Executive Summary

SAP Financial Solutions

SAP has been the market leader in Enterprise Resource Planning system for the last three
decades. The whole system offers solutions for business challenges especially in End-user service
delivery, Financial, Human Capital Management, Operations, Corporate Services as well as
Performance Management area. It works on real-time basis and integrates the relevant modules
to help the users develop information required to be used for decision making and strategic
planning.
As to assist the accounting needs of an enterprise, SAP ERP Financial system features two main
functions, namely Financial Accounting and Management Accounting.
Financial Accounting (FI)
There are both technical and legal needs to record and archive Financial Accounting data, in
which SAP can come in and support these needs. It features management and presentations of all
accounting data using open and integrated system that contain the whole enterprise to ease data
flow from every department to finally produce the information required to assist strategic
decision-making within the organization.
This module comprises the following sub-components:
• General Ledger
The General Ledger (G/L) will contain the enterprise accounts through recordings of all
business transactions from a business point of view. For this purpose, G/L is integrated
with other operational areas such as purchasing, sales and distributions so that the
information recorded will always be updated, complete and accurate.
It can be accessed through either group or company level, equipped with automatic
reconciliation ledgers that posts all sub-ledgers items such as Account Payables/
Receivables, Assets, etc into the appropriate G/L accounts which features simultaneous
update as well as real time evaluation on and report of the current accounting data.
• Accounts Payable
This sub-ledger account records the transactions that happen in relation to suppliers or
vendor purchasing activities. It is integrated with Procurement as its main source and G/L
for simultaneous updates. The available payment programs within SAP includes the
general method such as checks and transfers in printed as well as electronic forms.
• Accounts Receivable
This sub-ledger account records the transactions that happen in relation to customers
sales activities. It is integrated with Sales Management as its main source and G/L for
simultaneous updates. The payment program can automatically carry out direct debiting
and down payments.
• Bank Accounting
This sub-ledger account records the transactions that happen in relation to banks,
including cash management.

Prepared by Amanda Aurora M. Simanjuntak for Hermis Consulting

 Executive Summary

• Asset Accounting
This sub-ledger account records the transactions that happen in relation to the
enterprise's assets, including acquisition, depreciation, etc; based on the country and
company codes. SAP also allows parallel standards as to accommodate both national and
international requirements (i.e. International Accounting Standards, GAAP).
• Funds Management
This sub-ledger serves the function of setting up budgets for revenues and expenses for
individual responsibility areas, monitor future funds movements in light of the budget
available, and sustain the variances. In addition to G/L, it is also integrated with other SAP
modules under the R/3 version.
• Travel Management
This sub-ledger account records the transactions that happen in relation to all travel or
handling trips. It covers request, planning and booking of trips, as well as the settlement
of travel expenses and the transfer of settlement results to other business function areas.
The implementation is intended to increase efficiency and reduce costs through analysis of
trip processes in terms of, for example, the approval workflow of business trips, trip rules
for certain employee groups, etc.
• Special Purpose Ledger
The special purpose ledger (S/L) is created to serve the specific enterprise's business
needs, according to your self-defined constructs.
• Consolidation
This feature combines the accounts of multiple entities in an organization, or financial
statements of relevant companies into a single, consolidated financial statements of the
group as, now a single entity. This process will eliminate all transactions such as
investments or trades that happen among the individual affiliates of the group.
Management Accounting (CO)
With CO stands for Controlling, this module is used to support management accounting as to
provide the relevant information regarding the internal operations of the enterprise that might be
material to decision-making processes. The functions will be carried out in every controlling area
—the organization unit that represents a closed system used for accounting purposes.
This module comprises the following sub-components:
• Cost Element Accounting
Cost Element Accounting provides the information on the company costs and revenues
(i.e. the origin), which is derived from the figures in Materials Management, Sales and
Distribution, or mainly Financial Accounting General Ledger. This will only take account of
the costs that either do not have another expense or are listed as only one expense in FI.
• Cost Center Accounting
In Cost Center Accounting costs are assigned to the business units within the controlling
area in which they incurred (i.e. departments). It can be used to monitor the performance

Prepared by Amanda Aurora M. Simanjuntak for Hermis Consulting

 Executive Summary

of each individual business units in terms of cost efficiency and provides relevant data for
decision-making processes. Example of cost centers are Marketing, Purchasing, Human
Resources, Finance, Facilities, or even Quality.
• Internal Orders
Internal Orders track costs to specific jobs, services or tasks which will relate the costs
incurred to the business transactions behind them. Compared to Cost Elements and Cost
Center Accounting, this level of monitoring is more detailed and object-oriented, which
will improve the quality of information for the decision-making needs.
• Activity-Based Costing ( ABC)
ABC allocates costs with activity-related cost drivers according to their genuine resource
consumption to show the clear causal relationship as well as examinable and fair matching
between resources and activity levels with greater level of accuracy. With such definition,
ABC allows cross-functional view of the cost centers. It can be used along with Product
Costing and Profitability Analysis to provide a more realistic view on the matters.
• Product Cost Controlling
At this level, the information system provides the information of costs incurred during
product manufacturing or service provisions that are required for cost analysis as to
determine the competitive price to market the products. Sub-components to this module
is Product Cost Planning, Cost Object Controlling and Actual Costing/ Material Ledger.
• Profitability Analysis
Profitability analysis provides the information required for the management to assess the
performance of business segments, in terms of profits/ contributions margins. This can be
classified according to products, customers or the strategic business units such as sales
organizations or business areas, with respect to your company's profit or contribution
margin. It could help the decision making process, for instances price determination,
customer selection, conditioning, and for choosing the distribution channel.
• Profit Center Accounting
Profit Center Accounting can make use of Profitability Analysis, but is extended to internal
business units levels that are responsible for the costs and revenues. Same as profitability
analysis, it also comprises of period accounting or the cost-of-sales approach. It also
enables fixed capital analysis and the statistical key figures (i.e. number of employees,
square meters, and so on) by profit center. Consequently, you can calculate all the key
figures commonly used in cost accounting (return on investment, cash flow, sales per
employee, and so on).

Prepared by Amanda Aurora M. Simanjuntak for Hermis Consulting