procurement of enterprise resource planning systems v6 final
TRANSCRIPT
MANAGEMENT AND FINANCIAL REPORTING SYSTEM : PROCUREMENT PROCESS
Master of Forensic Accounting & Financial Criminology (MFAFC) Batch September 2012©
1
MOHAMAD RIZAL AHMAD
AHMAD AZWADI AMERUDDIN
SYED AZHARUDDIN SYED ABDUL RAHMAN
ELRIAYU MUHAMAD NGISA
YUZAINI MOHD YUNUS
AIS 710 ACCOUNTING INFORMATION SYSTEM
6 April 2014
GROUP MASEY
CONTENTS2
Introduction Procurement cycle Fraud in Procurement, Government
Initiatives, Result & Scenario in Automating Procurement Perspective - KTSB Overview of SAP & QAD SAP’s procurement QAD’s procurement SAP vs QAD Conclusion
3
Introduction
Introduction• Enterprise Resource Planning (ERP) system has been
recognized as a useful tool in the view of enterprise process integration mainly in the manufacturing fields since 1990s.
• Based in the development of IT and business reengineering, ERP system has been spotlighted as one of the most powerful tool among methodologies which set up and actualize enterprise future vision in the aspects of establish enterprise-wide management innovation.
• Garcia-Sanchez and Perez-Bernal (2007) defined ERP systems as an information system that combine organizational functions and distribute shared benefits to all departments.
4
Introduction (con’t)• Kvaros Alves (2008) stated the history of ERP adoption:
• Stefanou, C.J. (2001) mentioned that an ERP life cycle consists of three major phases: (a) pre-implementation, (b) implementation, and (c) post implementation
5
• focused on the integration of the various inner-processes and operations systems of the enterprise.In 1990’s
• focus expanded its range including CRM (Custom Relationship Management) and SCM (Supply Chain Management) related value chain, and pursued more advanced integration
In 2000’s
Introduction (con’t)
6
What is purchasing system?• procedures, manual or computerized, followed by an organization to achieve
the following basic objectives: (1) to determine the quality and quantity needed and the time when an item
is needed; (2) to obtain the best possible price; and (3) to maintain information on sources of supply. The system should utilize
such concepts as Economic Order Quantity (EOQ) , optimal reorder point, quantity discount , and Material Requirement Planning (MRP) .
• Brandon Coleman, ‘Finding the right Accounting Software Package’ believes that an effective accounting software package can help make monitoring finances less cumbersome and help save money at the same time.
• Selecting effective accounting software can be one of the most difficult tasks a company may face. Thus, Coleman recommends taking into consideration the following things when selecting software:
a) organizational needs b) user friendliness of e-procurement vendor c) hardware requirements d) flexibility e) price.
7
Procurement Cycle
Procurement cycle
• The procurement cycle normally consist of eight processes:
8. Payment
3. Requisition assigned to a Vendor
5. Order follow-up
2. Source determination
1. Requirements determination
4. Order processing
Purchase OrderPurchase Order
6. Goods receipt and inventory management
Purchase OrderPurchase Order
7. Invoice verification
Procurement cycle (con’t)• The main documents and transactions in the
Procurement process are:
Planning, Reporting, and Analysis
Purchase Requisition
Purchase Order
GoodsReceipt
InvoicePosting
Note: Payments to vendors are usually made at specified times (e.g. at the end of the month).
Payment amounts are determined according to the ‘open’ invoices posted on the system.
• Procurement business process uses the following organizational elements:
Company Code Plant Storage Location
Purchasing Organization Purchasing Group
Procurement cycle (con’t)
Source: Integrated Business Process with SAP ERP - Procurement
11
COMPANY CODE• represents an independent accounting unit and legally required financial statements as well
as profit and loss statements are created. • is an organizational structure of accounting.
PLANT• is an organizational element within a company. Within a plant, goods are procured, services rendered,
or goods are prepared for delivery. Eg. Manufacturing facilities, warehouses & distribution centers• is the central organizational unit of logistics. One plant is assigned to one company code; company
codes can include multiple plants.
STORAGE LOCATION• is an organizational unit enabling local distinction of material stock within a plant. • Quantitative inventory management and inventory are conducted on storage location level .
PURCHASING ORGANIZATION• are structured to negotiate procurement terms and conditions regarding one or multiple
plants or companies. • Pricing conditions are set at purchasing organization level. Purchasing organizations are
assigned to the material management functional area.
PURCHASING GROUP• are keys for buyers or groups of buyers responsible for particular buying activities. They cannot
be assigned to a purchasing organization, since purchasing groups are assigned directly to procurement objects (e.g. particular materials).
• This is not limited to the borders of particular organizational units, e.g. company codes or purchasing organizations.
Procurement cycle (con’t)
Source: Integrated Business Process with SAP ERP - Procurement
12
Material Management (MM) function area
Procurement cycle (con’t)
Source: Integrated Business Process with SAP ERP - Procurement
13
Material Management (MM) function area
Financial function area
Procurement cycle (con’t)
Source: Integrated Business Process with SAP ERP - Procurement
14
Fraud in Procurement, Government Initiatives,
Result & Scenario in Automating
Fraud in ProcurementProcurement fraud can be defined as dishonestly obtaining an advantage, avoiding an obligation or causing a loss to public property or various means during procurement process by public servants, contractors or any other person involved in the procurement.
Types of Procurement fraud :Kickback, whereby a dishonest agent of the supplier pays a dishonest agent of
the purchaser to select the supplier's bid, often at an inflated price.Collusion among bidders to reduce competition.Providing bidders with advance "inside" information. Submission of false or inflated invoices for services and products that are
not delivered or work that is never done. "Shadow vendors", shell companies that are set up and used for billing, may be used in such schemes.
Intentional substitution of substandard materials without the customer's agreement.
Use of "sole source" contracts without proper justification.Use of prequalification standards in specifications to unnecessarily exclude
otherwise qualified contractors.Dividing requirements to qualify for small-purchase procedures to avoid
scrutiny for contract review procedures of larger purchases.
15
Government Initiative
16
Government Initiative (con’t)
17
Government Initiative (con’t)
18
19
Government Initiative (con’t)
20
Government Initiative (con’t)
21
Result of Government Initiative
22
http://myprocurement.treasury.gov.my/
Result of Government Initiative (con’t)
Scenario in Automating Good Governance: Government Procurement Anti-Corruption
23
Source: Free Balance – Governance Scenario: GRP Impact for Anti-Corruption in Procurement
24
There are universal governance tools operating at every stage in the procurement lifecycle including:
• Controls
a) Chart of Accounts that aligns all government financial activity to budgets, users, purpose, organizational structure and accounting types to reduce accounting manipulation
b) Segregation of Duties to ensure that multiple individuals are involved in the procurement cycle making manipulation more difficult.
c) Integration to ensure that the commitment rules in use in the commitment accounting system are respected in the procurement system
d) Procedure Workflow that articulates the proper processes and prevents system user from changing rules such as the length of time that vendors have to respond to the RFP
• Decision-making
a) Workflow Alerts that notify interested parties such as internal audit or the Minister of Finance about milestones in the tendering process, thus providing more oversight
b) Dashboards that provide exception reporting to managers about the process
Scenario in Automating Good Governance: Government Procurement Anti-Corruption (con’t)
Source: Free Balance – Governance Scenario: GRP Impact for Anti-Corruption in Procurement
25
Some governance tools augment specific parts of procurement lifecycle: • Secure infrastructure is augmented by control tools such as data integrity that
prevents manipulation in underlying databases, encryption that prevents people from accessing certain types of data, and general IT security such as virtual private networks to reduce ICT manipulation
• User group controls is augmented by user management such as password controls • Budget preparation is enabled through structured multiple year planning decision-
making such as MTEF that leverages historical data to ensure that the planned hospital budget is realistic
• Commitment accounting is enabled through budget and commitment controls that ensure that obligations do not exceed commitments and that items not part of the hospital procurement are acquired
• Procurement is enhanced through e-procurement transparency that enables comparing contracts over time to expose potential manipulation
• Payment management is enhanced through secure payment controls such as Electronic Funds Transfer (EFT) that reduces the opportunity for the fungibility of cash and ensures traceability
• Auditing is enhanced through decision-making tools that trace every function, transaction and approval in the system from payments back to the original plan through the audit trail
Scenario in Automating Good Governance: Government Procurement Anti-Corruption (con’t)
Source: Free Balance – Governance Scenario: GRP Impact for Anti-Corruption in Procurement
26
Institutional governance enablers that are critical across the procurement lifecycle include: • Capacity of stakeholders including businesses, civil
society, legislature, anti-corruption organizations and the civil service for management and oversight
• Political Will by stakeholders such as the executive to support anti-corruption activities
• Standards used in public financials that provides better information to stakeholders
• Compliance processes and norms within the government
Scenario in Automating Good Governance: Government Procurement Anti-Corruption (con’t)
Source: Free Balance – Governance Scenario: GRP Impact for Anti-Corruption in Procurement
27
Procurement Perspective in Kejuruteraan Samudra Timur
Berhad (KSTB)
Procurement Perspective in KSTBCombination process: Manual and System (Auto Count)
8. Payment
3. Requisition assigned to a Vendor
5. Order follow-up
2. Source determination
1. Requirements determination
4. Order processing
Purchase OrderPurchase Order
6. Goods receipt and inventory management
Purchase OrderPurchase Order
7. Invoice verification
MANUAL FORM
MANUAL SEARCH. NO DATA BEEN
STORED IN THE SYSTEM
MANUAL REQUEST VIA
EMAIL/FAX
SYSTEM.
MANUAL. DATA ALREADY IN SYSTEM BUT IT UNABLE TO
ALERT USER ON PENDING PO
LIST.
SYSTEM. GOOD RECEIVED NOTES ISSUED
SYSTEM. MATCHING WITH
PO AND GRN
SYSTEM. CLOSE OF
CREDITORS AGEING
50 % PROCESS
VIA SYSTEM
29
Overview of SAP & QAD
Overview of SAP and QAD30
Country of Origin Germany USA
Implementation Date Aug 2010 17 February 2014
Consultant Vantage Point Magnus Consulting
Modules implemented Accounts, Material Management, Human Resources
Financial Mgmt, supply chain & distribution, manufacturing, inventory, project accounting
Implementation Cost
: Software Total RM3m RM850,000/-
: Hardware RM250,000/-
No of User Licenses 70 21
Cost per license RM1,000/user/month USD2,920
Yearly Maintenance cost USD10,011
31
SAP’s PROCUREMENT
SAP’s procurement• HeiTech Padu (HTP) SAP Procurement starts off with its raider
program outside SAP, known as Employee Self Service (ESS) where Personal Assistants (PA) will key in SSF (purchase request) inputs for Purchase Order (PO) pending approval, scans and upload quotations
• Procurement will verify and sends for appropriate approvals (via email notification) of the PR, once approved, the PO will be cut and send for approval in accordance to Limits of Authority (LOA)
• PO will be printed and signed off before sending it to the vendor (via email, fax and snail mail)
• Once vendor delivers, the GRN will be posted in SAP, Invoice sent will go MIGO (matching of invoice and PO) once verified complete documentation will be sent to Finance Department for MIRO (invoice process)
32
• HTP practices all goods and services, PO will be cut.• Fast track PO will be dealt with when the Procurement
Committee Meeting (PCM) approve the purchase, by pass the PO process only Project Manager will have to approve the PO
• HTP practices all goods and services items, PO will be cut.
• In summary is short but the process comes a long way of thoughts before it could be summarised.
• ERP must be carefully thought and planned out before it could be deployed into implementation.
33
SAP’s procurement (con’t)
34
QAD ’s PROCUREMENT
QAD’s procurement35
60%20%
10% 10%
Types of Procurement in Rafulin
Construction ManufacturingAdmin. ItemsOthers
QAD’s procurement (con’t)
•
36
Fully integrated with planning that provides sophisticated pricing across contracts & individual and blanket order
QAD’s procurement (con’t)• Key Features of Purchasing• Manage entire purchasing process from requisition entry, PO entry, PO print,
to part receipt process• Supports repetitive deliveries with supplier schedules, and discrete purchases• Accurate, reliable requirements sent to suppliers allowing them to order raw
materials, plan production, and arrange on-time deliveries• Provides purchase order processing for blanket POs, contract POs, discrete
POs• Supports repetitive deliveries with supplier schedules, and discrete purchases• Requisitioning process includes the creation, maintenance and routing of
discrete multiple-line purchase requisitions through the approval process• Requisitions can be accessed, approved, denied or rerouted on mobile
devices (iPhone and Android) while away from your desk. QAD Mobile GRS application is optimized for mobile access, and available to QAD customers free of charge
37
38
QAD’s procurement (con’t)
QAD’s procurement (con’t)
39
40
QAD’s procurement (con’t)
41
QAD’s procurement (con’t)
42
QAD’s procurement (con’t)
43
CONCLUSION : SAP VS QAD
Contents
Caring | Credible | Committed
Century Software (M) Sdn Bhd
Functional Comparison
Functional Comparison SAP QAD
Import/Export function of data transfer
Flexible chart of accounts
Multiple printing options – Output to PDF, Excel, HTML, Text
User Definable Fields Option
Online user manual and training docs
Report Writer function
Polished Document Formatting
Supports multi currency transactions
Supports multiple languages
Supports accrual basis
45
ISSUES SAP QAD
Procurement Process Suites to HiTech Pade Requirement
Suites to Rafulin Requirement
Generic system YES YES
Customization Costly – RM1500 per man day
Costly – RM1500 per man day
User Friendly YES – with training YES – modular concept
Integration with other system
Allow Allow
Process Flow Must be determined in advance
User can create and modify
Cost Nuclear Bomb 1/3 of SAP
WHAKAWHETAI KI A KOUTOU (TQ in Maori)
46