AC2401 Bible

Week 1
Seminar 1: Business Process Reengineering
Business Process – A set of related, coordinated and structured activities and tasks performed by a
person, computer or machine to accomplish a specific organisation goal.
Functional Structure – When an organisation is divided into groups or departments based on their
functions (e.g. sales, production, administration)
Accounting Information System (AIS) – A system that collects, records, stores and processes data to
produce information for decision making purposes. Its components are people, procedures, data,
software, IT infrastructure, and the internal controls and security measures.
Enterprise Resource Planning System (ERP) – A system that integrates all aspects of an enterprise’s
activities (e.g. manufacturing, sales, accounting, human resources, inventory management) into one
system. Information flow is facilitated and shared between different business functions.
The Value Chain (Porter, 1980)
• Proposes that the chain of activities and their connections be analysed to determine points
and opportunities that can enhance value throughout the organisation and eventually to the
customers (Inputs are converted into outputs to customers)
Data Processing Cycle
@somethingrandom | Carousell | 1
Internal and External Information Flows
• Internal information flows within an organisation (e.g. communications about an

organisation’s vision, mission and objectives for planning and execution purposes)
• External information flows could be with customers, suppliers and shareholders for
feedback (e.g. on quality or financial reporting, etc)
Characteristics of Useful Information (Regardless of its physical form or technology)
• Relevance (Serves a purpose)

• Timeliness (No older than the time period of the action it supports)
• Accuracy (Free from material errors)
• Completeness (All information essential to a decision or task is present)
• Summarisation (Aggregated in accordance with the user’s needs)
Business Transactions as Sources of AIS
• Business transactions provide the input data that is processed and stored within an AIS to
generate information
Manual vs Database AIS
Task Manual Database
Transactions Entered: Debit and credit journal Transactions entered using
• Vendor Transactions entries made manually onscreen database forms such
• Customer Transactions as onscreen invoices and
• Employee Transactions checks
Financial Cycle: Debit and credit journal Adjustments made using
• Adjusting Entries entries made manually onscreen journal
• Correcting Entries
Financial Cycle: Debit and credit journal Completed automatically
• Closing Entries entries made manually
Account Balances Entries in journal manually Account information stored in
posted to GL accounts and database tables; balances
account balances recalculated automatically calculated
Financial Statements and Reports prepared manually Database queries retrieve
Reports using GL account balances information from various
database tables and generate
reports
Organisational Improvement Approaches
Statistical Based Methods Measure-Based Methods Technology-Based Methods

• ISO 9000 • Activity-based Costing • Intranet/Extranet/EDI
• Cost of Quality • Product Costing • SCM/CRM
• PDCA Cycle • Balanced Scorecard • MRP/ERP
• Continuous • Cost Reduction • ICR/Workflow
Improvement • EVA/MVA Management
Time-Based Methods Marketing-Based Methods Structural-Based Methods

• JIT/Kanban • Relationship • Restructuring
• Time-to-Market, CPM Marketing • Downsizing
• Concurrent • Customer Retention • Centralisation/
Engineering • Service Quality Decentralisation
• Flatten Hierarchy
Strategy-Based Methods Employee-Based Methods Process-Based Methods
• Value Chain Analysis • Cultural Change • BPR
• Outsourcing • Skill-based Pay • Benchmarking/ Best
• Sustainable CA • Compensation Practices
• Core Competencies • Empowerment • Process Mapping
• Strategic Alliance/VAP • Self-directed Work • Task Interdependency
• Resource-based View Teams • Theory of Constraints
• Learning Organisation
Functional Silo (Traditional Structure)
• Teams of employees, grouped by function, that all operate separately from each other,
without cross-collaboration.
• Disadvantage: Serves the management instead of customers (Not customer-centric)
o No coordination
As problems are reported upwards, managers are supposed to integrate
departments or units and arrive at an appropriate resolution.
However, with physical separation and different reporting lines in a functional silo,
interdepartmental conflicts may not be easily resolved outside the units themselves.
o Control is devolved to departments.
The prime focus of operation units is to look after their own interests instead of the
interests of the organisation as a whole.
Managing Enterprise Processes
• Aims to manage processes rather than work activities or tasks to improve business
performance and operational effectiveness.
• Process will be on organisation limits and bring together people, system, information flows
and other assets to provide and enhance value to the customer.
• Various methods are used to discover, model, analyse, measure, improve, optimise and
automate business processes.
Process Identification (Identify the types)
• Strategic
• Dysfunctional (Some processes may be slowing down or hampering the organisation)
• Actionable
Example of a core process map: (Telco)
To achieve the goal
effectively
Process Discovery (Modelling Tools)
• Pen and paper (e.g. system flowchat, walk-through)

• General purpose graphical design tools (e.g. Visio, Powerpoint)
• Enterprise architecture tools (e.g. System Architect)
• Dedicated business process modelling tools (e.g. ARIS, Bizagi, Signavio, Lucidchart)
Why / When to focus on Processes?
• To fix things that are not working well

• To comply with regulatory requirements
• To conform to Industry Standards
• New technologies becoming available
• Evolving social, economic and political trends
o Changing customer preferences
o Changing nature of the workforce
o Competition from outside
o Corporate Social Responsibility (CSR)
Process Issues
To achieve the goal
• Effectiveness (Quality, Time) effectively
o When the fundamental objective and intended result is achieved

o Red Flags: Inconsistent output, rejects, rework, customer complaints, cycle time or
delay (dissatisfaction), shrink in market share (decrease in investor confidence)
• Efficiency (Cost)
o When a degree of effectiveness already exists, but it can be faster, cheaper and
better in other ways
o Red Flags: Complex procedure, slow cycle or response time (resource utilisation),
delays, long queues, backlogs, high cost but low yield, poor resource utilisation
• Adaptability (Flexibility)
Customization/trend o The agility of a process to respond to special or non-standard needs or when there is
bearing volume demand from the customer
o Red Flags: Inability to handle unexpected customer requests, inability to cater for
future expansion
▪ Low average time to process a special customer request
▪ Low number of non-standard customer requests handled
▪ High % of special requests turned down
▪ High % of special requests escalated to higher authority for fulfilment
Process Metrics
• Trade-offs between these 4 interdependent aspects of improving processes (More of 1

would imply less of the others)
Cost Quality
Time Flexibility
o Processing Time + Waiting Time = Cycle Time

o Processing Cost + Cost of Waste = Total Cost
o Time spent for resource used / Time available for resource = Resource Utilisation
o Rejects / Total Production = Defect Rate
o Others: On-time Delivery, Customer Complaints
Process Analysis
• Qualitative
• Quantitative
o Process Flow Analysis
o Process Simulation
▪ Tweak transaction arrival rate, resource availability
▪ See the effects on process metrics
Seeking Process Improvement (Process Analysis)
• Value-Added Analysis
o To examine individual process steps so that steps that add value can be separated
from those that do not
o Types:
▪ Customer value adding (e.g. Shortening delivery or cycle times)
• Retain, enrich, going beyond customer expectations
▪ Business value adding (e.g. Minimise approval levels for delivery)
• Minimise
▪ Waste (Non-value adding)
• Eliminate waste
• Lean Thinking (1980s – Toyota Production System)

o Aims to provide a new way to think about how to organise human activities to
deliver more benefits to society and value to individuals while eliminating waste
o Eliminating waste along entire value streams, instead of at isolated points, creates
processes that need less human effort, less space, less capital, and less time to
make products and services at far less costs and with much fewer defects,
compared with traditional business systems.
o Companies are able to respond to changing customer desires with high variety,
high quality, low cost, and with very fast throughput times.
• Sources of Waste (Reverse of value-added analysis)
o Over-production (e.g. one-piece flow)
o Excess inventories
o Unnecessary transportation/motion (e.g. setup, changeover, link
process/people/resource/information together)
o Delays (e.g. queue, wait, batch, approval, tasks waiting for resources)
o Defects (e.g. rework, scrap, loopback, unreliable suppliers)
o Over/incorrect processing (e.g. planning, scheduling, forecasting, budgeting, quality
control, one size fits all)
o Under-utilisation (idle time – machine/people, capacity imbalance) (resources
waiting for tasks)
• Six Sigma (1986) minimise the variation of the products to eliminate waste
o To improve quality so that the number of defects becomes so few that they are
statistically insignificant
o Six Sigma proponents claim that its benefits include up to 50% process cost
reduction, cycle-time improvement, less waste of materials, a better understanding
of customer requirements, increased customer satisfaction, and more reliable
products and services.
o Can be costly to implement and can take several years before a company begins to
see bottom-line results.
• Don’t Automate, Obliterate (Hammer, 1990)

o Organise around outcome, not tasks
o Have those who use the output of the process perform the process
o Subsume information processing work into the real work that produces the info
o Treat geographically dispersed resources as though these were centralised
o Link parallel activities instead of integrating their results
o Put decision points where the work is performed and build control into the process
o Capture information once and at source
• Deep Change – Operational Innovation (Hammer, 2004)

o Look for role models outside your industry because benchmarking within one’s own
industry is unlikely to reveal breakthrough insights
o Every operational innovation defines an assumption about how work should be
done, therefore need to identify and defy a constraining assumption
o Make the special case into the norm
o Companies usually achieve extraordinary results under extraordinary circumstances,
but how to perform extraordinarily in normal situations? By rethinking critical
dimensions of work (What, who, where, when, whether, what info, how)
▪ WHAT results are to be produced?
▪ WHO should perform these activities?
▪ WHERE should these activities be performed?
▪ WHEN (under which circumstances) these activities should be performed?
▪ WHAT INFORMATION should be available?
▪ HOW thoroughly should these activities be performed?
Managers looking to innovate should consider changing one of more of these
dimensions to create new operational designs that delivers better performance
Programme Six Sigma Lean Thinking
View of Waste Variation is waste Non-value add is waste
Application 1. Define 1. Identify value
2. Measure 2. Define value stream
3. Analyse 3. Determine flow
4. Improve 4. Define pull
5. Control 5. Improve process
Tools Maths, Statistics Visualisation
Focus Problem focused Process flow focused
But both processes should lead to improvement
Indicators of a Fundamentally Broken Process
• If a process is broken, there would be no outcome

• The intended result would not be produced or would be defective
• Key performance indicators would not be met
• There would be reduced or increasingly lower demand for the product or services from the
process
How to fix broken or defective processes?

Transaction Streamlining Transformative Redesign (Overhaul)
Assumption Sound Process Unsound
Essence Problem Solve Reinventing
Goal Enhancement Stretch
Style Analytic Creative
Domain Functional Cross-functional
Extent Widespread Concentrated
Implement Bottom-up Top-down
Explanation Assumes that the process is sound Assumes that the process is unsound and
and aims to solve a problem by aims to reinvent a new process with a better
analysing the functional aspect of outcome that stretches the goal. Creativity is
the organisation and implements stressed and used and all linkages, groups and
enhancing changes throughout the departments are looked at in a concentrated
organisation using the bottom-up manner, and the implementation is made
approach. using a top-down approach.
Issues-Rules-Assumptions
• Rules and assumptions may have come from past successes but may no longer be
appropriate for current situations
o Recognise process performance issues and the related impacts (From customer’s
perspective)
o Identify current rules that constraint performance
o Challenge / Question the necessity of the rules
▪ Rules: How things are done
▪ Assumptions: Why we do things the way we do
• Examples of RULES
o Credit decisions are made by the credit department
o Forms must be filled in completely and in order
o Merchandising decisions are made at headquarters
o Financial authorization can be made only by managers
o Sourcing must be done with three independent quotes
o Internal audit recommendations must be followed 100%
o We pay only when we match to the invoice
• Examples of ASSUMPTIONS
o Information is documented, distributed, and retrieved in paper form
o Buffer inventory is necessary for customer service
o Clerks are plentiful, easily available, and cheap to employ
o Workers can perform only simple tasks
o Machines are expensive to buy and maintain
o Customers don’t repair their own equipment
Process DESIGN
Process REDESIGN
• Look and question each component and ask questions such as:
o What work is performed and why?
o Who performs the work and why?
o Where is the work done and why?
o When is the work done and why?
o What resources the work require and why?
o What is the order in which the work is done and why is that the order?
Does IT improve all business process issues?
• Yes if IT is used to automate all manual, mundane and repetitive tasks and in doing so,
processes work more efficiently, effectively and economically.
• But not so if there are still manual processes dispersed within.
• e.g. if even after automating, same number of human involved in the process, there really
isn't much change
Process Design x Accountability
Process Accountability Good Process

(e.g. process governance,
maturity assessment, owners)
Process Improvement
/ Redesign
• Strengthening process accountability by identifying process owners and redesign of

processes will lead to an improved process and the results of this can be seen by the
establishment in tracking of process metrics
Business Process Reengineering (BPR) for eBusiness
• Streamline (Remove waste, simplify, consolidate similar activities)

• Lose Wait (Squeeze out waiting time in process links)
• Orchestrate (Let the swiftest and ablest party execute)
• Mass Customise (Flex the process for anytime, anywhere and anyplace)
• Synchronise (Synchronise the physical process with the electronic process)
• Digitise and Propagate (Capture information digitally at source and propagate throughout
the process)
• Vitrify (Provide visibility of information about the process status)
• Sensitize (Fit the process with vigilant sensors and feedback loops that can prompt action)
• Analyse and Synthesize (Provide ability to analyse data for better decision making)
• Connect, Collect and Create (Have knowledge management capabilities for avoiding
mistakes made)
• Personalise (Make the process intimate with preferences and habits of participants)
Four Phases of Process Improvement

Phase Tasks
Define • Identification of process(es) to be • Stakeholder identification
improved
• Process mapping to business
strategy
Analyse • Prioritised processes • Root cause analysis

• Process modelling • Metrics and benchmark data
• AS-IS process diagram
Implement • TO-BE process diagram • Communication of results to

• Gap analysis stakeholders
Control • Results Monitoring • Continuous improvement
How the Five Whys can lead to the Discovery of the Root Cause of a Problem
Examples:
Problem Why are so many expense reports rejected instead of being approved?
Why #1 Because supervisors keep rejecting them
Why #2 Because the employees do not complete the reports properly
Why #3 Because the employees do not understand how to use the online expense system
Why #4 Because the employees never received the appropriate training
Why #5 Because the organisation does not have a process for identifying and tracking training
needs
Cause-and-Effect Diagram
• Fishbone diagram (Ishikawa diagram):

o Aids discovery and identification of issues and problems at source
6 Process Improvement Enablers

Process design Human Resources (HR)
• Consider the relevance, ownership and • Consider skills, training, assignment of
efficacy of process steps, handoff tasks
points, and exceptions
Information Technology (IT) Policies and Rules
• Automating or changing automation • Simplify where appropriate
elements • Eliminate approval steps by providing
regular audits and reports
Motivation and Measurement Facilities Design

• Consider incentives to improve process • Change the layout of physical work
function environment
Design Thinking (a non-linear process)
• An iterative process to:

o Understand the user (needs and wants)
o Challenge assumptions
o Redefine problems:
• So as to enable or help us to:
o Identify alternative strategies and solutiins that might nopt be instantly apparent
with our initial level of understanding
• Design thinking provides a solution-oriented approach
• It is a method of thinking and working around the problem from the customer’s perspective
and can be a collection of hands-on methods
• To initially UNDERSTAND and empathise the customer and identify and define clearly the
customer's problem, then EXPLORE ideas and prototypes on possible solutions, thereafter,
the idea is MATERIALISED by testing prototypes and obtaining customer's feedback and
ultimately, we implement it by putting the ultimate solution into effect and practice
Week 2
Seminar 2: Flowcharts
• A flowchart is an analytical technique that describes information flows in a business process

in a clear, concise, and logical manner
• Flowcharts use a set of standard (agreed upon) symbols to depict processing procedures and
flow of data
o Every shape on a flowchart depicts a unique operation, input, processing activity, or
storage medium
• Flowcharts are developed for process analysis, typically accompanying a set of narratives
Standard Flowchart Symbols
Computer Process
• Data is processed using a computer device
• Usually results in change in data or information
• E.g., Scan, print, generate, email, mobile app,
web portal, etc
Disk Storage (Electronic File)

• Device or media that provides input to or
output from a computer process
• E.g., Master files or databases
Handling Data (Computer Processing)
• Create / Save Data
• E.g., System generates SO and saved to disk

• Read / Retrieve Data

• Update / Delete / Change Data
Manual Process
• Data is processed manually
• E.g., Photocopy, phone call, fax, mail, etc
Paper-based Input / Output

• Hardcopy documents / journals that provides
input or serve as output from a process
• A single hardcopy document that is prepared
by hand or printed by a computer
• E.g., Invoice, SO, PO, PR, Quotation, Ageing
Report, cheque, forms, lists etc
• Multiple documents or multiple copies of a
document

• Permanent book records for MANUAL update
• E.g., GL, sales journal, approved vendor list,
time table, schedules
Paper-based Storage
• A file of documents that are manually stored
and retrieved
• Letter indicates ordering sequence
o A = Alphabetic order
o D = Date
o N = Numeric order
Terminal
• Beginning or end of a process or programme
• Only used to indicate EXTERNAL PARTIES
Flow
• Direction of processing, or flow of document
and/ or data / information.
• Typically: Top to bottom and left to right
Decision
• Input arrow comes down from the top
• If 2 options, only branch out from left and right
• If more options, branch out from bottom
Annotation
• Provides descriptive comments or explanatory
notes as clarification
• When alternative process is not stated, cannot
use decision, use “---[If > 10k” instead
On-page Connector
• Connects processing from one location to
another ON THE SAME PAGE
• Can use alphabets or numbers to link
Off-page Connector
• Connects processing flow between TWO
DIFFERENT PAGES
• Can use alphabets or numbers to link
• E.g., “Pg1 / A”
Common Errors
• Access to computer files must be through a computer process

• Do not need to show process symbols for:
o Filing a document (Correct way: Document -> File)
o Forwarding a document to another entity
(Correct way: Document -> Terminal or connector)
• Do NOT connect two documents except when forwarding to another column
(With a connector in between)
• Storage disks should be next to a computer process and NOT a document
• Terminators should NOT be labelled with an action
o Wrong label: “Receive invoice from customer”
o Correct label: “Customer” -> [Process symbol: Receive invoice from customer]
Flowchart Guidelines
• Identify:
o Internal entities who do the work (e.g., departments, specific people)
o External entities: Sources of inputs and destinations for outputs (e.g., customers,
suppliers)
o Documents or information flows
o Processes or activities
• Draw one column for each internal entity.
For example:
• Flowchart should only include the normal course of operations and exclude exceptions
unless critical
• As much as possible, flow should go from top to bottom and left to right
• Use standard flowchart symbols and clearly label all symbols
• Use annotations, if necessary, to provide explanations, e.g., for clarification
• Flowchart should have clear beginning and end
o ALWAYS start with a terminator
o ALWAYS end with a terminator, file or connector
• Read through narrative and for each step define:
o What was (were) the inputs(s)
o What process was carried out
o What was (were) the output(s)
• Use connectors whenever possible to make the flowchart more readable
Week 3
Seminar 3: Business Process Controls
Why is Control Necessary?
• Threat or Event – Any potential adverse occurrence or unwanted event that could be
injurious to either the accounting information system or the organisation
• Exposure or Impact of the threat – The potential dollar loss should a particular threat
become a reality
• Likelihood associated with the threat – The probability that the threat will happen
When analysing controls, need to consider the:
1) Possibility of the threat

2) Extent of the damage / loss
Risk Management – Response
Risk is not necessarily a bad thing. It allows organisations to charge premiums for their services.
Higher risk = Higher premiums. If any entity is able to manage risk well so that the probability of
adverse effects is low, they can potentially charge money for the risk and hence risk is something a
typical business can live with.
$ Impact
Transfer Avoid
/Share
Keep Mitigate
(Live with it) (Controls)
Probability of
Occurrence
• Transfer/Share: High Impact, Low Probability

o E.g., For truck companies, threats of accidents have low probability of occurrence
because their drivers are licensed. If there is an accident, the impact / cost is high.
o Solution: Transfer / share risk by purchasing insurance / hedging
• Avoid: High Impact, High Probability

o E.g., Providers for illicit activities like loan shark, gambling. If they get caught, impact
is high. Note that there are legal activities under this area as well.
o Solution: Avoid participating in such activities
• Keep (Live with it): Low Impact, Low Probability
• Mitigate (Controls): Low Impact, High Probability (Cumulatively, can have serious impact)
o E.g., A petty cash safe without a lock
o Solution: Use mitigation strategies such as adding a lock (Control)
Types of Undesirable Events
Access Errors
Fraud Mischief
Control Red Flags
• Unintentional Acts
o Dominant and unchallenged management
o Lengthy tenure in key jobs
o Close association with suppliers and customers
o Unclear lines of authority, policies or procedures
o Insufficient separation of authorization, custody and record-keeping duties
o Hardware malfunction & software errors
o No physical security system (E.g., locks)
o No logical security system (E.g., passwords)
o No audit trails
o Hardware or software failures
o Logic errors
o Constant breakdown / delays of services
• Intentional Acts
o Management override of controls
o Corruption or bribery
o Misappropriation of Assets
▪ Theft of cash
▪ Fraudulent disbursements
▪ Stealing merchandise
o Fraudulent financial reporting
▪ Deceive investors or creditors
▪ Increase a company’s stock price
▪ Hide company losses or other problems
o Computer frauds
• Other Signs (Can be intentional / unintentional)

o Experienced CEO leading the company for long periods (E.g., more than 20 years)
o Strong relationships with suppliers
Categories of Frauds
• Misappropriation of Assets
o Theft of company:
▪ Physical assets (e.g., cash, inventory)
▪ Digital assets (e.g., intellectual property such as protected trade secrets,
customer data)
• Fraudulent Financial Reporting
o Manipulating the books (e.g., booking fictitious revenue, overstating assets, etc)
Multiple Levels of Internal Controls (Time-Based Model)
• Preventive Controls
o Deter problems from occurring (Before they arise)
• Detective Controls
o Quickly discover problems that are not prevented (already occurred)
o Detect before they cause further damage
• Corrective Controls (Containment controls)
o Correct and recover (remedy) from the problems that have already occurred by:
▪ Identifying the cause
▪ Correcting the resulting errors
▪ Modifying the system to prevent similar future problems
Examples of Preventive Controls
• Separation of duties
• Pre-approval of actions and transactions
• Access controls (e.g., passwords, authentications)
• Physical controls on assets (e.g., locks)
• Large CCTV with Monitor Display (lets people know they are being monitored)
Examples of Detective Controls
• Log analysis
• Intrusion detection systems (Different intentions than preventive CCTVs)
o Small 360-degree camera without monitor display (Not conspicuous, easily missed)
• Managerial reports
• Security testing
• Monthly reconciliations of transactions
• Reviewing and comparing documents (e.g., budget-to-actual comparisons, past year to
current comparisons to look for significant or unexpected differences)
• Physical count of inventories
Examples of Corrective Controls

(To ensure that the firm/process can still run properly after the problem has occurred)
• Second-site backups (Must be far from the main/first site to prevent threat “spillage”)
o Empty shell – Buy or lease a building for a computer site, but without computer
o Recovery operations centre – A completely equipped site
o Internally provided backup – Internal excess capacity
• Disaster recovery team
• Testing the distribution requirements planning (DRP) regularly
o DRP: Process to determine which goods, in what quantities, and at what location are
required to meet anticipated demand
• Back-up and off-site storage procedures
• Software or system patches or modifications
• Terminating a process
• Quarantining a virus
• Rebooting the system
• Disciplinary actions or new policies to prohibit practices
1. Segregate the custody of an asset from its accounting
2. Segregate the operational responsibility from the accounting
3. Segregate the system development from the accounting
4. Segregate the computer operations from the accounting
5. Segregate the reconciliation and independent checking from the accounting
Segregation of Duties 6. Segregate the authorisation of transactions from the custody of the assets
Custodial, Recording and Authorisation functions should be kept separate.
• Custodial + Recording = Falsify records to conceal theft of assets entrusted to them

• Recording + Authorisation = Falsify records to cover up an inaccurate or false transaction
that was inappropriately authorised
• Authorisation + Custodial = Authorisation of a fictitious or inaccurate transaction as a means
of concealing theft of assets
Examples of Functions
• Custodial
o Handling cash, inventories, tools or fixed assets
o Writing cheques
o Receiving cheques in the mail
• Recording
o Preparing source documents or entering data online
o Maintaining journals, ledgers, files and databases
o Preparing reconciliations
o Preparing performance reports
• Authorisation
o Authorisation of transactions or decisions
Examples of Clashing Duties
• Approving changes to customer credit + take customer orders (order taking + credit admin)
o The same person can authorise sales to friends that are subsequently not paid
(Preferential treatment)
• Ship merchandise + bill customers (shipping + billing)
o The same person can ship merchandise to friends without billing them
• Maintain accounts receivable + issue credit memos (AR + credit memos)
o The same person can write off their friends’ accounts
• Deposit customer payments + reconcile the bank accounts (cash collection + bank
reconciliation)
o The same person can steal cash and cover up the difference by listing fraudulent
bank expenses to adjust the cash balance
Information and Communication Monitoring
• Perform internal control evaluations (e.g., internal audit)

• Implement effective supervision
• Use responsibility accounting systems (e.g., budgets)
• Monitor system activities
• Track purchased software and mobile devices
• Conduct periodic audits (e.g., external, internal, network security)
• Employ computer security officer
• Engage forensic specialists
• Install fraud detection software
• • Implement fraud hotline
Application Controls
• Processing Integrity Controls
Input Controls (Data Entry Controls)

Field Check Range Check
• Ensure that the characters in a field are • Tests numerical amount against lower
of a proper format/type and upper limits
• E.g., dd/mm/yy • Input must be within a set range
Limit Check Completeness Check

• Tests numerical amount against a fixed • Verifies that all required data is entered
value before proceeding
• E.g., temperature of a person should • E.g., In a survey, only can proceed after
not exceed 42 degrees all * fields are filled in
Size Check Reasonableness Check

• Ensures input data fits into the field • Ensures correctness of logical
• E.g., Bank account number should only relationship between two data items
have 7 digits, or pin-codes should only (whether it makes sense)
have 4 digits • E.g., Algorithm trading
Validity Check Check Digit Verification

• Compares data from transaction file to • Recalculating check digit to verify data
that of the master file verify existence entry error has not been made
(verifiable) • E.g., NRIC uses a structured format
• E.g., CRM system ask existing customer (Start with T or S, etc) and the system
for phone number, then the system will will flag it out if the digits don’t match
verify this number with existing records the structure
to see if this person really exists
Sign Check Batch Processing

• Ensure that data in a field has • Sequence Check
appropriate sign (positive/negative) o Test a batch data in proper
numerical or alphabetical
Prompting sequence
• System prompts user for input (Online o E.g., Invoices should be
completeness check) numbered in sequence
Closed-loop Verification
• Checks accuracy of input data by using • Batch Totals
it to retrieve and display other related o Summarise numeric values for
information a batch of input records
• E.g., Keying in the customer account ▪ Financial totals
number will retrieve the customer’s ▪ Hash totals
name, age, gender, etc ▪ Record count
Processing Controls
(Assumption: Inputs are captured correctly)
Aims to solve problems that occur in the PROCESSING stage only
Data Matching Concurrent Update Controls
• Two or more items must be matched • Prevent error of two or more users
before an action takes place updating the same record at the same
• E.g., Data keyed in must match an time
existing data before subsequent steps • E.g., To lock the file from others when
are taken to edit/update the data someone is already using it
File Labels Zero-balance Tests

• Ensures correct and most updated file • For control accounts
is used (Older versions may be E.g., Payroll clearing
outdated)
Cross-footing Write-protection Mechanisms

• Verifies accuracy by comparing two • Protect against overwriting or erasing
alternative ways of calculating the data
same total Only certain actions allow data overwrite
Recalculation of batch totals
Output Controls
• User Review of Output Reconciliation
• Procedures to reconcile to control
reports
• E.g., To ensure the A/R figures tie,
• Data Transmission Controls reconcile the GL A/R account with AR
Subsidiary Ledger or directly confirm
with customers their balances
Resolving Efficiency-Control Issues (Finding the balance between Efficiency and Controls)
Recall Seminar 1: Process Design x Accountability
Some decisions on process

Internal Controls improvement/redesign may
result in lower controls
Process Accountability Good Process (E.g., giving employees
autonomy to motivate them)
(e.g., process governance,
maturity assessment, owners)
Process Improvement
/ Redesign
• Resolving the Efficiency Issues:

o Making the process faster, cheaper and better in other ways
• Resolving the Control Issues:
o Implementing preventive, detective and corrective measures
Resolving Efficiency-Control Issues

Issue Recommendation
Efficiency Issues Make the process:
• Effectiveness • Faster
• Efficiency • Cheaper
• Adaptability (Solution: Customisable) • Better
Control Issues Implement:

• Security (Solution: Not easily accessible) • Preventive measures
• Integrity (Solution: Information generated by • Detective measures
organisation cannot be edited by anyone) • Corrective measures
• Availability (Being hijacked easily compromises
information availability)
Efficiency-Control Issue Analysis Template
Step 1: Identify the Issue (What is happening?)

• Effective, Efficiency, Adaptability
Step 2: Explain the Resulting Consequence / Impact of the Issue
Step 3: Provide an Analysis, Recommendation and Expected Improvement

• What will be changed?
• How will it be changed?
o How to make it faster, cheaper and better?
o How to prevent, detect and correct the control risks?
Issue Impact Recommendation

(Threat, Risk, Problem)
Process Issue Impact on Customers What will be Changed?
• What problem is created • Slow response time See streamlined:
as a result of the process • Delayed delivery • Policy, rule, assumption -
being done this way • Poor quality of service Infrastructure
currently • Dissatisfaction, complaints • Process, data
• Loss of trust • People
Excerpts
• From Narrative Impact on Organization Driver for Change?
• Time, cost, quality -loss of • Transactional streamline
Type of Issue inventory, cash or transformative redesign
• Effectiveness, efficiency, • Poor resource utilization
adaptability • Misrepresentation of How will the Change work?
• Control weaknesses financial status • New procedure
• Inflexibility, inadaptability
Expected Result from Change?
Impact on Employees • Faster, cheaper, better
• Conflict of duties interest • Prevent, detect & correct
• Potential for corruption
• Rework, backlog
• Lack of empowerment
• Low motivation & morale
Week 4
Seminar 4: SAP
Data Processing Cycle
1. Data Input – Capture (How organisations capture and enter data about business activities into
their AIS)
As a business activity occurs, data are collected about:
• Each activity of interest (e.g., A sales transaction and its Date and Time)
• The resources affected (e.g., Items sold and quantity)
• The people who are participating (e.g., Employee who made the transaction)
Input: Source Documents
• The initial record of a transaction on pre-printed forms or formatted screens.

• Data are collected on source documents (e.g., a sales order form)
o Data from paper-based source documents will eventually need to be transferred to
the AIS
• Turnaround Documents (Can be paper-based or electronic)
o Sent from the organisation to an external party
o Same document is returned by the external party to the organisation
• “Garbage in, garbage out” – Must ensure data collected are accurate and complete
o Documents and data entry screens should be well designed
o Data entry screens should have appropriate input data validation
Input: Source Data Automation
• Source data are captured in machine readable form at the time and place of the business
activity (e.g., ATM, POS)
2. Data Storage (Data stored for future use)
• Paper-based
o Ledgers (Sum of all subsidiary ledger account balances = GL control account balance)
▪ General Ledger
Summary level data for asset, liability, equity, revenue and expense
▪ Subsidiary Ledgers (e.g., AR, AP, Inventory, Fixed Assets)
Detailed data for a general ledger (control) account that has individual sub-
accounts)
o Journals
▪ General Journal
For recording infrequent or specialised transactions (e.g., loan payments)
▪ Specialised Journal
For recording repetitive transactions (e.g., sales transactions)
• Computer-based
o Entity – Person, Place, or Thing (Noun)
▪ Something an organisation wishes to store data about
o Attributes – E.g., Details about a customer
▪ Facts/characteristics about the entity
o Fields
▪ Where the attributes are stored
o Records – E.g., A customer
▪ Group of related attributes about an entity
o File/Table – E.g., An AR File
▪ Group of related records
• Audit Trail – Traceable path of a transaction through a data processing system from point of
origin to final output, or backwards from final output to point of origin
3. Data Processing (How companies process data and transform it into useful information)
• 4 Main Activities:
o Create new records
o Read existing records
o Update existing records
o Delete records or data from records
• Online Real-Time Processing
o Updates transactions as it occurs
o Ensures stored information is always current
• Batch Processing
o Updates only periodically
o Suitable for applications that do not need the most current information and do not
need frequent updating (e.g., payroll processing)
4. Data Output – Types (Providing key information to users)
• Soft Copy – Displayed on a screen

• Hard Copy – Printed on paper
Silo Architecture (Different functional areas within the same system)
• Database Tier – Each silo has its own separate database

• Application Tier – To store application software
• User Tier – Each silo has its own separate front-end client computers
Disadvantage: Silo architecture doesn’t allow data to be shared electronically. If data needs to be
used by another silo, the data needs to be keyed in again.
Customers may need to transaction with different departments in the organisation (e.g., customer
may need to provide information to both marketing and sales debt during a purchase)
Silo Architecture WITH SPAGHETTI CODE
• Database Tier – Each silo has its own separate database

• Application Tier – To store application software
o Some data can be shared from one silo to other silos using additional
programming codes (spaghetti codes)
o However, in some cases, data may still need to be re-keyed in
• User Tier – Each silo has its own separate front-end client computers
Integrated Enterprise System (3-Tier Architecture)
• It makes it possible to enter data once and share

data across functional areas (e.g., human resource
share payroll data with accounting)
o Database Tier – Contains the shared
enterprise databases and RDBMS
o Application Tier – Contains enterprise system
modules (e.g., accounting/financials, CRM,
ERP and SCM)
o User Tier – User computers display the
user interface consisting of database forms
and reports
Integrated Enterprise System & the Value Chain
• Problem:
o The existence of multiple systems creates numerous problems and inefficiencies.
o The same data must be captured and stored by more than one system, which not
only result in redundancies but also lead to discrepancies if data are changed in one
system but not others.
• Solution:
o The Integrated Enterprise System is interwoven to support the value chain activities
o The Accounting System, SCM, OPS and CRM can exchange data electronically
throughout the value chain (Enter data once, other departments can also retrieve)
Enterprise Resource Planning (ERP)
• Integrates an organisation’s information (including accounting) into one overall information

system
• Modular – Each module using best business practices to automate a standard business
process, by allowing businesses to add or delete modules as needed.
ERP Modules
Financial Human Resources and Payroll Customer Relationship
(GL and Reporting System) Management (CRM)
Order to Cash Purchase to Pay Manufacturing

(Revenue Cycle) (Purchasing Cycle) (Production Cycle)
Project Management System Tools
• An activity part of a business process (e.g., a customer order) often triggers a complex series
of activities throughout many different parts of the organisation (e.g., revenue, production,
expenditure, payroll)
• Well-designed ERP systems provide management with easy access to up-to-date information
about all of these activities in order to plan, control and evaluate the organisation’s business
processes more effectively
• Advantages of ERP:
o Integration of an organisation’s data and financial information
(enterprise-wide, single view)
o Data is captured once

(downloading data from one system to another is not needed)
o Greater management visibility into every area of the enterprise, increased
monitoring
o Better access to controls
o Standardises business operating procedures

(very valuable during M&A because the ERP system can replace the different
systems with a single unified system)
o Improved customer service

(Employees can quickly access orders, available inventory, shipping information and
past customer transactions)
o More efficient manufacturing

(Manufacturing plants receive new orders in real-time and the automation of
manufacturing processes leads to increased productivity)
• Disadvantages of ERP:
o Cost (ERP hardware, software, upgrading and consulting costs can be in millions)
o Time-consuming to implement
(It can take years to select and fully implement an ERP system depending on
business size, number of modules to be implemented, degree of customisation,
scope of change and how well the customer takes ownership of the project)”
o Changes to an organisation’s existing business processes can be disruptive

(Unless the company wants to spend time and money customising modules, they
must adapt to standardised business processes instead of adapting the ERP packages
to existing company processes. Failure to map current business processes to existing
ERP software is the main cost to ERP project failures)
o Complex
(Comes from integrating many different business activities and systems, each having
different processes, business rules, data semantics, authorisation hierarchies and
decision centres)
o Resistance to change
(It can take considerable training and experience to use an ERP system effectively.
An employee resistance is a major reason why many ERP implementations do not
succeed. It is not easy to convince employees to change how they do their job, train
them in new procedures, master the new system and persuade them to share
sensitive information.)
SAP ERP System (Latest and Best Version: SAP S/4HANA)
• Designed to satisfy the information needs for ALL BUSINESS SIZES (Small to large)
o Multi-lingual, Multi-currency, Multi-balance
• Designed to satisfy the information needs for ALL INDUSTRIES
• Enables a company to support and optimize its business processes
• Ties together disparate business functions (integrated business solution) such as:
o Finance (Financial Accounting, Managerial Accounting, Treasury, …)
o Logistics (Sales, Procurement, Production, Fulfilment, …)
o Human Resources, etc.
• Real-time environment
• Scalable and flexible
SAP ERP Key Modules covered in this course:
• Finance – Financial Accounting (FI)

• Logistics – Sales & Distribution (SD) INTRA-company processes
• Logistics – Material Management (MM)
INTER-company Processes:
• Supply Chain Management (SCM)

• Supplier Relationship Management (SRM)
• Customer Relationship Management (CRM)
• Product Lifecycle Management (PLM)
Organisational Data
• A structure in which the organisational units in an enterprise are arranged according to tasks
and functions
• Static data and rarely changed
• The definition of organisation units is a fundamental step in ERP system setup
Business Rule (Configuration) Data
• Defines the parameters for Master Data and Transactions

• Determines functionality for Master Data and Transactions
• Relatively fixed
• Changes as policy or process changes
Master Data
• Long-term data representing data entities repeatedly used in transactions

• Master data are relatively fixed (typically accumulate balances)
o Material master data
o Customer master data
o Vendor master data
o General Ledger account master data
Transaction Data – A combination of organisation, master and situational (specific to task) data
• Includes internal and external exchanges that describe business activities

• Unlike master data, transactional data are dynamic – each transaction is unique
Basic Concepts of SAP ERP
• Documents – Records of Transactions (Virtual documents)

o Transaction documents (e.g., PR, PO, Invoice, SO, Delivery, Billing, etc)
o FI documents – To record the impact on financial account
o CO documents – To record the impact on management accounting
o Material documents – To record the impact on material status (e.g., quantity, value,
location)
• Generation of Documents
Generated only
AFTER the process
is completed
Reporting – Ways that users can view and analyse both transactions and historical data to help them
make decisions and complete their tasks
• Reporting WITHIN SAP ERP

o Transactional system - Online Transaction Processing (OLTP) system
▪ Work lists - identifies tasks that are scheduled to be completed in a process
▪ Online lists - displays lists of master data and documents generated during
the execution of a process (quickly and efficiently)
o Informational system - Online Analytic Processing (OLAP) system
▪ Analytics via information systems (Using aggregated and summarised data)
• Reporting OUTSIDE SAP ERP
o Analytics via SAP Business Warehouse (BW)
▪ Advantage: Designed and optimised for processing large quantities of data
▪ Disadvantage: NOT a real-time or online system
Example of an Organisational Structure of a Company using SAP ERP (Global Bike Inc)
Cross-Functional Integration
• Important because business processes often span across different functional areas
• These departments will take care of the different functional areas but if it is a business
process, we know that this process will require integration across different functional areas
o E.g., A sales process – A sales order may be larger than the inventory on hand which
may trigger a production order (need to produce more to satisfy this sales order) so
now need to integrate the production process which will require more raw material
and hence trigger the buy process
• Process Integration Example:
o Order-to-Cash Process will require the integration of the SD, MM and FI modules
o Procure-to-Cash Process will require the integration of the MM and FI modules
SAP Navigation
• Easy Access Manu

• Transaction Codes
• GUI Elements
o Menu Bar
o Standard Toolbar
o Title bar
o Application Toolbar
o Screen Body
o Status Bar
• Screen Elements
o Tabs
o Header
o Info
o Line Items
• User Profile Settings
• GUI Options
• System Messages
o E = Error (Invalid entry has been made)
o W = Warning (Possible error has been made, user can continue without changing)
o I = Information (Feedback from the system)
• Data Entry Fields
o Required
o Default
o Optional
• Help Functions (F1: Description of Input Fields, F4: Value List)
• SAP Help Portal (http://help.sap.com)
• Search Function
• Create New Session (Working with Multiple Sessions, Maximum 6 sessions at one time)
• Favourites
• Multiple Selection
• Desktop Shortcut
• Commands:
o /I – Close interface
o /n – Opens interface in current session/window
o /o = Opens interface in another session/window
Week 5
Seminar 5: Financial Accounting using ERP (FI)
Financial Accounting – Process of recording, summarizing and reporting business transactions

related to a business through financial statements.
• Summarising – Appropriate level of details for a meaningful understanding (not too much,
not too little)
• Input (vouchers, supporting documents) -> Throughput (recording, classification, balancing,
trial balance) -> Financial Statements (P/L, B/S, CFS) -> Analysis (trend, ratio, common size)
Financial Accounting Managerial Accounting

Users External persons who make Managers who plan for and
financial decisions control an organisation
(e.g., shareholders, tax authority
or creditors)
Time Focus Historical Perspective Future Emphasis
Verifiability vs Relevance Emphasis on objectivity and Emphasis on satisfying

source documents (traceability) management needs
Precision vs Timeliness Emphasis on “fair” report of Emphasis on getting information

operations and financial position to managers when they need it
Subject Primary focus is on companywide Primary focus is segment reports

reports
Rules Must follow GAAP / IFRS Not bound by outside rules
Requirement Mandatory for external reports Not mandatory
Example of an Accounting and Finance Organisation Chart
Financial Accounting Activities (Accounting Cycle)
1. Identify Transactions
2. Record Journal Entries Throughout the accounting period
3. Post Ledger Entries
4. Unadjusted Trial Balance
5. Adjusted Entries
6. Adjusted Trial Balance End of accounting period (closing)
7. Financial Statements
8. Close Books
(A) Chart of Accounts (COA)
• A classification scheme consisting of a list of general ledger accounts

• Provides a framework for the recording of values to ensure an orderly presentation of
accounting data
• The accounts it contains can be used by one accounting entity or shared by multiple
accounting entities
(B) Accounting Records – Documents, journals, and ledgers used in the accounting cycle
• Documents
o Source documents – Input document
o Product documents – Output document
o Turnaround documents – From a Product document becomes a Source document
• Journals
o General journals – For all double entries
o Special journals (e.g., sales journal) – Designed to record repetitive transactions
• Ledgers
o General ledger – Every account has a section in the GL (cross-reference to GJ)
o Subsidiary ledgers – Further breakdown of a GL account (e.g., Each AR customer)
Flow of Information from Billing to GL
Relationship between Subsidiary Ledger and GL
Audit Trail
• A set of accounting records that trace transactions from their source documents to the
financial statements.
• An audit trail is of utmost importance in the conduct of a financial audit.
• The external auditor’s responsibility involves, in part, the review of selected accounts and
transactions to determine their validity, accuracy, and completeness.
• The audit trail allows the auditor to trace the financial data from the general ledger to the
source document, during the conduct of an audit.
Key FI Sub-Modules
General Ledger Accounts Receivable Accounts Payable
Asset Accounting (Not tested) Bank Accounting (Not tested)
Financial Account Module (FI) – Organisational Data
• Client – An independent environment in the system
• Company Code – An independent legal accounting unit

o Client may consist of more than one company codes
o Balanced set of books are prepared at this level (Required by law)
• Business Area – An organisational unit that represents a separate area of operations or

responsibilities within an organisation where value changes recorded in FI can be allocated
o Financial statements can be created for business areas and they are used for various
internal reporting purposes (Segmental reporting)
• Illustration
1 Client
3 Company codes
1 COA (shared)
1 Business Area
Financial Account Module (FI) – Master Data
Chart of Accounts – An orderly list of accounts used in the GL
• Technically, not a master data but a COLLECTION of master data (GL Accounts)
• 3 Types of COA
o Operative COA – Used for recording and reporting (Compulsory)
o Country COA – Used for Country-Specific reporting Optional, only used for
o Group COA – Used for Group-Level consolidation reporting and NOT recording
• Multiple company codes may share the same Operative COA, but each company code can
only use 1 Operative COA.
General Ledger Accounts (Master Data)
• Records of all accounting-relevant business transactions

• Data in the GL accounts are segmented by organisational level:
o COA segment (1 record per GL account)
o Company code segment (1 record per GL account PER COMPANY CODE)
COA Segment comprises of: Company Code Segment comprises of:

• Account number • Accountancy currency
• Long text • Tax related data
• Short text • Open item management
• Account group • Line-item display
• Balance sheet or income statement • Reconciliation account for account
account type
• For any account in the COA, there is only 1 COA segment.

• However, there can be more than 1 company code segment for the same account IF the COA
is SHARED by multiple company codes
• This means that information in the COA segment (e.g., account number and description)
have to be consistently applied to ALL company codes but information in the company code
segment (e.g., currency and tax relevance) can be different for different company codes
Financial Account Module (FI) – Transaction Data
Accounting Documents
• Structure
Header Line items (Detail)
• Document date • Account
• Document type • Description
• Document number • Posting key (debit or credit)
• Company code • Amount
• Posting date •
• Currency •
• Reference number •
o Document Type – e.g., KZ (Vendor Payment, 1500000000-1599999999)

▪ Identifies the process that generates the document
▪ Provides useful information about the origin or nature of the accounting
document such as the document number range (e.g., 100000-149999) and
the account types (e.g., GL accounts, customer, vendor, etc) that can be
posted to that document
o Posting Date
▪ Determines the accounting period in which changes to the ledger balances
should be effected
o Posting Key – e.g., 15 (Payment, Credit, Customer)

▪ Identifies whether the document item is a debit or credit item, its account
type (e.g., GL accounts, customer, vendor, etc)
▪ Provides a detailed classification for reporting line items (e.g., invoice, credit
memo, payment, internal adjustment, etc)
▪ Automatically updated by the system depending on the transaction that
creates the accounting document
• Posting Process (Direct Posting) – One-step, Two-step, Error Handling
Illustration: Accounting clerk needs to record an accounting transaction
o One-Step Document Posting Process
o Two-Step Document Posting Process
o Parking the Accounting Document

▪ When an accounting document is parked, system still generates a unique
document number for it.
▪ A parked document can be incomplete (e.g., not balanced)
▪ A parked document can be reported, further edited, deleted or posted
▪ Ledgers are not updated until the document is posted
Error Handling (Also part of the posting process)
SAP Document Principle
• Each business transaction impacting FI writes data to the SAP database creating a uniquely
numbered electronic document. This document number can be used to recall the
transaction at a later date.
• It contains critical and necessary information as:
o Responsible person
o Date and time of the transaction Audit Trail
o Commercial content
• Once written to the SAP database, a financial document (one impacting the financial
position of the company) cannot be deleted from the database.
• Changes to a posted document are limited to only non-critical fields (e.g., texts, reference)
• Cannot change critical fields (e.g., posting date, currency, exchange rate, GL account,
amount)
• All changes (critical and non-critical) are logged by the system to maintain an audit trail
• The SAP document principle provides a solid and important framework for a strong internal
control system (a requirement of law for companies that operate in the United States and in
most other countries in the world)
Guidelines for Actions Taken when Errors are Discovered (Correction of Errors in FI Document)
• Documents Created in a Non-Accounting Module

When a source transaction is created in a non-accounting module (e.g., customer billing in
sales and distribution module), documents are created and posted automatically by the
system.
o If errors are found in such accounting documents, it implies that errors are also
present in the source transaction (e.g., the billing document).
o SAP won't allow the user to change or reverse the accounting document, so they
must reverse the source transaction (e.g., billing document in SD) which will result
in an automatic posting of the reversal document in the FI module.
o Having fixed the source of the error, a new billing document can be created in the
non-accounting module (e.g., SD) and this will result in an automatic re-posting of
the correct accounting document.
• Documents created in FI Module

o If errors are found in a non-critical field, the user can simply use the document
number to call up the accounting document to make changes to these fields.
o If errors are found in a critical field, the user will need to reverse the erroneous
accounting document and repost the correct one.
Effect of Reversal – It nullifies the original posting that the accounting document has made
Financial Account Module (FI) – Reporting
• Financial reporting is broadly divided into 2 categories

o Displaying Account Information
▪ In each company code’s GL, the system maintains a periodic balance for
each operative account.
▪ Whenever the account is posted to by an accounting document, the system
makes these updates:
• Accounting document records are created to record the accounting
entries
• Line-item records are created to link the items in the accounting
documents to their respective GL accounts
• Amounts posted in the accounting documents will be incremented
in the respective balances of the GL accounts
▪ This link enables us to drill-down from an account balance (Balance Display)
to the posted items (Line Items) and to the posted documents (Original GL
Entries)
o Generating Financial Statements

▪ Financial Statement Version (FSV)
• GL accounts are aggregated and assigned to report lines
• FSV allows the user to configure their financial statements
(e.g., order it by liquidity, etc)
Week 6
Seminar 6: Revenue Cycle using ERP 1 (SD)
The Revenue Cycle provides goods and services to customers and collects cash in payment for those
sales. The Revenue Cycle enables the firm to earn a profit, pay expenses and stay viable in the long-
run. Revenue is most prone to fraudulent reporting and is typically a risk area for the auditor.
Primary Objective is to provide the right product in the right place, at the right time for the right
price.
Activities in the Revenue Cycle
1. Pre-Sales Order
2. Sales Order Entry
3. Shipping
4. Billing / Issuance of Invoice to Customer
5. Cash Collections
2. Sales Order Entry
• Take order
• Check and approve credit
• Check inventory availability
• Respond to customer inquiries (e.g., inquire about order status)
• Document Created: Sales Order
• An internal document to process the transaction within the organisation. To start the
process, not end it. The sales may not even occur even if there is a sales order
• Referenced to the customer’s purchase order (originating document)
• It is standardised for the organisation’s purposes as different customers would have
different types of orders
• Provides a level of internal control by ensuring completeness as the order is processed
by the various departments
3. Shipping (Delivery of goods to customer)
• Pick and pack the goods from the warehouse

o Perpetual vs Physical
o Periodic reconciliation
o A buffer is needed between picking tasks and time of delivery to ensure timeliness
• Ship the goods
• Inventory Ledger is updated
• Document Created: Picking Ticket and Picking List
3. Billing
• Issue invoice the customer

• Accounts Receivable GL and subsidiary ledger are updated
• Documents created: Invoice and Journal Voucher
(Journal entries such as depreciation expense, accruals, total credit sales and accounts
receivable from the sales journal for a period are recorded in the journal voucher)
Traditional
(Manual)
SAP Modules used in the Revenue Cycle
• Sales and Distribution (SD): Sales, Delivery & Billing

• Materials Management (MM): Inventory Recording
• Financial Accounting (FI): Financial Recording and Credit Limit Recording
Sales and Distribution Module (SD) – Organisational Data
• Client Accounting (Covered in Week 5 – FI Module)

• Company Code
• Sales Organisation
• Distribution Channel Sales
• Division
• Sales Area
• Plant (Delivering Plant) Delivery
• Shipping Point
• Sales Organisation
o Responsible for Distributing goods and services, Negotiating sales conditions, Product
liability and rights of recourse
o Used to Divide the market based on geographic regions
o Highest level of aggregation in sales-related reporting
o Relationship with Company Code: (Many to One)
▪ 1 Company Code must have AT LEAST 1 Sales Organisation, but it can also have
MULTIPLE Sales Organisations
▪ But each Sales Organisation belongs to ONLY 1 Company Code
• Distribution Channel
o Responsible for Getting the products to customers
o Used to Differentiate distribution strategies or approaches (Different pricing,
responsibilities, statistics, plants) (e.g., wholesale sales, retail sales, internet sales)
o Relationship with Sales Organisation: (Many to Many)
▪ 1 Sales Organisation must have AT LEAST 1 Distribution Channel, but it also can
have MULTIPLE Distribution Channels
▪ 1 Distribution Channel have MULTIPLE Sales Organisations
o (Each Channel has its own strategies, approaches and constraints for getting the goods
and services to the customer)
• Division
o Used to Differentiate strategies or approaches (Different pricing, responsibilities,
statistics, plants)
o Associated with product lines (A product/material can be assigned to one division only)
o Need at least one Division
o Possible to aggregate reports at division level
o Relationship with Sales Organisation: (Many to Many)
▪ 1 Sales Organisation must have AT LEAST 1 Division, but it can also have
MULTIPLE Divisions
▪ 1 Division can have MULTIPLE Sales Organisations
o (Each Division has its own sales strategies such as pricing agreements with customers)
• Sales Area
o Made up of 3 organisational elements (MUST be indicated on every sales transaction)
▪ Sales Organisation
▪ Distribution Channel
▪ Division
▪ 1 Company Code can have MULTIPLE Sales Areas
▪ But each Sales Area belongs to ONLY 1 Company Code
• Plant (Delivery Plant)
o In SAP, a plant can have multiple roles (from different modules): Delivery, Production,
Servicing, Maintenance and/or Storage
o In SD (Delivery Plant): Used to Deliver product or service, Storage and distribution of
materials, Production planning and Performance of service or maintenance
o A plant can be a factory, warehouse, regional distribution centre, service centre or an
office. It can be part of a building or an entire building
o Delivery Plant MUST be indicated on every delivery document
▪ 1 Company Code can have MULTIPLE Plants
▪ But each Plant belongs to ONLY 1 Company Code
• Shipping Point
o It is a physical location from which outbound deliveries are sent (e.g., loading dock, mail
room, rail depot, group of employees to handle expedited orders)
o Shipping Point MUST be indicated on every delivery document
o Relationship with Plant: (Many to Many)
▪ 1 Delivery Plant must have AT LEAST 1 Shipping Point, but it can also have
MULTIPLE Shipping Points
▪ 1 Shipping Point can be associated with MULTIPLE Delivery Plants
▪ (If the plant is not a delivery plant, it does not need to have at least 1 shipping
point)
Sales and Distribution Module (SD) – Master Data
• Customer Master
• Material Master
• Condition Master
• Credit Management Master (Week 7)
Sales and Distribution Module (SD) – Master Data
• Customer Master (The party whom the purchasing transaction takes place with)
Segmented by Organisational Level

Segment Cardinality Key information
General Data One record per Customer Generic information: Name,
(Client-level) address, contact details
Company One record per Customer + Company Accounting: Reconciliation
Code Data Code account, payment terms,
(A Customer can be a debtor (account correspondence detail
receivable) of multiple Company Codes)
Sales Area One record per Customer + Sales Area Sales: Currency, Pricing
Data (A Customer can do business with procedure
multiple Sales Areas) Shipping: Delivery plant,
A sales area is made up of Priorities, Methods, Tolerances
• 1 Sales Organisation, and Policies for dealing with
• 1 Distribution Channel, and partial deliveries
• 1 Division Billing: Payment terms, Taxes
The same business partner can be a customer as well as a vendor, therefore, when a customer
master is created, the system automatically creates a business partner and links the 2 masters.
But note that the customer master and business partner master are 2 different master records
with 2 different master numbers (But 1 general data is shared)
Use different BP roles to gain access to

different data of the customer master
• Material Master (Items sold to the customer)

Basic Data One record per Material Generic: Description, base unit of
measure, classification
Sales Data One record per Material + Sales Sales: Delivering plant, Sales units
Organisation (or measure), Minimum quantities
(A Material can be sold by multiple (order, delivery)
Sales Organisations through multiple
Distribution Channels)
Plant Data One record per material + plant Storage: Handling requirements
(A Material can be distributed from (refrigeration), loading (hand cart,
multiple Plants) forklift)
• Condition Master (Pricing)
Includes information such as:

Prices Surcharges Discounts
Freights Taxes
This information can be specified and be dependent based on various data/factors:

o Material specific
o Customer specific
Conditions can be dependent on any document field
Sales and Distribution Module (SD) – Transaction Data
• Sales Order Process

1. Pre-Sales Activity – Inquiry, Quotation
2. Sales Order – Sales Order Document, Check Availability
3. Shipping – Delivery Document, Pick Materials, Pack Materials, Post Goods Issue
4. Billing – Invoice Customer
5. Payment (Week 7) – Receipt of Customer Payment
1. Pre-Sales Activity
• Inquiry
o A customer’s request to a company for information or quotation in respect to their
products or services without obligation to purchase (cost, availability, dates, etc)
o The inquiry is maintained in the system and a quotation is created to address questions
for the potential customer
• Quotation
o Presents the customer with a legally binding offer to deliver specific products or a
selection of certain number of products in a specified timeframe at a pre-defined price.
2. Sales Order
• Originates from:
o Customer contacting through phone, internet, email
Triggers the creation
o Existing contract
of a Sales Order
o Quotations
• Sales Order Document is created and it contains information about:
Customer (Sold-to-party) Material / Service and Quantity Pricing / Conditions
Specific delivery dates and Shipping (Ship-to-party) Billing

quantities
• Structure of a Sales Order
• Data Processing in Sales Order

o Step 1: Input Data is captured from the triggers
o Step 2: Input Data is validated against the Organisational and Master Data Files
o Step 3: Input Data is processed to perform other activities
o Step 4: If no mismatches or breaches in conditions, the Sales Order will be confirmed
and the Transaction Data File will be created
• Outcomes of Sales Order
o The Sales Order contains all information to process the customer’s request
o The following information is automatically determined for each Sales order:
Delivering Scheduling Finds an appropriate time slot for delivery of goods
Availability Check • Determines the material availability date

• Considers all inward and outward inventory movements
• Proposes 3 options of delivery
o One-time delivery on required delivery date
(Sufficient stock)
o Complete delivery on a later date
(Completely no stock)
o Partial deliveries on multiple dates
(Insufficient stock)
• A critical consequence of a stockout in the face of
increased customer demand is that no delivery is made
for a period of time
Credit Limit Check • Allows enterprise to manage its credit exposure and risk
for each customer by specifying credit limits
• During the sales order process, the system will alert the
user about the customer’s credit situation that arises. If
necessary, the system can be configured to block orders
and deliveries
• Automatically flag orders that require specific
authorization because they exceed a customer’s pre-
approved credit limit
• This is an important control to ensure that sales do not
result in non-collections or bad debts.
Pricing Determination With a pricing condition master, the system is able to

automatically determine the gross price, discounts, freight
charges etc.
Shipping Point and Choose a route that is the shortest/cheapest freight/most

Route Determination efficient route to deliver the goods to the customer
(includes which dock is the nearest to the customer, etc)
3. Shipping
• Delivery Sub-Processes
o The delivery processes is initiated by the creation of the delivery document, which
serves as the control mechanism for all subsequent delivery sub-processes:
o Changes in Delivery will update the sales order
• Structure of a Delivery Document
• Data Processing for Delivery

o Step 1: Input Data is captured
o Step 4: If no mismatches or breaches in conditions, a Picking Request, Packing List and
Delivery Note will be created and Transaction Data Files will be updated or created
• Outcomes of Delivery Creation
o Checks order and materials to determine if a delivery is possible (e.g., delivery
block/hold, incompleteness)
o Checks stock availability
o Checks credit limit
o Checks export/foreign trade requirements
o Determines total weight and volume for freight purposes
• Outcomes of Goods Issue (Shipping)

o The data required for goods issue posting is copied from the outbound delivery
document into the goods issue document which cannot be changed manually, any
changes need to be made in the outbound delivery document itself to ensure that the
goods issue document is an accurate reflection of the outbound delivery.
o Goods Issue is an event that indicates the legal change in ownership of the products
o Financial Impact:
▪ Reduces inventory quantity and value
▪ GL is updated
DR COGS
CR Inventory
▪ Ends the shipping process and updates the status of the shipping documents
4. Billing
• Creation of a billing document will also automatically create an accounting document which
posts a debit to the customer sub-ledger account and a credit to the revenue account.
o It is at this point that the sales process is handed over to Financial Accounting (FI) to
manage the receivable and payment receipt.
• Structure of a billing document
• Data Processing in Billing
o Step 4: If no mismatches or breaches in conditions, an Invoice will be created and
issued, and Transaction Data Files will be updated or created
• Outcomes of Billing
o Invoice is created for billing the customer.
o Sales order and delivery document are updated with billing status.
o Accounting document is posted to Financial Accounting (Financial Impact):
DR Accounts Receivable (Customer Sub-Ledger Account)

CR Sales Revenue
▪ GL and AR subledger are updated
• Billing – Accounting Updates

o The single accounting document updates both the AR sub ledger and GL simultaneously
thereby eliminating several steps as compared to the manual process (efficient)
Sales and Distribution Module (SD) – Reporting
• General SAP Reporting Options

o Traditional – Online Transaction Processing (OLTP) system
▪ Work lists (e.g., Delivery & Billing Due Lists)
• Helps the employee identify tasks that are scheduled to be completed in
a process
▪ Online lists (e.g., List of Sales Orders)
• Displays lists of master data and documents generated during the
execution of a process (quickly and efficiently)
o Information System – Online Analytic Processing (OLAP) system

▪ Sales Information System (SIS) Analyses
• Uses various masters to provide reporting in the form of analytics via
information system
• E.g., Drilling down from Sales Organisation to Customers then zooming
in to its monthly sales to a single customer
• Fulfilment Specific Reporting Options

o Document Flow – Identifies all documents related to a customer order
▪ Waterfall presentation of related transactions and their statuses
▪ Used to check statuses
▪ Used for audit trail
Week 7
Seminar 7: Revenue Cycle Using ERP 2 (AR)
Accounts Receivable Management
4 Ways to Ensure that Customers Pays Promptly:

The business needs to ensure that customers pay their invoices, hence, good AR management is an
important component of an effective cashflow management of the business.
1. Quality of Receivables
Ensure customers are credit-worthy and are in a sound financial position
2. Length of Period Average Collection

Vary the length of the credit period in line with the credit-worthiness or Period
payment history of customer (i.e., long standing customer may extend
a longer credit period as compared to a new customer)
3. Possible Cash Discount

Prompts customers to make early payments
4. Firm Collection Programme Bad-debt Loss

The business should have a collection programme for overdue customers
to ensure that these are paid up and do not go bad
Optimising the AR Cycle
Cash Receipt Activities – Via the FI Module
• Cash Collection – Payment (Last stage of the Revenue Cycle)

o Record Cash Receipts
o Update AR
o Deposit Cash
• Remittance Advice
o Provides a breakdown of the invoices included in the payment
o It is typically sent by a customer together with a cheque or other form of payment
advising the supplier of the invoice payment
o It is good practice to include the remittance advice as part of the statement or reminder
letter (top portion) to the customer as it will not only make it convenient for the
customer, but also enable easy tracking, accurate data entry and save processing time
for the supplier
• Accounting Updates:
Recap: SAP Modules used in the Revenue Cycle
• Sales and Distribution (SD): Sales, Delivery & Billing

• Materials Management (MM): Inventory Recording
• Financial Accounting (FI): Financial Recording and Credit Limit Recording
SAP ERP Accounts Receivable (AR)
• AR Organisational Data
• AR Master Data
• AR Transaction Data
• AR Reporting Data
AR Organisational Data
• Client Accounting (Covered in Week 5 – FI Module)

• Company Code
• Credit Segment Credit Management
• Credit Segment
o Responsible for managing customer credit
o Relationship with Company Code: (One-to-Many)
▪ 1 Credit Segment can be used by MULTIPLE Company Codes
o Types of Credit Segments:
▪ Centralised
• 1 Credit Segment for ALL Company Codes in the Enterprise
• 1 Credit Segment manages the credit function for ALL Company Codes
▪ Decentralised
• Multiple Credit Segments in the enterprise, each managing customer
credits for one or more company codes
• Manages the risk exposure because it depends on the nature of the
business, some segments will require longer or short credit periods, so
having different controls for each segment serves the different markets
o Centralised Credit Management
o Decentralised Credit Management
AR Master Data
• Customer Master Revenue Cycle 1 – Week 6

• Customer Reconciliation (G/L) Account
• Credit Management Master
• Customer Reconciliation Account

o Although customer subledger accounts are
NOT part of the GL, the data in these
accounts must be reflected in the GL.
o Companies do this by posting the data
from the subledger accounts into special
GL accounts called reconciliation
accounts.
o A linkage between reconciliation account
and subledger account is created by
specifying the reconciliation account in the
customer masters and the account type in
the GL.
o Characteristics of reconciliation accounts:

▪ Not possible to post data directly into them
▪ Data must be posted to subledger accounts where they are automatically
posted to the corresponding reconciliation accounts
• Credit Management Master Record

o An extension of the customer master record
o Includes 2 types of data relevant to managing credit for that customer
o General Data (Client Level)

▪ Credit profile E.g., address, communication data and credit
▪ Credit worthiness granted to the customer across the enterprise
o Credit Segment Data (Credit Segment Level) – Resides in the Business Partner Master
▪ Credit limit for the credit segment – The credit granted to the customer for
companies in a particular credit segment
▪ Credit exposure / utilisation
▪ Payment behaviour
AR Transaction Data
• Credit Management
• Customer Reconciliation (G/L) Account
• Credit Management Master
Credit Management in SAP
• A credit limit can be set for each customer, per credit segment
• Various credit-check options can be configured in the SAP system
• Advantages of using SAP to manage credit:
o Process is automated
o Credit data are available in real-time
• Credit Limit by Credit Segment
o Customer credit limit is set and monitored per credit segment
o In addition, a “main” credit segment can be set up to manage an overall credit limit
o Credit limit check is carried out based on the customer’s credit status in the credit
segment applicable to the transaction as well as in the main credit segment
• Credit Limit Checks

o Used to determine if credit should be granted to a customer (should process continue?)
o Credit is checked when:
▪ Sales order is created or changed
▪ Delivery is credit or changed
▪ Post goods issue
o Approval is based on: 3 Configurable Options
▪ Credit exposure = sum of open orders, deliveries,
open invoices and current order value
o Outcomes (depending on whether the system is breached):
Warn & Continue, Error & Terminate, Block Delivery
Dunning in SAP
• Dunning is the process of generating dunning notices (reminder letters) to customers with
overdue invoices, requesting payment of the outstanding amount by a specified date.
• The dunning process is automated and extracts information from the customer master and open
items and generates output in the form of dunning lists and notices to be sent o the customers
• Information from Customer Master – Defines: Dunning interval, Minimum number of days in
arrear for an item to be selected for dunning, Texts to be used in the dunning notices, Whether
or not to charge interests, etc
• AR Open Item Selection for Dunning

o Whether or not an AR open item would be selected for dunning depends on:
▪ Selection criteria set in the “Parameter” tab of the dunning run
▪ Whether it is in arrears on the dunning date – as a general rule, an item is due
on the net due date
▪ Further checks defined in the dunning procedure
• Dunning Proposal
o The dunning run creates a dunning proposal which can be edited, deleted, and
recreated (as long as dunning notices are not yet printed).
o If desired, the dunning run can be set to directly and automatically be followed by the
printing of dunning notices, thereby eliminating the editing step
• Dunning Levels
o Each item to be dunned gets a dunning level according to its days in arrears (length of
the dunning period).
o The higher the dunning level the more insistent is the dunning text in the dunning
notice (Becomes “harsher”)
o The dunning levels and days in arrears are defined in the dunning procedure:
• Dunning Notices
o The print program of the dunning run:
▪ Generates the dunning notices for printing,
▪ Updates the last dunned date and dunning level into the dunned items (e.g.
invoices) and customer master records.
Incoming Payment
• Post incoming payment

• Financial Impact (Creates an Accounting Document):
DR Cash
CR Accounts Receivable (Customer Account)
o Post to GL and AR Sub-Ledger
• Invoice item status set to “Cleared”

• Cash Receipt – Accounting Updates
o The single accounting document updates both the AR sub ledger and GL simultaneously
thereby eliminating several steps as compared to the manual process (efficient)
• Data Processing in Incoming Payment
o Step 4: If no mismatches or breaches in conditions, a payment record/bank file will be
created, and Transaction Data Files will be updated or created that is subsequently used
to post entries to the AR subledger, the bank and the AR control accounts in the GL
• Clearing
o Upon billing, an invoice item is posted to the customer account with “open” status.
o Upon payment, a payment item is posted to the customer account
o When entering incoming payment, the invoice item is selected and assigned to the
payment, resulting in both items being set to “cleared” status.
AR Reporting (To monitor and measure the company’s AR)
• SAP ERP offers a number of reports that help analysing AR business transactions and measuring
collection performance:
o Customer Account Balances (Audit Trail)

Shows the various transactions that are made with a particular customer during a
period, as well as the total amount that is outstanding from the particular customer at a
particular point in time.
o Customer Line Items

Provides details about transactions with a particular customer; Whether an outstanding
amount has been paid up or cleared, or is still open or awaiting collection or overdue
o Overdue Receivables (AR Ageing)

A useful report to enable management to determine the possibility that a long
outstanding AR may not be ultimately collectible, thereby alerting them to take steps to
expedite the collection of such an AR and to improve the company's cash position or to
make a provision for impairment of this AR.
▪ Customer open items are aged based on number of days overdue (i.e., past their
net due dates).
o Days Sales Outstanding (DSO)

▪ The report shows how efficient the AR team has been in collecting cash from its
credit customer, can be used to assess the performance of the sales team and
incentivise staff
▪ It is also another important financial ratio for the company to aid in its decision
making
• DSO = AR Balance / Average Daily Sales
Week 8
Seminar 8: Expenditure Cycle using ERP (MM)
The Expenditure Cycle consists of activities and information processing related to the purchasing and
payment of goods and services.
Primary objective is to minimize the total cost of acquiring and maintaining inventories, supplies,
and the various services the organization needs to function.
Kraljic Portfolio Purchasing Matrix
High Profit Impact
Leverage Items Strategic Items

(High profit (High profit
impact, low impact, high
supply risk) supply risk)
Low Supply Risk High Supply Risk
Non-critical Bottleneck
Items Items
(Low profit (Low profit
impact, low impact, high
supply risk) supply risk)
Low Profit Impact
Leverage Items (High profit impact, Low supply risk) (e.g. plastics, raw materials)
• Standard products with many suppliers (easy to get)

• Strategy: Fully utilise the firm’s purchasing power in the market to lower its costs
• Tactics: Bulk purchases, competitive bidding (e.g. calling a tender or RFP), aggressive
negotiation to get the best deal
Strategic Items (High profit impact, High supply risk) (e.g. semiconductor chips, aircrafts)
• Specialised products with limited suppliers or delivery could be unstable (difficult to get)
• Items that are most vulnerable because they are highly reliant on its suppliers
• Strategy: Develop long-term partnerships with suppliers and consider in-sourcing because it
may not always be possible to form a win-win partnership with suppliers
Non-critical Items (Low profit impact, Low supply risk) (e.g. stationary)
• Standard and low-value products with many suppliers (easy to get)
• Strategy: Reduce time and cost spent on purchasing them so enterprise can decentralise
their purchasing to local managers, standardise them and improve their purchasing process.
IT systems are often developed to make this happen.
Bottleneck Items (Low profit impact, High supply risk) (e.g. power pack of laptops)
• Specialised products with limited suppliers or delivery could be unstable (difficult to get)
• Short-term strategy: Mitigate supply risk by negotiating contracts to ensure continuous
supply, hold excess stocks to protect themselves against events that supply become risky
and make contingent plans for those events
• Long-term strategy: Innovate and reduce reliance of such suppliers and therefore make it
possible to look for alternative suppliers
Overview of Purchasing
Upstream (Sourcing)
1. Needs Assessment
• To identify items to purchase
2. Market and Portfolio Analysis
• Use Kraljic Matrix to identify best purchasing strategy
3. Supplier Relationship Analysis
• To understand where the firm stands in relation to its suppliers
4. Risk Management
5. Supplier Selection
• Conduct activities to look for, evaluate and decide on the best supplier for the
firm
Downstream (Operational Execution / Procurement)
6. Contracting
• Negotiate and seal a contract with the selected supplier
7. Purchasing and Delivery
• When the item is required, the enterprise communicates details such as
quantity, date and location to the supplier (Through a purchase order)
8. Receipt of Goods
9. Payment to Vendor
• Upon receiving invoice
10. Review on Process
• To monitor and review the performance of the selected supplier, which provides
feedback to the upstream sourcing activities the next time it happens
Activities in the Expenditure Cycle:
1. Ordering materials, supplies and services

2. Receiving materials, supplies and services
3. Approving supplier invoices
4. Cash Disbursements (Payments)
1. Ordering materials, supplies and services
• Purchase Requisition (Internal) – The department that requires the goods/services will send
a PO to the purchasing department
• Purchase Order (External) (Referenced to Purchase Requisition) – The purchasing
department will send a purchase order to the supplier to request for the goods/services (An
official document to supplier)
o In some cases, a Blind PO (Without price and quantity) may be given to the receiving
department to force them to count the goods received
2. Receiving materials, supplies and services
• Count items received

• Record items received in a receiving report
• Update inventory Records
• Receiving report (Referenced to PO): A source document used to update inventory records.
It is prepared whether or not the supplier provides a delivery note or packing slip
3. Approving supplier invoices
Verify supplier’s invoice for payment
• Update AP and GL
Match Level Invoice Purchasing Receiving Acceptance Typical Use

Order Report Report
2 Way Quantity Quantity Low-value
Price Price purchases
3 Way Quantity Quantity Quantity Most commonly
Price Price used
4 Way Quantity Quantity Quantity Quantity Highly regulated
Price Price purchases
4. Cash Disbursements (Payment)
• Make payment
• Update AP and GL
SAP Modules used in the Expenditure Cycle
• Materials Management (MM): Purchasing, Goods Receipts, Invoice Verification

• Financial Accounting (FI): Payment and Financial Recording
Materials Management Module (MM) – Organisational Data
• Client
Accounting (Covered in Week 5 – FI Module)
• Company Code
• Plant Inventory Management
• Storage Location
• Purchasing Organisation Purchasing
• Purchasing Group
Inventory Management
• Plant – Role: Storage Plant

o Relationship with Company Code:
▪ 1 company code can have MULTIPLE plants
▪ But each plant belongs to ONLY 1 company code
• Storage Location – Areas designated for different types of material (RM, WIP, FG)
o Can be further divided into divisions (storage bins, cabinets, trays)
o Relationship with Storage Location:
▪ 1 storage plant can have MULTIPLE storage locations
▪ But each storage location belongs to ONLY 1 storage plant
Purchasing
• Purchasing Organisation – An organisational unit that performs purchasing activities

o Identifies and selects vendors
o Negotiates general conditions of purchase and contracts fore one or more plants or
companies (Determines pricing conditions)
o 3 Models (can co-exist in the same system):
▪ Enterprise-level (AKA Cross-company code)

• ONE purchasing organisation assigned to ALL company codes
• Purchasing for ALL plants across ALL company codes
(Highly centralised)
• E.g. Global purchasing shared service centre
▪ Company-level (AKA Cross-plant)

• DIFFERENT purchasing organisations assigned to EACH company
code (Each purchasing organisation is purchasing for all plants in the
assigned company code)
• E.g. Purchasing department of a company
▪ Plant-level (AKA Plant-specific) (Does NOT exist in GBI)

• EACH plant has its OWN purchasing organisation
(Highly decentralised)
• E.g. Purchasing function within a production plant
o A Purchasing Organisation is ASSIGNED to plant(s) or company code(s)

o It has a service provider / service receiver relationship with plant and company code
• Purchasing Group – A buyer / group of buyers responsible for certain materials or groups of
materials
o Can be internal or external (External: using an agent to execute the purchase)
o For SAP: Not assigned or related to purchasing organisation
Materials Management Module (MM) – Master Data
When a purchase order is created, the system automatically extracts relevant information from the
various master data and populates them into the transaction
• Vendor Master (The party whom the purchasing transaction takes place with)

General Data One record per Vendor Generic information: Name,
(Client-level) address, contact details
Company Code One record per Vendor + Company Accounting: Reconciliation
Data Code account, payment terms,
(A Vendor can be a creditor (account payment methods
payable) of multiple Company Codes)
Purchasing One record per Vendor + Purchasing Purchasing: Purchasing
Organisation Organisation currency, salesman’s name,
Data (A Vendor can do business with incoterms
multiple Purchasing Organizations)
The same business partner can be a customer as well as a vendor, therefore, when a
vendor master is created, the system automatically creates a business partner and links the
2 masters. But note that the vendor master and business partner master are 2 different
master records with 2 different master numbers (But 1 general data is shared)
Use different BP roles to

gain access to different
data of the vendor master
• Material Master (Items purchased from vendor)

Basic Data One record per Material Generic: Description, base unit of
measure, classification
Purchasing One record per Material + Plant Purchasing: Purchasing group, GR
Data (A material can be purchased for processing time, delivery tolerances
multiple plants)
Plant Data One record per Material + Plant Storage: Handling requirements
(A material can be stored in (refrigeration), loading (hand cart,
multiple plants) forklift)
Accounting One record per Material + Plant Accounting: Valuation class, price
Data (A material can be valuated control (moving average price / standard
differently for different plants) price)
• Condition Master (Pricing)
Includes information such as:

Prices Surcharges Discounts
Freights Taxes
Maintained as a result of:

o Purchasing information records
o Contracts and agreements
o Other sources
Materials Management Module (MM) – Transaction Data
Procurement Process: (D) – Document created
1. (D) Purchase Requisition (Created on SAP, Sent to purchasing department – Internal)

2. Vendor Selection
• (D) Request quotations (If sourcing for the item hasn’t been done before)
3. (D) Purchase Order (Creased on SAP, Sent to vendor – External)
4. Notify Vendor
5. Vendor Shipment
6. (D) Goods Receipt (Record goods received on SAP)
7. (D) Invoice Receipt (Record invoice received on SAP)
• Can use SAP to verify invoice against purchase order and goods received
8. (D) Payment to Vendor (End of Expenditure Cycle)
• SAP makes payment when invoice is due
Documents created during the Procurement Process
1. Purchase Requisition – Process: Purchase Requisition

• Sent to purchasing department (Internal) to procure a specific good or service for a
specified time
• Creation:
o Manually (Staff needs to determine what, how much and when)
o Automatically (SAP)
• Material requirement planning (MRP)
• Production Orders
• Maintenance Orders
• Sales Orders
Requisition Sourcing
• Once a source of supply is assigned to the requisition, it is converted to a PO
• Ways to determine the appropriate source of supply:
o Internal Sourcing (Supplied by own plant)
o Source List (List of pre-approved vendors)
o Outline Agreements (Long-term purchasing agreements with vendors)
o Request for Quotation (RFQ)
2. Quotation – Process: Purchase Requisition

• If nothing exists in the system (no reference data for automatic assignment of
source), need to request for quotation from vendors
• RFQ: Invitation to a vendor by a Purchasing Organisation to submit a bid for the
supply of materials or services
o Step 1: In SAP, enter vendor’s response (quotation) against the RFQ created
o Step 2: Perform quotation price comparisons and vendor evaluation
o Step 3: Select a quotation (and reject others)
3. Purchase Order – Process: Purchase Order
• A formal request to a vendor for a specific material or service under the stated
conditions
• Communication with Vendors (Outcome of creating a PO)
o Communication medium: Mail, e-mail, fax, web-services, EDI
o Company sends PO to Vendor
o Vendor sends back an acknowledgement / Rejection notice
o Company expedites/remind Vendor
o Vendor sends shipping notice to Company (Prepare for receiving shipment)
• Creation:
o Manually
• Can be referenced to a Purchase Requisition, Quotation, Purchase
Order, or without any reference
Structure of a purchase order

Head Items (Details about the material to order)
Purchase order number Material
Purchase order data Order quantity
Payment terms Delivery data
Vendor Price
Currency
4. Receiving Report – Process: Goods Receipt
• Once document is created, Material master is updated:

o Stock quantity
o Stock value
o Moving average price (if applicable)
• Accounting document is posted, GL is updated: (Financial Impact of Goods Receipt)
DR Inventory / Expense
CR GR / IR
• PO History is updated
• Output can be generated (GR slip / Pallet label)
• Quality inspection lot is created
5. Invoice – Process: Invoice Verification
• Upon receipt of invoice, a 3-way match is performed to verify their content, prices
and arithmetic.
Match Level Invoice Purchasing Order Receiving Report
3 Way • Quantity • Quantity • Quantity
• Price • Price
If a discrepancy arises, the system may prevent the invoice creation or allow it to be
created with a payment block
• Types of discrepancies
o Price Variance (Invoiced price vs PO price)
o Quantity Variance (Invoiced quantity vs Delivered quantity)
o Schedule Variance (Invoice date vs Requested delivery date in PO)
• Handling Discrepancies
• Invoice Verification
o PO history is updated
o Accounting document is posted, GL is updated (Financial Impact)
DR GR / IR
CR Accounts Payable (Vendor)
o Material Master is updated (if there is a price variance):

▪ Stock value
▪ Moving average price (if applicable)
6. Process: Outgoing Payment
• Creation:
o Manually
(Both will post an accounting document to record the payment transaction)
• Elements of the Payment Transaction

Items to be paid
Bank to pay from Outside
Payment method System Automatic Payment
Calculate payment amount Programme
Generate payment medium Manual
Record payment Posting
• Clearing
1. Upon invoice verification, an invoice item is posted to the vendor account with
an “open” status -> Invoice is incomplete, further follow-up is expected
2. Upon payment, a payment item is posted to the vendor account
3. When entering outgoing payment, the invoice item is selected and assigned to
the payment, resulting in both items being set to “cleared” status -> no further
follow-up expected
• Financial impact of vendor payment
DR Accounts Payable (Vendor)

CR Cash
Material Management Module (MM) – Reporting
➢ General Reporting Options within SAP ERP

• Online Transaction Processing Environment (OLTP) – Lists and Reports
o Provide listing of data and reports useful for carrying out business processes
o Examples:
• Online Lists (e.g. list of invoices)
• Work Lists (e.g. PR source assignment)
• Online Analytic Processing Environment (OLAP) – Information Systems

o Provide information systems which makes use of aggregated database that
are useful for trend analysis and supporting decision making
o Examples: Logistic Information System (LIS) analyses
• Purchasing I.S. (Provides info on purchasing documents)
(To analyse the value of purchases made by an enterprise’s
purchasing groups by zooming into a particular purchasing group's
purchases and drill down by its vendors or break down by periods)
• Sales I.S.
• Quality Management I.S.
• Inventory Control (Provides info for managing inventory)
• Transportation I.S.
• Shop Floor I.S.
• Plant Maintenance I.S.
➢ Procurement Specific Reporting Options

• PO History – Provides visibility to the transactions that take place AFTER the PO is
created (Similar to document flow in S&D module)
o Displays the goods receipts and invoices that have been created in the
system related to a PO item following the creation of this PO
o Provides an audit trail: Allows the user to drill down on a particular goods
receipt or invoice receipt to look at the details
Week 9
Seminar 9: Process Enhancement & Controls using ERP
Process Automation
Enablers of Process Automation
• Common Database
o Organisational units involved in the same business processes are creating, updating
and using data in the same database, making it possible to automate processes
driven by data.
• Real-time Updates
o Data are updated real-time upon the completion of a transaction. This eliminates
the wait time for updating data, thereby always providing the latest information to
automate the business processes.
• Business Rules
o SAP is a highly configurable system. Hence, business processes can be automated in
the system based on the rules which are configurable in the system.
• General Automation Tools

o SAP provides a host of general tools such as workflows and automatic collaboration
between the various departments in the enterprise involved in the business process.
It also provides interface technology that enables the enterprise to work seamlessly
with its external business partners.
• Process-Specific Automation Tools

o Such tools are used to automate certain activities involved in the business process
supported by the application.
Process Automation in Financial Accounting (FI)
• Automatic Posting from Non-accounting Modules (Integration)

o When business transactions are performed using non-accounting modules, the
system automatically generates and posts accounting documents into FI to record
its financial impact.
o The GL and relevant Subsidiary Ledgers are automatically updated
o Within FI, some of the accounting modules generates and posts accounting
documents (e.g. depreciation journals posted automatically by the asset accounting
module)
o Benefit: This eliminates the need to duplicate source documents and route them
for the purpose of accounting recording
• Automatic Workflow to for the Two-step Accounting Document Process
(Supports the collaboration between accounting employees)
Accounting Clerk: Responsible for parking the document

Accounting Supervisor: Responsible for checking and posting the document
1. The collaboration between these 2 employees can be automated using a workflow

engine provided by SAP. The workflow engine is a programme running all the time,
looking out for the occurrence of a particular event before performing an action.
2. In this process, the parking of document will trigger the engine to create a workflow
item for the accounting supervisor. A workflow item is like an item in the to-do list.
This will prompt the accounting supervisor to check the parked document.
3. Should he decide to reject it, the workflow engine will be triggered again and this
time, create a workflow item for the accounting clerk to amend the item.
4. The accounting clerk amends the document and triggers the workflow to create a
new workflow item for the accounting supervisor to check the document again. And
this goes on.
5. Only when the accounting supervisor posts the document, the workflow will end.
• Automatic Posting of Recurring Documents

o An example of a recurring document: Monthly amortisation of a prepaid insurance.
o If the volume of such recurring journals is high, it may be tedious for accounting
staff to keep track of them and post them in a timely manner. The SAP system
provides a tool called the recurring document to automate this process.
o A recurring document is a template that stores the details of an accounting
document to be posted, without posting it. Alongside with the details, also need to
specify posting parameters such as the duration of the posting and frequency of the
posting.
o A posting programme is scheduled and executed periodically (e.g. daily or
periodically) and automatically post the accounting documents based on the details
stored in the template and frequency of postings specified.
o Benefits: This automation totally eliminates the need for human users to manually
keep track of such recurring journals and carry out the postings.
Process Automation in Revenue Cycle (S&D)
• Automatic credit limit checks (Refer to Seminar 7)

o Done during sales order creation, delivery document creation and posting of goods
issue
• Automatic inventory availability checks (During sales order creation)

o This is a highly complex but important check that is difficult to perform by humans
without timely information available. Why so complex?
▪ Requires forecasting of inventory movements from the date of order to the
date of delivery.
• Current Inventory on hand + Increase from production or purchases
– Decrease from orders
▪ As sales order is usually processed by the sales dept, they do not have
access to all information (e.g. purchasing plans, production plans)
o Enterprise should perform this check when receiving a customer order. They
should only accept the order when they are confident that they have available
inventory to meet the customer’s requirements on the required delivery date,
Otherwise, they should reject the order or propose other alternatives to the
customer, such as the 3 Delivery Options:
▪ Partial delivery on required date (and forgo the rest)
▪ Partial delivery on required date, Remaining on later date
▪ Full delivery on later date
o Issue: Due to its complex nature, many enterprises are not able to perform this
check when they receive orders. Instead, they only do the check when they have to
physically pick the goods from the warehouse to prepare for delivery, which is
usually too late.
o Benefits: With SAP automating this check using a centralised common database, it:
▪ Eliminates the problem of human checking, and
▪ Helps the enterprise be confident about committing to a customer's order
(assures the enterprise of its ability to promise the customer to deliver the
goods as required by them)
o FYI Example: A customer order is received today for 50 units of a product to be
delivered on a particular required delivery date in the future. To do the inventory
availability check, need to check the latest material availability check date in order
to deliver the goods to the customer on the required date. This is taking into
consideration the time taken to do picking, packing and loading and time required
for the transportation to reach the customer. Start looking at the quantity on hand;
today there is 10 units, which is not good since the customer wants 50. But need to
look further into the future to see if there might be an increase in inventory (e.g.
due to planned factory production or purchases ordered by production dept). With
100 (10 now + 90 future), enterprise should be able to deliver to the customer the
50 that they want. But also need to look at the downside. Maybe in the future there
will be an expected decrease of 70 units due to another customer order which will
reduce the quantity to 30. With 30, there is a problem delivering the 50 that the
customer wants. Assuming there is no other movement until the material delivery
date, it means that there are problems delivering the 50 requested by the customer.
• Automatic creation of delivery documents
o Activities performed during delivery:
▪ Picking
▪ Packing
▪ Scheduling the actual deliveries to customers
o Manual: Forward a copy of sales orders to the planner
▪ Issue 1: Volume of sales orders can be very high (tedious)
▪ Issue 2: Easy to make mistakes in the planning and lose track of which sales
order to work on
o Automated (SAP): Delivery Due List
▪ Online processing of the delivery due list
▪ Explanation: During sales order creation, the system has automatically
worked out the various dates for the various delivery activities. Based on
this, the delivery due list programme is able to identify sales orders due for
delivery. For these sales orders, the delivery due list automatically creates
the delivery documents and trigger the delivery process.
▪ Benefit:
• It eliminates the need for a human to perform the computation and
monitor the sales orders in order to action on them.
• Allows the creation of more than one delivery at a time
• Creating a batch job in the background to be executed during off-
peak hours
• Automatic creation of customer invoices (similar to the delivery documents)

o Manual: Forward a copy of sales orders and delivery document to the billing person
(after delivery)
▪ Issue 1: Volume of sales orders can be very high (tedious)
▪ Issue 2: Easy to make mistakes in the planning and lose track of which sales
order and delivery document to work on
o Automated (SAP): Billing Due List
▪ Online processing of the delivery due list
▪ Explanation: The billing due list programme is able to identify the deliveries
which have been completed (when goods issue has been posted) and
automatically create customer invoices for them.
▪ Benefit:
• It eliminates the need to involve a human to compute invoice
amounts and monitor the deliveries in order to action on them.
• Allows the creation of more than one invoice at a time
• Creating a batch job in the background to be executed during off-
peak hours
• Automatic communication with customers (Interface technology)

o Manual: Enterprises use mail, fax or email the business documents to each other
o Automated: Enterprises use interface technology such as EDI, that allow their
respective ERP systems to interact with each other. SAP provides such interface
technology that enables the enterprise to exchange business data with its
customers' systems.
• Automatic barcode/mobile integration with SAP applications
(Automates warehouse processes)
o Automated: Integrates its applications with third-party barcode scanning and
mobile device solutions. This integration enables the enterprise to have automated
and timely updates of inventory information in its ERP system as activities are
carried out and recorded immediately in the warehouse. (e.g. goods delivery)
Process Automation in Expenditure Cycle (MM)
• Automatic creation of PRs (Materials Requirements Planning) (Refer to Seminar 8)

o The MRP process automatically creates PRs. It looks at production plans and works
out the quantity of raw materials and semi-finished goods that need to be
purchased and automatically creates the PRs for them.
• Automatic PR source assignment & PO creation

o Once source assigned, PO is automatically created without human intervention
• Automatic workflow for PR & PO approval

A configuration in the MM module called the release strategy, the workflow engine can
handle complex approval process for PRs and POs. (5 options)
1. Approval Option 1: No approval needed
▪ If the PR does not need any approval, the release strategy will specify that
no approval is needed for this PR and the workflow engine will forward the
PR to the purchasing dept for creating a PO
2. Approval Option 2: PRs need to have 2 signatures

▪ After the PR is created, the workflow engine will forward it to the first
approver (level 1), and only upon his approval, it will be forwarded to the
next approver (level 2).
▪ Once both approvers approved the PR, the workflow engine will forward it
to the purchasing department
3. Approval Option 3: The amount of purchase is used to determine WHETHER AN

APPROVAL IS NEEDED or not.
▪ No approval needed below $X.
▪ E.g. 1 approver if value is above $X and below $Y, but 2 approvers if value is
above $Y
4. Approval Option 4: The amount of purchase is used as a benchmark to determine

the NUMBER OF APPROVALS.
▪ E.g. 1 approver if value is below $Y, but 2 approvers if value is above $Y
5. Approval Option 5: Just to double check the automatic generated PRs by the
planner
▪ The number of such PRs is usually very high and it may not make sense to
put these PRs through the approval process
▪ However, the material planner may want to take a look at these PRs before
letting them be forwarded to the purchasing department. In this case, the
material planner will be made the approver. Once he approves the PRs, the
workflow engine will forward them to the purchasing department to create
the PO.
• Automatic communication with vendors
o Similar to the sales cycle, interface technology (e.g. EDI) implemented to facilitate
seamless communication between the enterprise, customers and vendors.
• Automatic barcode/mobile integration with SAP applications

(Automates warehouse processes)
o Automated: Integrates its applications with third-party barcode scanning and
mobile device solutions. This integration enables the enterprise to have automated
and timely updates of inventory information in its ERP system as activities are
carried out and recorded immediately in the warehouse (e.g. goods receipt)
• Automatic vendor invoice management integration (VIM)

o VIM is an add-on to simplify the process of receiving, posting and monitoring
vendor invoices in SAP
▪ Invoices are received by several input channels in any format and directly
uploaded into the SAP system
• Benefits: Enables paperless processing and reduces manual steps
▪ Before posting the invoice, a set of business rules is checked. If the invoice
data is correct, it will be posted in the background. If any exception occurred
(PO mismatched vendor, missing mandatory information), the invoice will be
automatically routed to the pre-defined role to resolve the exception or
approve the invoice.
• Benefits: Personalised workflow steps, minimises invoice processing
time, boosts productivity
▪ Mobility solutions: Allow approval of invoice on smartphones/tablets from
anywhere.
▪ Facilitates monitoring by providing a complete overview of all invoices
processed
• Benefits: Enhance vendor relationship, answer vendor inquiries
quickly, on-time financial reporting, identify bottlenecks
o OpenText software comes with capabilities to convert and capture hardcopy vendor
invoices into electronic data, perform 3-way matching and identify other anomalies
about the invoices, support subsequent dispute and exceptions arising with the
invoices and support the approval process for the invoices.
• Automatic invoice variance detection (Refer to Seminar 8)

o Automatically detect certain variances during invoice verification and block the
invoice for payment if necessary
• Automatic payment program (Refer to Seminar 8)

o It can automatically identify invoices that are due for payment and execute the
payment for them
Process Control
General Application Controls
• SAP User Security Setup

Ensuring that only valid users has access to the SYSTEM and that they only access the
FUNCTIONS AND DATA they are authorised to.
o Step 1: Design and set up a role in the system (e.g. “GL Accounting Document
Creator”)
o Step 2: Identify transaction codes to give to this role for it to perform his job
▪ Authorised transactions (e.g. FB50)
▪ Authorisations (Users given this role can only do this activity for this
company code)
• To define the company code which the role should be authorised to
create the accounting documents for (e.g. US00)
• To define the activity or action the role should be permitted to
perform for accounting documents (e.g. Parking of documents)
o Step 3: Create a user account for the GL clerk which contains information such as
password and defaults (e.g. date formats, decimal notations, etc)
o Step 4: Assign the role to the user account, then release the account to the user
• 3 Levels of Security in SAP

1. User Master Record
▪ SAP will check the user master record to verify that the user’s ID and
password input are correct
2. T-code Check (authorisation for transactions)
▪ When user launches a transaction, SAP will check the roles assigned to the
user account to determine whether the transaction (e.g. FB50) is among the
transactions that the user is authorised to use.
▪ If authorised, the user can enter data for the document he wants to create
3. Authorisation Check (authorisation for authorisation objects and field values)
▪ Once the clerk posts the document, SAP will check whether the role has
authorisation to post the documents for that company code. If he does not,
he will get an error message and will not be allowed to post.
• Input Data Validation

o Validation using field type and field length defined in data dictionary for input
fields
▪ Ensures that the input data conforms to the field type and field length of the
inputs field (e.g. if defined as numeric field, cannot enter text)
o Validation using configuration & master data

▪ Country-specific rules (e.g. SG postal codes must be 6-digits)
▪ Enterprise-specific rules (e.g. in GBI, all GL accounts must be 6-digits)
▪ Valid organization units, master data & business objects (usually pre-defined
in system as valid values)
▪ Valid relationships (e.g. between organisation and distribution channels)
o Other input data validation techniques (not limited to):
▪ Closed-loop verification
• After entering a vendor number and pressing enter, the system will
refresh the screen and show the name of the vendor
▪ Zero-balance check
• Ensuring that all debit and credit items offset each other to 0 in the
GL journal
▪ Field status
• A unique validation technique used by SAP where it can be pre-
configured for certain fields to be hidden or appear on the screen
being optional or mandatory depending on another field
• E.g. creating a GL account and specify the account group being a
reconciliation account then on the next screen, you will see a field
"reconciliation account type" for you to choose between customer,
vendor or asset. If you choose any other account group, this field
won't exist
• Data Control
o Very few ways to delete data – Most of the master data and transaction data
cannot be deleted after creation.
o Data can only be removed (not deleted) from the system after they have been
recorded to media (e.g. tape backup, DVD-R) for permanent storage
o Permanent storage: Archiving – To transfer the data to a different storage so that
they may be accessed in the future when the need arises
o SAP keeps track of when data are created or changed (Strong audit trail)
▪ “Created by xx on ddmmyy”, “Last changed by yy on ddmmyy”
Functional Controls in Financial Accounting (FI)
• Tolerance Groups
o Pre-set limits on an employee’s ability to post transactions (size of transaction an
employee can process)
o Set limits on the dollar value for a single item in a document as well as the total
value of document (e.g. cannot post documents with amounts more than $1,000)
o When a user performs a financial transaction, the system will check the tolerance
group assigned to a user to ensure that it does not exceed the pre-set limits.
• Tracing from Account Balances

o Balance display -> Line items -> Original GL entries -> Originating transactions
o If the accounting document is generated from other SAP modules (e.g. S&D, MM,
etc), drill-across is possible to review the originating transactions
▪ Drill-across: To call out the originating transaction (e.g. billing document or
goods receipt document) to view the non-accounting source document
o Benefits: Provides an audit trail
Functional Controls in Revenue Cycle (S&D)
• Credit Limit Check

o A control that will help the enterprise mitigate default risk posed by customers of
poor credit worthiness
• Inventory Availability Check

o Another important control that will help the enterprise mitigate the risk of inability
to deliver goods that it has promised its customers to deliver
• Completeness Check
o A lot of information used in the sales order are used downstream to facilitate
delivery and billing so it is important to ensure that key information required for
downstream processes are completely captured in the sales order.
o Completeness check can be configured in the system for it to ensure the
completeness of the key information in the sales order before it is allowed to
proceed to the next stage (delivery and billing stage)
• Document Status
o The system always updates the status of the sales order when the delivery has
taken place. Similarly, the status of the delivery document is also updated when
billing takes place. This ensures that the enterprise does NOT double deliver the
goods in the same sales order or double bill the goods delivered.
o Similarly, in FI, sales invoices created also have status. When the customer makes
payment, the status of the invoice changes to "cleared". This helps the accountant
keep track of outstanding invoices and invoices that have been paid.
• Document Flow
o Allows us to see the flow of documents from quotation to sales order to delivery to
billing and its accounting documents. This serves as a very important audit trail,
allowing people to trace from sales order to accounting or vice versa.
Functional Controls in Expenditure Cycle (MM)
• Release Strategy for PR & PO

o A configuration to control when the PR can be released to the purchasing
department and when the PO can be released to the vendor.
o It is an important control that helps the enterprise mitigate the risk of having
improper or fraudulent purchases
• Three-way match for vendor invoice (During invoice verification)

o It helps establish whether the vendor invoice contains any serious exceptions or
variances that warrants blocking it for payment.
o If the vendor invoice is proven to be error-free or exception-free, it is then released
for further processing for payment.
• GR/IR Account
o The GR/IR account is credited when goods are received, and debited when invoice
is received.
o A useful detective control tool, from an accounting perspective, to identify cases
when goods are received when there is no invoice, and for cases when invoice is
received when there is no goods receipt.
• Document Status
o The system updates the status of the PR when the PO is created for it, this helps
prevent making double purchases for the goods requested for in the PR.
o The status in the PO also helps keep track whether the quantity of goods ordered
have been fully received and fully invoiced.
o The system also keeps track of status of accounting documents related to the
vendor invoice. This helps prevent making double payment for the same invoice.
• PO History
o Just like a document flow, the PO history provides a useful audit trail from a PO
perspective to identify whether goods receipt has been made for the PO and
whether invoice has been received for the PO.
Week 10
Seminar 10: Robotic Process Automation 1
• Robotic Process Automation (RPA) – A technology that enables the software programme to
mimic human actions while interacting computer applications to accomplish required tasks.
o Automate human digital interactions by using robots to automate keyboard inputs,
mouse movement and clicks and reading from the computer screen
o Automating repetitive and time-consuming tasks and processes, leading to better
efficiency and utilisation of time. It is more than just a cost saving method.
• RPA is NOT a humanoid robot (It is a software programme), nor is it a human replacement. It
is also not just a cost-saving method.
Benefits of RPA
• Reads and Processes Data in Structured Form

E.g., Extracting data from a website into a table form, or scanning an invoice and extracting
information from the invoice in a structured form such as an Excel table.
• Operates on Different Applications

RPA can automate processes in different software such as SAP, Excel, or the Web.
• Mimics Human Actions

RPA is able to click and input via the keyboard, which are similar inputs as what humans
would do, such as clicking certain elements in a website or typing certain texts.
• Easy to Implement and Powerful to Scale

Different RPA software have different interfaces but UiPath is easy to use thanks to its drag
and drop interface. Even if the user has no accounting knowledge, he can easily use UiPath.
• Works 24/7 without making Errors

Robots can run at 24/7, and as many times as necessary. They also offer an excellent
accuracy as long as the processes were created correctly in UiPath. Note that robots will not
make any errors on their own, but if the process was created with mistakes, the process
will run with mistakes. Therefore, it is very important that when creating the process, the
programmer will need to discover if there are any mistakes during the testing phase. The
software will only automate any actions input into the software (UiPath), and it will not
detect any mistakes in the process itself. This means that for this point to be true, the RPA
setup in the software needs to be correct as well.
• Purely Digitised
The whole RPA process is on the software and therefore, purely digitised. RPA creates a
digital robotic workforce which performs manual operations. The workforce is virtual in
nature as it is purely digitised and performs the same activities as a human. These tasks
can be executed by traditional automation as well. But the significant difference between
traditional automation and RPA, as a solution, is that RPA is faster and is less disruptive.
While traditional automation works on code-based instructions, RPA is a software trained
using illustrative steps.
The Need for RPA
RPA helps companies increase efficiency in their operations and achieve essential business goals.
• Businesses want to:

o Upgrade service quality
o Minimise costs
• Technology helps to:
o Increase productivity
o Stay competitive
• Essential Business Goals achieved:
o Revenue maximisation
o Optimum resource utilisation
For example, employees can spend more time building relationships with clients rather than
filling in forms and issuing invoices because these tasks can be performed by robots
RPA in Business
Firms are always looking for ways to upgrade service quality and minimise costs.
The emergence and adoption of new technologies and innovation have always helped organisations
increase productivity and stay competitive.
Recall: RPA is a technology that helps organisation achieve the goals of revenue maximisation and
optimal resource utilisation.
• RPA can do repetitive jobs more quickly, accurately and timelessly than humans
• RPA helps in achieving operational efficiency by reducing operating costs
• RPA helps organisations liberate their workforce from working on repetitive tasks to focus
on high-value tasks such as actively participating in building strategies with the help of data
analysis.
Benefits of RPA in Business
• Easier Scaling
RPA is highly adaptable as it can be scaled up or down as per the fluctuations in the business
environment. When performing a particular task, can easily increase of decrease the
number of robots in the system without compromising on the quality of work.
E.g., In an investment bank, can deploy 1 robot to obtain financial information, but
sometimes need information from thousands of companies so can split them into groups
such as per industries.
• Improved Accuracy
RPA works with rules and instructions. This minimises errors.
E.g., Can use RPA to automatically extract prices and quantities from invoices, reducing
normal data entry errors from invoices.
• Non-invasive Technology
RPA is compatible with existing systems and applications. This means that neither business
processes, nor applications, require any change or updates for RPA implementation. RPA just
replicates the repetitive human actions.
E.g., Create a robot to work with existing applications such as SAP or any other Microsoft
applications.
• Reduced Cost
Deploy robots to perform day-to-day repetitive tasks 24/7 for 365 days. This in turn releases
the human workforce capacity to perform creative and high value tasks.
• Rapid ROI
Factors such as reduction in cost, improved accuracy, and optimisation of time and
resources will result in extremely efficient operations for an organisation. Therefore, there
will be higher ROI when implementing an RPA solution.
Industries and Domains where RPA can be Deployed
Banking Healthcare Customer Service

Insurance Manufacturing Travel
5 Characteristics to Identify Processes Suited for RPA
• Rules-driven
The processes which are rules-based and consistent
E.g., All clients who pay before the due date will receive a 10% discount.
• Voluminous
Tasks which have high volumes of transactions
E.g., Supplier invoice processing
• Data Intensive
Tasks which require a lot of data manipulations and crunching
E.g., Invoices can contain different numbers (quantity, price, etc). If invoices are manually
entered into the system, mistakes are more likely to happen
• Repetitive in Nature
Processes that involve manual and repetitive tasks
• Driven by Electronic Inputs

Processes that begin by receiving data through electronic files
E.g., Using emails or websites to collect data are examples of electronic inputs used in RPA
Examples of Processes Suited for RPA
• Every organisation comprise of various departments and each department follows multiple
processes. Common departments where RPA can be used to automate processes are sales,
HR, formation technology, supply chain, finance and accounting.
• To choose a process for automation, need to identify whether it has the 5 characteristics.
Customer Onboarding Vendor Onboarding Material Master Management

Sales Order Creation Invoice Processing Bank Reconciliation
Payment Allocation Purchase Order Processing Order fulfilment
Invoicing Cash Allocation and Reporting
Types of Robots (Categorised according to the manual intervention required)
• Attended Robots
Robots that need to be triggered by a human to perform the tasks. They are usually
performed under human supervision and require intervention.
• Unattended Robots
Robots that are in the virtual environment and can automate any number of processes. In
addition to the capabilities of attended robots, unattended robots are capable of working as
a standalone system which can execute tasks like remote execute, monitoring, scheduling
and providing support for work cues.
E.g., A batch of new client information is received in a spreadsheet and needs to be entered
into multiple applications. This can be done without the intervention of an employee.
Best Practices in RPA
• Selecting the Right Process (Refer to the 5 characteristics)
• Consensus within the Organisation

RPA implementation is done in waves and all stakeholders must be on board during the
journey.
• Improving the Process

The process chosen should be screened properly to be fit for automation. All steps in the
execution for the process should eb suitable for automation. If not, find an opportunity in
the process for better suitability for the RPA as needed.
• Documentation
It is imperative to document every detail about the process which has been chosen to be
automated. This includes documenting the goals, calculating the efficiency, ROI, etc.
Understanding UiPath’s Interface
Basic UiPath Components
• Studio
The Studio is where automated processes are designed in a visual manner, with minimal use
of code, and where the user indicates the different tasks that the robots need to perform.
• Orchestrator
The Orchestrator is a server application that can be accessed through a web browser. The
user can control, manage and monitor the robot workforce via the Orchestrator.
• Robot
Robots execute the work flows, steps and instructions transmitted by the Orchestrator or
code which the user has generated. There are 2 types of robots; Attended and Unattended.
o Attended Robots operate alongside a human and are triggered by user events. They
work in the same work stations or computer as a human worker.
o Unattended Robots operate without any human intervention in virtual
environments. They can automate any number of processes efficiently. They are
assigned tasks through the orchestrator and they work 24/7.
Benefits of UiPath Automation
• Robot takes over boring mundane and repetitive tasks

Such tasks are rule-based and time-consuming. Therefore, this saves time which can be used
for more meaningful and productive work. As a result, the nature of work is undergoing a
fundamental shift. Increasingly, more workers will have their own robots for completing a
portion of their tasks. This combination of human and robot will transform the global
economy in the next few years.
• High Productivity – Lowers execution time

A portion of the tasks is being completed by a robot that can better plan and leverage
resources available to the workers, leading to enhanced productivity.
• Reliability – Working for 24/7

Robots, unlike humans, do not get tired or bored. Once deployed, they can continuously
work with the same accuracy and precision.
• Consistent – Performs the assigned tasks efficiently each time
• Accurate – Less prone to errors

Robots execute tasks based on pre-defined rules. Hence, operations are highly accurate and
precise.
• Resource Optimisation
A robot can quickly execute lots of tasks in a shorter span of time which helps to allocate
liberated bandwidth available resources to more meaningful and productive tasks, leading to
optimisation of resources.
UiPath Interface
• Panel (Activities, Designer, Properties)

• Ribbon
Types of Automation Projects in UiPath
1. Capturing Data
• Screen Scraping
Used to read the data from the screen. Capable of scraping both visible and non-visible data
on the screen.
There are 3 types of Scraping Methods:
o Native – For scraping texts and to capture position, font style and colour
o FullText – For all visible texts on the Ui Object or on the selected screen area
o Optimal Character Recognition (OCR) – Used to scrap data from virtual desktops or
form Ui elements that are not recognised by the other 2 options
• Data Scraping
The process of extracting structured data (Any information presented in a pattern) from a
browser, application, or document, to a database, .csv file, or to Excel spreadsheets
2. Recorder in UiPath Studio (On the Ribbon)
The recording wizard for all Basic, Desktop and Web recorders consist of 3 types of similar
components which are Save & Exit, Record, and Manual recording actions
• Basic Recorder
For automating desktop applications. Only used when working with a single window.
• Desktop Recorder
Captures data from desktop applications. Used when multiple actions are performed in
numerous windows.
• Web Recorder
Used to automate user actions performed on websites. Can only be done on either the
Internet Explorer, Google Chrome, or Mozilla Firefox.
• Image Recorder
Records images for all virtual environments. The automation cannot identify all applications
and it relies on image recognition. Therefore, explicit position of data is required.
• Native Citrix
Used for Citrix environments that are configured to support UiPath Native Citrix. Once the
setup is made, this recorder will work seamlessly on virtual environments, just like the
Desktop Recorder works on a regular desktop.

3. Sequence
• It is the smallest type of project suitable for linear processes as they enable you to go from
one activity to another seamlessly and act as a single block activity.
4. Flowchart
• A flowchart is a type of project in UiPath that offers a very good representation of the
activities used and the underlying logic.
• Multiple branching and logical operators can be represented very accurately, enabling the
user to connect activities in multiple ways and create complex business processes.
5. Nested Flowchart and Sequences
• A flowchart nested within a sequence activity.

• Nesting is very vital when creating complex work flows as it allows a logical division of the
programme and it promotes reducibility.
6. Loop
• A programming structure that repeats a sequence of instructions until a specific condition is

met.
7. The If Activity
• Contains a statement with a condition attached, and two sets of instructions as outcomes.

Variables – Storage containers for data that can be later used throughout the program.
• Creating – Creating or declaring a variable by typing its name

• Adding Content – Storing information in the variable
• Reusing – Copying information from one variable to another
• Extracting information – Retrieving only a specific piece of content from that variable
Main Types of Variables
• Integer (Whole numbers 1,2,3,45345, doesn’t include decimal numbers such as 3.14)
• String (Text of any kind “abc123!@#$%^”)
• Boolean (True or False)
• Generic (All of the above + a few others)
• Array of… (A list of any type)

Week 11
Seminar 11: Robotic Process Automation 2
RPA Team
• Business Analyst
o Gather business requirements
o Collect keystroke level information
o Map existing process
o Offer support
• Infrastructure Engineer
o Maintain and upgrades hardware and software that supports the RPA solution
o RPA is designed to work with minimal interventions on the existing infrastructure.
There are specific requirements for the robots to work (e.g., virtual machines,
network configurations, etc)
• Project Manager
o Primary “owner”
o Plan, execute and deliver the project
o Set project goals, timelines, resource allocation
o Manage the project team
• RPA Developer
o Develop and test the automation artifacts
o Technically sound in developing robotic processes
o Has a fair understanding of business processes to make automation simple and easy
• Solution Architect
o Design architecture of the solution
o Offer support to RPA developers
o Keeps in mind all aspects related to the technical and business processes while
preparing the design
• Technical Lead
o Provide tactical management of RPA developers during development and testing
stages
o Assist Project Manager and Solution Architect
The Automation Cycle
• Stage 1: Preparation for RPA

• Stage 2: Designing the Solution
• Stage 3: Building the RPA solution
• Stage 4: Testing the RPA solution
• Stage 5: Stabilising the RPA
• Stage 6: Continual Improvement

Stage 1: Preparation for RPA
Activity Owners and their Roles / Activities
• Business Manager
o 1.1 – Department and Process identification
▪ The business manager should have in-depth domain knowledge, be aware of
the industry dynamics, significant innovations disrupting the market and
impacting the business, factors and trends that influence the future of the
business and all these knowledges will help in identifying the processes fit
for automation.
▪ Devise Strategy
▪ Identify processes to be automated
▪ Identify and calculate complexity factor
▪ Business benefit mapping
▪ Prioritise process
▪ Map process into quadrant
o 1.2 – Opportunity Assessment

▪ Identification of manual processes (3 types)
1. Frequent changes in the processes and require human intelligence /
judgement (not feasible for automation)
2. Comprise of fixed rules and involve human intelligence / judgement
(semi-automatable, only part of the process can be automated)
3. Comprise of fixed rules and does NOT involve human intelligence /
judgement (fully automatable, ideal candidates for RPA)
▪ Other factors to consider while deciding on the feasibility of automation are:

1. There should only be few changes in technical environment
2. Applications must be fixed - The processes should always only
happen in specific applications
▪ Keeping these characteristics in mind, the business manager conducts an

organisation wide assessment to decide whether the process can be
automated. He analyses the process under these 2 factors:
1. The complexity of process
Managers usually creates a formulated spreadsheet
o Input Methods
with scores from 1-10 for each of these elements and
o Application Type then create an overall score for the complexity of the
o Number of Applications process. If the score is more than 60%, the process is
o Nature of Input considered complex and the development time is
o Environment minimum 6-8 weeks.
2. Full-time employee savings – This is a key driver for making a

decision in selecting the process. It is done by calculating the
potential full time employee savings that the automation will have
as a result.

o 1.4 – Planning and Communication
▪ A plan is created based on the opportunity assessment
▪ Requirement gathering
▪ Prepare process map
▪ Review
▪ Document and sign off
▪ Communicates the plan to stakeholders (via emails)
• Management
o 1.3 – Gives the “Go-ahead” decision to the Business Manager
Stage 2: Design the Solution
• Solution Architect
o 2.1 – Process and Robot Architecture
o 2.5 – Create “Solution Design Document”
o 2.2 – Test Scenario Creation
▪ Create multiple test scenarios which incorporates all the business rules
▪ Use a “What-if analysis” and “Scenario planning” frameworks
o 2.6 – Process Design Documentation (PDD) Creation and Sign-off

▪ Create complete documentation regarding the:
• Process description
• Key-stroke level activities
• The “As-Is” & “To-Be” process map -> Flow charts
o This document indicates what the process is NOW and what
it should be AFTER automation
▪ Sign off from business team, IT team and RPA development team
• IT Department
o 2.3 – Infrastructure Review
o 2.4 – Test Environment Readiness

Stage 3: Build the RPA Solution
• RPA Developer
o 3.1 – Process Automation
• Business Team
o 3.2 – Prepare test data for testing
o 3.3 – Testing
▪ Designing of Workflow
There also needs to be careful observation on how the process is carried on
by the final users and what the advantages are going to be once RPA is
implemented
▪ Liaising with the Business and IT Department (to get test data and
infrastructure readiness)
There is a very strong component of communication here. This means that
the whole organisation needs to be aligned on how the RPA solution is going
run.
▪ Planning and Estimation of Automation

Plan in terms of how long it will take to complete these RPA and also how
much it will cost to implement it
• IT Department
o 3.4 – Prepare User Acceptance Test (UAT) Environment
▪ To simulate how the users are going to be dealing with RPA on a day-to-day
basis so the IT department is responsible of preparing this environment so
that later on, the final users of the RPA solution can also take advantage of
this environment

Stage 4: Testing the RPA Solution
• Business Team
o 4.1 – Perform UAT
• RPA Developer
o 4.2 – Bug Fixing
o 4.3 – Records Test Results
▪ Test Strategy
• What to test, how to test, testing time and date, environmental
readiness
▪ Test Design
• Business team and RPA developer discuss test cases and scenario
▪ Test Execution
• Perform UAT with business department and record the results
▪ Defect Management
• Log and record all defects
• Ask the RPA developer to resolve defects. To repeat this process
until the robot performs the task like a human user with no or
minimal defects
▪ Test Result
• Share the testing results with business team for validation
o 4.4 – Prepare Sign-off for Production

▪ Final Sign-off
Sign off from business and move solution to production environment.
This means that all the business parties agree that this process has been
automated, it is working and can be implemented

Stage 5: Stabilise the RPA
• IT Department + RPA Developer + Solution Architect

o 5.1 – Move to production
• RPA Developer + Business Manager + Business

o 5.2 – Training + User Manuals
▪ Facilitate training for all stakeholders who are involved in the execution of
the new way of doing the process (business and operating team members)
▪ Ensure availability of user manuals
▪ Training by SME
▪ Update user manual through all implementation phases and each team
member should provide input based on their activity
▪ The training schedule and user manuals should be prepared in advance and
handed over to the trainees during the training programme
• RPA Support Team

o 5.3 – Production Monitoring
o 5.4 – Measuring Expected vs Actual Results
▪ In a business environment, it is vital to map the outcomes of any activity.
When the automation initiative is undertaken by the organisation, certain
objectives must be documented. This includes but are not limited to:
• Reduced manpower
• Reduced turnaround time
• Cost saving
• Smoother and efficient operations
• Return on investment and impact on business
• Whether the implementation has provided the desired results
• Scope for further improvement
▪ The business manager then measured the output of the automation solution
and its efficacy. The results are further shared with all relevant stakeholders,
thereby letting everyone know about the success of the initiative
o 5.6 – Documents Handover

▪ Hand over documents to the business team
▪ Stabilise RPA solution by properly keeping the nigh on every aspect of the
solution and collaborating with the stakeholders
▪ Ensure that the correct process understanding are shared and
acknowledged by everyone

• Centre of Excellence (CoE) + Business Manager
The CoE brings together people from different disciplines and provides shared facilities or
resources (AKA competency or capability centre)
o 5.5 – Documenting Learnings
▪ Enhance knowledge bank so that the leadership team can refer to the used
cases while taking the path on automating the new processes
▪ Issues encountered, what triggered them and how they were resolved
▪ Events and their outcomes (but not the people involved)
▪ Details of teams affected by the changes from the RPA implementation
Stage 6: Continual Improvement
o 6.1 – Performance Assessment
▪ Assess performance of the solution’s
• Speed of execution
• Scalability
• Availability
• Efficiency
o 6.2 – Change Management

▪ Changes due to improvement
▪ Proper change management procedure
▪ Policies and guidelines to facilitate a changed management
▪ Structured approach should be considered for transitions in individuals,
teams and organisations from a current estate to a desired future estate
• Business Team + Business Manager

o 6.3 – Benefit Tracking
▪ Automation results and benefits reaped
▪ How automation helps augment business and other processes
▪ Enhancement plan by mapping existing RPA benefits and percentages to the
business team for further improvement in technology required in RPA
• RPA Support Team

o 6.4 – Prepare UAT Environment

Example of RPA Implementation – Invoice Processing
Invoices are entered into the financial system of an organisation. Each invoice has a unique number
attached to it (Invoice Number). This process is very lengthy and time-consuming, but with RPA, it
can be made simple and efficient.
• Typical Steps Involved in Invoice Processing:
1. Storing the Invoice

2. Reading the Invoice
3. Extracting Key Information
4. Logging into SAP ERP
5. Opening SAP and entering the information
6. Sending an Email
• How RPA can be used to automate the above steps:
o Information Extraction and Transfer

Using intelligent Optical Character Recognition (OCR) and natural language
processing capabilities, software robots are able to read out / extract information
that are visible on the invoice. After the robots extract information from each
invoice, they use their credentials to open the company's ERP database, then the
robots start processing the invoices 1-by-1 by transferring over the relevant invoice
information.
o Email Notification
After successfully registering each invoice, the software robots are then able to send
posting notifications in the form of emails to the responsible employee or to the
vendor in question. An email is also sent to the responsible party in case of an
exception.
o Other Background Activities

Throughout this whole process, the software robots are running background
activities.
▪ Monitor dedicated invoice folder
▪ Perform basic checks on company’s database
▪ Verify vendor information on invoice with database

Selectors in UiPath
• Selectors are used to identify individual UI elements on the screen (Selectors are something
like an address of a UI element)
o Human users can intuitively identify graphical elements or objects on the screen
whereas software robots need to be trained to recognise the same elements that a
human would see.
o Usually, objects identified with UiPath recorder will be accurate, but there are
special cases where the user will need to look deeper into the object's properties
and manually select the attributes that uniquely identify that object. (Through the
use of the selector)
Types of Selectors
• Partial Selectors
Generated when the user creates automation through the Desktop Recorder
o They do not contain multiple level window information.
o They are more suitable when the robot has to perform multiple actions in the SAME
window or application. In these cases, the activities would be placed inside a
container such as open browser or open application.
• Full Selectors
Generated when the user creates automation through the Basic Recorder
o They contain all information of a UI element.
o They are suitable when the robot has to switch between multiple windows and the
use of containers would add unnecessary complexity.
UI Explorer
• When using the recording function of UiPath, some errors might be found if the UiPath is
unable to identify the object or image the user has selected. In such cases, the user will need
to go to UI Explorer to find the error and use a selector to select the items again. UI Explorer
can be used to create a custom selector to identify a UI element.

Properties of UI Explorer
o Visual Tree
A list of containers from the current container to the target UI element. It is placed
at 3 of the user interface hierarchy and it enables the user to navigate through
various options.
o Selector Editor
Displays selector for the specified UI object and enables the user to customise it.
o Selector Attributes
Displays all the available attributes of a selected note from the selector editor panel.
o Property Explorer
Displays all attributes that a specific UI object can have. Including the ones that do
not appear in the selector
o Indicate Element
Indicates a new UI element to replace the previous one. This is very important
because when using the web or desktop recorder, sometimes UiPath may identify an
error that indicates that certain elements cannot be selected. In such cases, need to
go to "indicate element" and indicate the new UI element to replace the previous
one.
o Indicate Anchor
Enables the user to choose an anchor relative to the target UI element. Use it when
there are certain field or images that will not be changing positions
o Highlight
This brings the target element into the foreground. The highlight stays on until it is
switched off. The button is enabled only if the selector is valid.

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Week 1

Seminar 1: Business Process Reengineering

The Value Chain (Porter, 1980)

Data Processing Cycle

• Internal information flows within an organisation (e.g. communications about an

Characteristics of Useful Information (Regardless of its physical form or technology)

• Relevance (Serves a purpose)

Business Transactions as Sources of AIS

Organisational Improvement Approaches

Statistical Based Methods Measure-Based Methods Technology-Based Methods

Time-Based Methods Marketing-Based Methods Structural-Based Methods

Managing Enterprise Processes

Process Identification (Identify the types)

Example of a core process map: (Telco)

Process Discovery (Modelling Tools)

• Pen and paper (e.g. system flowchat, walk-through)

Why / When to focus on Processes?

• To fix things that are not working well

o When the fundamental objective and intended result is achieved

• Trade-offs between these 4 interdependent aspects of improving processes (More of 1

o Processing Time + Waiting Time = Cycle Time

Seeking Process Improvement (Process Analysis)

• Lean Thinking (1980s – Toyota Production System)

• Don’t Automate, Obliterate (Hammer, 1990)

• Deep Change – Operational Innovation (Hammer, 2004)

Indicators of a Fundamentally Broken Process

• If a process is broken, there would be no outcome

How to fix broken or defective processes?

Process Design x Accountability

Process Accountability Good Process

• Strengthening process accountability by identifying process owners and redesign of

• Streamline (Remove waste, simplify, consolidate similar activities)

Four Phases of Process Improvement

Analyse • Prioritised processes • Root cause analysis

Implement • TO-BE process diagram • Communication of results to

Control • Results Monitoring • Continuous improvement

Why #1 Because supervisors keep rejecting them

Why #2 Because the employees do not complete the reports properly

Why #4 Because the employees never received the appropriate training

• Fishbone diagram (Ishikawa diagram):

6 Process Improvement Enablers

Motivation and Measurement Facilities Design

• An iterative process to:

• A flowchart is an analytical technique that describes information flows in a business process

Standard Flowchart Symbols

Disk Storage (Electronic File)

Handling Data (Computer Processing)

Handling Data (Computer Processing)

Paper-based Input / Output

Paper-based Input / Output

• Access to computer files must be through a computer process

Seminar 3: Business Process Controls

Why is Control Necessary?

When analysing controls, need to consider the:

1) Possibility of the threat

Risk Management – Response

• Transfer/Share: High Impact, Low Probability

• Avoid: High Impact, High Probability

• Keep (Live with it): Low Impact, Low Probability