Chapter 6

Chapter 15Accounting and Enterprise Software

Discussion Questions

15-1.Retail businesses often adopt software with "point-of-sale" features. The most important data for a retailer is likely to concern sales and inventory control. Having software that is able to record sales as they occur, and at the same time, deplete inventory, is vital to success. And of course, differences will be apparent for different sorts of retail merchandisers. For example, some retail stores sell merchandise and others rent merchandise. A store that rents merchandise must track the goods after they've left the store. Ideally the software would also include automatic messaging that would notify the store when an item is overdue.

Students might give a number of reasons for selecting specific software like the ability to download a free trial, support offered by the vendor, price, etc.

a. boutique software: http://www.wfxondemand.com/b. golf management software: http://www.activegolfsolutions.com/technology-solutions?gclid=CKCXl4bY5JcCFQSenAodVWE_DQc. Time and Billing for CPAs: http://www.imaginetime.com/?gclid=CPzghanY5JcCFRgqHgoda0YNDgd. software for animal breeders: http://Capterra.com/e. equipment rental software: http://www.orion-soft.com/f. retail stores (56 employees and growing): http://www.apparelsearch.com/software_retail_pos.htm15-2.Actually the features available in low-end packages today are truly amazing, when you consider that a decade ago, these features would only have been available in high-end packages. Still, the high end software is often worth its price, primarily because of flexibility and customization capabilities. High-end packages may allow for features such as "user-defined codes." These are extra fields that users can designate to meet the special needs of a particular business. High-end software also typically offers much more in terms of reporting.

15-3.Traditional ERP systems were back-office systems and addressed the internal information system needs of an enterprise. Todays extended enterprise systems include a variety of software that allows customers, vendors, employees, and others to access information within the company to enable collaboration across the enterprise and across outside groups such as strategic partners.

15-4.Some of the basic features of an ERP are: a single database and integration across the enterprise for sharing data (typically includes Manufacturing, Supply Chain Management, Financials, Projects, Human Resources and Customer Relationship Management). Although accounting software has changed a great deal (i.e., increasingly sophisticated with more and more features available in lower end packages and for less cost than before), they lack the integration feature of ERPs that is, data is not shared across the many functions of the organization.

15-5.A centralized database architecture minimizes data redundancy. Data redundancy refers to representing a data element more than once. While data redundancy uses up storage space, that isn't its primary drawback. When data elements are stored multiple times, it is easy for them to lose integrity because the values of the same data item may be different in different storage sites. For example, if you have student addresses stored in several files or databases, one may be updated when a student moves, and the others may not. Over time, the data can lose its value as data integrity is lost.

Combining multiple databases requires deciding on just one name for each data element. Along with one name, there must be one value, and one field specification. For example, in multiple databases an inventory item may have been represented differently by each one. In one, the field name may have been mnemonic, and in another it could have been a 12 position numerical field. Combining the databases means that you must choose which to use in the new centralized database.

15-6.Perhaps the best way to select an AIS is to hire a consultant or work with the companys CPA to get help identifying the best software for the new company. Even though a number of companies have developed ERPs for mid-sized companies, a new business may not have the capital initially to invest in even a smaller ERP package. However, some companies do acquire an ERP package when they start up their business. The primary advantage is that the company can adopt the best practices for processes that are incorporated in the package - from the beginning. There will literally be nothing to reengineer. The downside would be that if the company actually was going to have some unique processes, these would not be part of the software.

15-7.There are many articles available about enterprise-wide (or ERP, enterprise resource planning) systems. Good sources for these articles include the Wall Street Journal, Computerworld, Management Accounting, and Business Week. Students will discover that many of the cost savings relate to process improvement. This improvement could create a reduction in work force, and is also likely to decrease paper and paper-handling costs. Some companies adopting these systems have found that it was costing $50 to $75 to process an accounts payable transaction. Reengineering this process can reduce this cost to only a few dollars.

Many of the articles concerning enterprise-wide information systems are written because an organization has encountered problems. These problems usually relate to cost overruns or time delays. Companies can spend literally hundreds of millions of dollars on their information systems (e.g., General Motors and Procter and Gamble). It can take anywhere from a few months to several years for an installation of these systems to be completed. Regarding implementation issues, data conversion might be most time-consuming but designing new business processes is likely to be the most challenging.

Moving to an ERP represents a great deal of change for an enterprise. Most businesses are "silo-ed." Each functional area is separate and keeps its own data. The ERP requires breaking down the silos and integrating. An ERP represents new ways of doing things also because it typically involves redesigning business processes. When you implement an ERP, you will not receive the benefits from it without making significant changes in the way things are done. Change management activities help to counter some of the fears people have about change. These activities also help employees to understand the differences in the new system and how those differences affect them. Using the new system the old way will not achieve the goals of the ERP.

Oddly it may be more difficult to select a low-end accounting package than an ERP. There are very limited choices with ERP software and the packages have reached the point where all the major ones have the capability to handle the basics. Specific vendors have staked out certain territory in terms of industry so that it would be easy to choose a package that incorporates best practices for your industry. While there are dominant players in the lower end and middle markets, no one package has everything, so it may require more analysis to make sure you choose the best fit.

15-8.A VAR will, by definition, have sales relationships with a set of software vendors. For example, a VAR may be trained in Great Plains software. Therefore it is in the VAR's best interest to recommend the package(s) they represent.

Students can use an Internet search engine, such as Yahoo, to find sites for many accounting software programs. Using the terms construction software, health software, and retail software, students will find many specialized software vendors. You may want to ask students to print web pages for specific vendors, or to do some analysis of the special features associated with software for each industry. For example, many retail packages are specifically designed to accommodate point-of-sale transactions. 15-9.There are many consequences in making a bad decision in acquiring a new accounting information system. Aside from the wasted financial investment, time will have been wasted. In trying to make it work, employees are likely to become frustrated and discouraged. Managers will not have the information they need to make good decisions about the business. In the worst case scenario, a company may have trouble managing its inventories, paying its bills, collecting on accounts receivable, managing cash flows, reporting net income, and meeting payroll deadlines.

15-10.ERPs support and integrate business processes, and as such, incorporate best practices for business processes. Thus, it is important for companies to align their business processes with the methodology embedded in the ERP to gain maximum efficiencies and effectiveness from the ERP. In fact, some experts claim that an ERP implementation is not as much about technology as it is about business transformation.

Successful aspects for a BPR project include (from Figure 15-6): Appropriate allocation of time for the BPR project: approximately 2/3 of the time planning and designing; and 1/3 of the time on development and implementation

Allow an appropriate amount of time to complete the project. An average BPR project takes a little over a year (13.8 months) Engage a proven change management consultant, which is critical to meet or exceed project objectives

Successful BPR teams are dedicated to the project, they have support from top management, and they have a clear vision of objectives and goals

The company should use consultants as leaders/key facilitators of the BPR project to coordinate team efforts and for IT or technical systems advice and expertise

Problems

15-11.

To find lists of vendors for low-end and enterprise systems, visit http://www.2020software.com. Another site to start your search is http://www.erp.com. The depth behind web sites is sometimes related to the product pricebut not always. Many packages today also are scalable, which means that one web site for the package will serve software ranging from low-end to high middle-end.

15-12.

Scalable, as we defined in the chapter, is the ability of software or hardware to seamlessly accommodate growth of a company (i.e., increased demands on the system) to easily be expanded or upgraded as necessary. For a business owner (and managers of larger firms), this means that an investment in a software package and/or hardware is a long-term investment, i.e., the system will not have to be replaced when the company grows and expands the system can grow with the company.15-13.

a. This question should get a lively discussion started among the students. Obviously, we have an entrepreneur who started a business, took on a business partner to help him grow the bike shop, and now has a business that is growing out of control. As with many small, family-owned businesses or small partnerships, growth seems desirable, but many problems and issues may confront the owner(s). For example, the owners must concern themselves with issues of cash flows, buying vs. leasing (office or production space, equipment, etc.), inventory control, internal controls, division of responsibilities, etc.

It sounds like Steven and Tom only have an accountant to do their annual financial statements. While that may have been fine for one small bike shop, more than likely it is not adequate for a growing business such as this one. For example, how do the owners address such questions as: How are we managing our Accounts Payable? How do we know were paying our bills on time? How are we managing cash receipts? Accounts Receivable? Do we have cash reserves? If so, what are we doing with them? Do we have any internal controls? What are they? Are they adequate?

b. Most likely, students will go to the web sites for the Entry-Level software solutions identified in Figure 15-11. The bicycle shop meets the criteria for this level of accounting software (i.e., revenues < $5 million, and up to 20 employees). Several vendors that students might also consider are the Top 7 Small Business Accounting software options that are identified (and compared) by 2020 Software (http://www.2020software.com).

However, you might want to discuss the fact that the business is growing and is at the upper limit of the capabilities of a number of the software solutions in the small business section. Perhaps the bicycle shop should consider the next higher level of software (mid-market) so that the capabilities will not soon be exceeded. It would undoubtedly be very costly for the bike shop to invest in an accounting software package immediately and then discover in the following year or two that the software is inadequate.

Steven and Tom might want to consider the following features: sales, payroll, inventory control, purchasing, accounts payable, accounts receivable, etc. They should also ask questions such as: What reports are available? Will we be able to query the system to get answers to questions (those we have now or new questions we may have in the future that we have not thought about yet)?

c. There is no easy answer to this question. Frequently, students will say a consultant is necessary and give very little thought to the cost of such services and whether the firm would be financially able to do so. In the case of our bicycle shop, most likely a consultant would be able to help Steven and Tom. However, they should first do their homework! Steven and Tom should do a sufficient amount of research on the available software solutions that are targeted for the size of their company. They should read professional journals and probably talk with a number of their business associates in the Chamber of Commerce, the State Society of CPAs, and other professional organizations so that they obtain as much information as possible about the software systems that others are using (businesses that are of a comparable size) and about the consulting firm that they might choose.

Steven and Tom need to decide what they expect of the software and what they hope to achieve by selecting an appropriate system. Several of the articles in the Recommended Readings section at the end of this chapter offer help in comparing software and understanding the variety of features available (e.g., Johnston 2003; Menninger 2003). Specifically, Johnston (A Strategy for Finding the Right Accounting Software) cautions that this is not a task to take lightly, claiming that it is one of the most challenging tasks of a professional career! Here are some steps that Johnston recommends: (1) establish a technology advisory committee (this would be Steve and Tom); (2) prepare a needs analysis (this should include all of the employees) that identifies all the tasks that each person (department) does; (3) consider an outside consultant a wise decision if this project is beyond the time and technical resources of the business.15-14.

a. B&R, Inc. may want to implement ERP. The company is concerned with reducing expenses and ERP is a way to accomplish that. Other benefits may be better supply chain relationships with suppliers and customers. The Internet features of this software are particularly beneficial. A consumer products company probably also needs the software to maintain a competitive stance in the industry. Many of the benefits are intangible such as customer satisfaction and are difficult to evaluate or quantify. The most quantifiable benefit is usually a reduction of employees which may or may not actually occur. b. Customers of ERP software are usually big companies often Fortune 500. However, as we mentioned in the chapter, a number of software companies now offer downsized ERPs to accommodate the needs of mid-sized companies that could not afford millions of dollars for the earlier versions of ERPs. The SAP web site allows you to search its list of customers by country, industry, and solution. c. The horror stories often concern cost overruns, unrealistic expectations, poor implementation consulting, and prolonged implementation. For example, several universities had problems with PeopleSoft implementations. The software did not solve some problems and created some new ones. Some companies have found that they can only use parts of the ERP system and need to keep some of their old systems running. Because some ERP software handles business processes one way only (according to best practices), some organizations may not be able to fit the mold. There are many articles available to read that have stories about failed ERP implementations. A search of the Wall Street Journal interactive web site can turn up some of these. One of the most famous stories was Hersheys failure to deliver Halloween candy on time and the company blamed it on the new ERP.Case Analyses15-15. The RETAIL Cooperative (Creating an Enterprise Portal)1. Enterprise portals (EPs) are gaining in popularity based on their ability to address the information and application access requirements of knowledge workers. Firms want the capability to offer information inside the enterprise to different groups of people (employees, partners, vendors, distributors, etc.). In general, a well-designed EP can help reduce inefficiencies from different computer systems and technologies, paper-intensive processes, and outdated manual procedures.

There are many ways to describe a portal but the characteristic that distinguishes a portal (from say, a web site) is that a portal organizes both data and functions from multiple sources across the organization into a single, easy-to-use interface. Several recognizable examples of successful portal technology are Amazon.com, Landsend.com, and eBay each offers the convenience of purchasing products and services online.Enterprise portal platform vendors include IBM WebSphere, SAP Enterprise Portal, Oracle, and Microsoft SharePoint. Some of the advantages of an Enterprise Portal include:For the organization:

a tool for knowledge management early implementation of an EP might give a competitive advantage

could help with improving time-to-market

might offer opportunities to change how company is operating

For employees:

online support, training, and worldwide information distribution

access information quickly for decision-making

convenience of quick access to applications that are used frequentlyFor suppliers, partners, customers, and those with strategic alliances:

opportunity to place orders, confirm status, or search resources at any time; presumably this will also increase loyalty to the firm with the portal Examples:

Hewlett-Packard implemented a human resources portal for employees

Whirlpool implemented a B2B portal to handle sales growth from $7B to $10B Virginia Commonwealth University has a human resources portal for staff and faculty to access all sorts of payroll and personal data maintained by the university

As we might imagine, organizations have a wealth of structured and unstructured information that is stored across the enterprise in a variety of enterprise applications, databases, content repositories, archives, and perhaps legacy systems. The challenge for a successful implementation of an Enterprise Portal is to integrate the current content management with the portal application so that the organizations information will be easily accessed and used by the intended individuals and groups of people.2.Students should have fun with this and should be encouraged to develop interesting and informative presentations.3.Surveys of companies who implemented EPs indicate that:

Most firms were in the financial management, process manufacturing, and business/legal services industries Almost half had no performance metrics in place to measure the financial impact of their portal initiative

The EP implementations were usually accomplished by a cross-functional team Implementations usually started with a specific department or departments and then expanded to the rest of the organization (providing time to focus on problems and issues with individuals, software, technology, etc.)

A variety of sources suggest useful steps that organizations might take to implement an EP. Not surprisingly, these steps are similar to any large project implementation that an organization might attempt. Accordingly, students should identify several of the following: Select a function or department in the organization to get started (dont try to implement an EP for the entire organization immediately)

As with any project, select a team of individuals (preferably from across the organization) and have them define the scope of the project and the information needs of the department

The project team should next work with IT people (and perhaps consultants) to identify the systems requirements and determine what is feasible If possible, have the vendor do a prototype for individuals in the organization to use and test the features of the portal; evaluate and continue to work with the vendor until users are satisfied

Implement the portal application, perhaps in parallel with existing systems so that employees and other stakeholders are comfortable with the new system before the old one is disabled4.Depending on how many EP vendors are considered, students might come up with a variety of different recommendations. As the instructor, you may wish to select 2-4 vendors and then ask the students to only evaluate those vendors and make a selection from this short list. Either way, the students will learn a great deal more about EPs and be able to evaluate (and hopefully benefit from) such an application when they are in the workforce.15-16. Linda Stanley and State University (Transitioning from a Legacy System to an ERP)

1. Probably the ERP adopted by most universities is the Banner Suite that includes the following modules: Student, Financial Aid, Human Resources, Finance, and Advancement. The source for the following information on each of these modules is the Banner home page: http://www.sungardhe.com/Products/Product.aspx?id=1024.

Student module: fuses administrative and academic functions, giving prospects, current students, and faculty secure, 24x7, online access to the information they need. Prospects can apply for admissions. Students can search and register for classes by term or date, and retrieve financial aid data. Faculty can manage course information, rosters, and grading, and advise students.

Financial Aid module: aligns with enrollment practices, including early decision, early action, and regular admissions, to provide financial aid services to students; automates day-to-day responsibilities; offers students many services (i.e., complete requirements; accept, decrease, and reject awards; and communicate with the financial aid office all over the web).

Human Resources module: administrative and self-service solution to manage personnel information across the institution; accommodates payrolls, budgeting policies and procedures, and workforce management; enables employees to obtain answers to routine inquiries, personnel and payroll information. Finance module: makes data available 24x7 to all key stakeholdersfrom procurement and accounts payable to sponsored research programs and endowment management; finance professionals can prepare and control budgets to facilitate sound decisions. Banner Finance was built using higher education fund accounting principles, so it is easier and more cost-effective to implement, configure, maintain, upgrade, and use.

Advancement module: facilitates relationships with alumni, donors, friends, parents, community members, corporations, foundations, and other organizations. Offers fundraising support that includes campaign management, event management, annual giving programs, stewardship activities, corporate/foundation programs, planned giving, and major donor efforts. Self-service features provide internet access to staff, alumni, and other friends of the institution. This makes it easy for alumni to make donations and keep in touch with their former classmates, and it gives fundraising staff quick access to complete constituent informationanytime, anywhere. Staff can monitor the progress of assigned prospects. All activity recorded for a prospect, including new gift and contact information, is immediately available.

It is not unusual for a university that is in the process of adopting an ERP to have a place on the university web site that is dedicated to informing the university community of all aspects of the implementation. 2. The business processes that would be most affected would be those that correspond to the modules of the ERP that the university intends to adopt (see #1 above).3.A number of the benefits are identified above in the descriptions of the modules, such as: Integration of data across the modules for information sharing, enabling better decision making Stakeholders have access to appropriate information 24x7 over the Internet Enables better communication across user groups Enables better customer service (includes students, faculty, and many others identified in #1 above)

Some of the typical costs include: Cost of the software package Consultants to help implement the ERP BPR projects, especially the employee time spent (opportunity cost because they cant do their normal responsibilities while they work on the BPR project)

Potential morale issues that must be considered and dealt with (change management)

Training so employees can use the system and that the university can more fully realize benefits of the new system

4. As we discussed in the chapter, and included in Figure 15-6, the use of consultants is very directly related to a successful implementation of an ERP. One of the keys to a successful ERP implementation is the leadership, and an interesting article on this topic is by Edwin Cornelius, entitled, Who Should Lead Your Campus ERP Implementation? and may be found at this site: http://www.collegiateproject.com/articles/Who%20should%20lead%20your%20campus%20ERP%20implementation.pdf

The different types of support that consultants can offer are:

Change management

Leader/key facilitator of the project (working with the university project manager)

Coordination of the ERP implementation team(s) efforts

IT or technical systems advice and expertise

5.A number of examples are available for expected timelines to implement an ERP (for example, see Temple University: http://www.temple.edu/cs/erp/timeline.htm). Some use graphical representations, some use a table format, but the information conveyed is the same giving the viewer an idea of the length of time to implement the ERP and the progression of the implementation across the university.

Since there are many modules to implement, Linda would undoubtedly want to include timelines for implementation. She would suggest which modules to install first and how long it will take to install and train users in the new systems. Installing in stages has many advantages, one of which is success in smaller increments which raises confidence and moral.15-17.Springsteen, Inc. (Enterprise Resource Planning System)

Yes, one of this book's authors is a big fan of Bruce "The Boss" Springsteen!

This is a fun case to use in class. It's also a good way for students to understand the various issues associated with implementing a large-scale information system. You might want to assign it ahead of time and allow the groups to do some research before holding their in-class "meeting." The following describes some of the information each "role" should discuss.

Patricia (CEO) - she might mention that the new system could help the company to redesign their processes so that they reflect the best practices in their industry. Since the competition has done it, they might be able to fill orders faster, which could hurt Springsteen.

Bruce (CFO) - the dollar costs can include direct and indirect costs. Direct costs are for the software, hardware, and consultants. Indirect costs would be those associated with diverting employee time to the ERP project. There are also going to be ongoing costs associated with training and upgrades.

Wendy (CIO) - will mention the centralized database and the advantages of it. Some of the technical issues she might describe concern security, data conversion, customization, and screen design.

Clarence - is just a salesman! He should talk about the consultant's role and the expectations the consultant will have of the client during the implementation. The cost and time should be on par with the norm - several months to over a year and several million dollars.

Rosalita - can discuss the problems some projects encounter. One of the primary reasons for failure can be lack of management involvement and interest. Change management can help ensure the success of the new system. Two important components of the change management will be training in the new business processes and frequent, firm-wide communication.

Steve - can talk about back-office ERP with distribution, manufacturing, financial, and human resource functions. He can also describe ERP II, including SCM, CRM, APS, and so on.

SM 15-1