the information system. It can either be done manually or automatically by systems. Doing it manually is time consuming and also quite tedious as it goes through many steps.
CONCLUSION
These days, SAP General Ledger gives Pantaloon a higher level of transparency into individual operations and helps it continually drive productivity improvements across the enterprise. For example, Pantaloon can now automatically split accounting line items per document for each company profit centres. And, because these transactions are handled by the software, the company no longer needs to make period adjustments to balance sheet and profit and loss statements.
With the document splitting tool, Pantaloon now has a real-time, complete picture of its accounts receivables and payables across all operational levels, which has enabled it to reduce receivables by up to 10%. In addition, it is now able to close the monthly books 20% faster, due to tight integration between financials and controlling components and real-time reconciliation capabilities.
The Information Systems helps the company helps them to create Unified reports for ensuring compliance with a variety of regulatory requirements. Data redundancy is also reduced helping in more accurate reports. Overall the general ledger system provides high quality reports resulting in better decision making and profit analysis.
FUTURE
Pantaloons plans to use other functions of SAP General Ledger as well. Like if it uses the parallel reporting feature of then it can also compare and manage the sales and marketing in different financial years.
Hence we see that for such a large company it is next to impossible to do all the financial and accounting work without the help of Information systems. Pantaloon will also benefits from this feature when India converges with International Financial Reporting Standards (IFRS), planned for 2011.
