Introduction to SAP & FI/CO

Lesson Objectives

After completing this lesson, participants will be able to -

 Know the meaning of ERP
 Introduction to SAP
 SAP Landscape
 Understand the R/3 system
 Understand the Basics of SAP
 Overview of SAP FI Module
 Sub-Modules of SAP FICO
Introduction to ERP

What is ERP?
 E – Enterprise R – Resource P – Planning
Definition:
 An integrated information system that serves all departments within an
 enterprise.
 ERP is a way to integrate the data and processes of an Organization into
one single system.
 Software solution that addresses the enterprise needs taking the process
 View of an organizational goals tightly integrating all functions of an enterprise
Introduction to ERP
ERP Vendors
Introduction to ERP
 ERP Overview

• Is a high-end sophisticated software solution that reduces the pressure and workload
of the managers
• Provides accurate, timely information for taking appropriate business decisions.
• Managers with knowledge of ERP will be able to achieve their targets and goals by
proper implementation of ERP system in their organization.
• In fact managers are expected to translate the business rules and requirements for
mapping them into ERP software.
• Implementation of ERP solutions is one of the largest drivers of growth in the
consultancy business.
• ERP automates the tasks involved in performing a business process.
 ERP Extension

• Web Enable

• Customer Relationship Management (CRM)

• Supply Chain Management (SCM)

• Strategic Enterprise Management (SEM)

• Business Information Warehouse (BIW)

• Knowledge Management (KM)

• So on …
 ERP Functional Systems
• Typically contained within a department
• Islands of automation
• Applications independently developed and deployed
• Driving force: availability of mini-computers

Applications:

• Human resources System

• Accounting and finance systems
• Sales and marketing System
• Operations management System
• Manufacturing Systems
 ERP Functional Systems
Human resources System:
• Recruiting
• Compensation
• Assessment
• Development and Training
• Planning
Accounting and finance systems:
• General Ledger
• Financial Reporting
• Costing
• Budgeting
• Accounts Payable
• Accounts receivables
 ERP Functional Systems
Sales and marketing System:
• Lead tracking
• Sales forecasting
• Customer management

Operations management System:

• Order management
• Inventory management
• Customer service

Manufacturing Systems:
• Inventory
• Planning
ERP Functional Systems

Problems :Delays, Lost orders, Keying into different computer systems invites errors
Problems with function based application

• Sharing of data between systems

• Data duplication

• Data inconsistency

• Applications that don’t talk to one another

• Limited or lack of integrated information

• Isolated decisions lead to overall inefficiencies

• Increased expenses
Problems with function based application

• Sharing of data between systems

• Data duplication

• Data inconsistency

• Applications that don’t talk to one another

• Limited or lack of integrated information

• Isolated decisions lead to overall inefficiencies

• Increased expenses
Order fulfillment with ERP

Helps integrate management, staff, and equipment, combining all aspects of the
business into one system.
Facilitates every element of the manufacturing process.

Groups traditional company and management functions (such as accounting,

human resources [HR], manufacturing management, and customer relationship
management [CRM]) into a coherent whole.

Manufacturing management also includes inventory, purchasing, and quality and

sales management.

Today’s leading ERP systems group all traditional company management functions
(finance, sales, manufacturing, and human resources).
Many systems include with varying degrees of acceptance and skill, solutions that
were formerly considered peripheral product data management (PDM), warehouse
management, manufacturing execution system (MES), and reporting.
Order fulfillment with ERP

During the last few years the functional perimeter of ERP systems began an
expansion into its adjacent markets.

For example, supply chain management (SCM), customer relationship management

(CRM), business intelligence/data warehousing, and e-business.

The focus of this knowledge base is mainly on the traditional ERP realms of finance,
materials planning, and human resources.

The foundation of any ERP implementation must be a proper exercise of aligning

customers'' IT technology with their business strategies, and subsequent software
selection.
An example: Order fulfillment
Introduction to SAP
About SAP :
In 1972, five former IBM employees -- Dietmar Hopp, Hans-Werner Hector, Hasso Plattner, Klaus Tschira,
and Claus Wellenreuther -- launch a company called Systems, Applications, and Products in Data Processing
in Mannheim, Germany. Their vision: to develop standard application software for real-time business processing.
The original name for SAP was German: Systeme, Anwendungen, Produkte, and German for "Systems
Applications and Products." The original SAP idea was to provide customers with the ability to interact with a
common corporate database for a comprehensive range of applications. Gradually, the applications have been
assembled and today many corporations, including IBM and Microsoft, are using SAP products to run their own
businesses.
SAP applications, built around their latest R/3 system, provide the capability to manage financial, asset, and cost
accounting, production operations and materials, personnel, plants, and archived documents. The R/3 system runs
on a number of platforms including Windows 2000 and uses the client/server model. The latest version of R/3
includes a comprehensive Internet-enabled package.
Introduction to SAP

The 1980s: Rapid Growth

SAP moves into the company's first building on Max-Planck-Strasse in an industrial park in Walldorf, near
Heidelberg. Our software development area and its 50 terminals are all now under one roof. Fifty of the 100
largest German industrial firms are already SAP customers.
The SAP R/2 system attains the high level of stability of the previous generation of programs. Keeping in mind its
multinational customers, SAP designs SAP R/2 to handle different languages and currencies. With this and other
innovations in SAP R/2, SAP sees rapid growth.
By the middle of the decade, SAP founds its first sales organization outside Germany, in Austria. The company
makes its first appearance at the CeBIT computer fair in Hanover, Germany. Revenues reach DM 100 million
(around $52 million), earlier than expected.
In August 1988, SAP GmbH becomes SAP AG. Starting on November 4, 1.2 million shares are listed on the
Frankfurt and Stuttgart stock exchanges.
Introduction to SAP

Germany's renowned business journal, manager magazine, names SAP its Company of the Year -- a distinction we
would receive twice more in the next few years.

With the founding of subsidiaries in Denmark, Sweden, Italy, and the United States, SAP's international expansion
takes a leap forward.
The 1990s: A New Approach to Software and Solutions
SAP R/3 is unleashed on the market. The client-server concept, uniform appearance of graphical interfaces,
consistent use of relational databases, and the ability to run on computers from different vendors meets with
overwhelming approval. With SAP R/3, SAP ushers in a new generation of enterprise software -- from mainframe
computing to the three-tier architecture of database, application, and user interface. To this day, the client-server
architecture is the standard in business software.
Introduction to SAP

A growing number of subsidiaries are managed out of Walldorf. The new Sales and Development Center in Walldorf
officially opens it doors. It symbolizes the global success of the company. In our twentieth year, our business
outside Germany exceeds 50 percent of total sales for the first time.
By 1996, the company has earned 1,089 new SAP R/3 customers. At the end of the year, SAP R/3 has been
installed in more than 9,000 systems worldwide .
SAP celebrates its twenty-fifth anniversary in 1997 and now employs approximately 12,900 people. We continue to
strengthen our industry focus and build more and more industry-specific solutions. Henning Kagermann becomes
Co- Chairman and CEO of SAP AG with Hasso Plattner. On August 3, 1998, the letters S-A-P appear for the first
time on the Big Board at the New York Stock Exchange (NYSE), the largest stock exchange in the world.

As the decade draws to a close, Hasso Plattner, Co-Founder, Co-Chairman, and CEO announces the mySAP.com
strategy, heralding the beginning of a new direction for the company and our product portfolio. mySAP.com links
ecommerce solutions to existing ERP applications, using state-of-the-art Web technology.
 Introduction to SAP
The 2000s: Innovation for the New Millennium
With the Internet, the user becomes the focus of software applications. SAP develops SAP Workplace and paves
the way for the idea of an enterprise portal and role-specific access to information.
Currently, more than 12 million users work each day with SAP solutions. There are now 121,000 installations
worldwide, more than 1,500 SAP partners, over 25 industry-specific business solutions, and more than 41,200
customers in 120 countries. SAP is the world's third-largest independent software vendor.
SAP are categorized into 3 core functional areas:
Logistics :
• Sales and Distribution (SD)
• Material Management (MM)
• Warehouse Management (WM)
• Production Planning (PP)
• General Logistics (LO)
• Quality Management (QM)
SAP Landscape
Why R/3
The main purpose of an R/3 system is to provide a suite of tightly integrated, large-scale business
applications. The standard set of applications delivered with each R/3 system are the following:
 PP (Production Planning)
 MM (Materials Management)
 SD (Sales and Distribution)
 FI (Financial Accounting New)
 CO (Controlling)
 AM (Fixed Assets Management)
 PS (Project System)
 WF (Workflow)
 IS (Industry Solutions)
 HR (Human Resources)
 PM (Plant Maintenance)
 QM (Quality Management)
SAP Core Modules
Defining R/3

R/3 means Real-time 3-tier Architecture

R/3 software supports all of a company’s business transactions and links them together using
real-time integration
Real-time integration means that each change or update in one application causes the automatic
change or update of the data in the other applications involved.
R/3 also represents 3-tiered Client-Server Architecture.
The three Logical Layers of this R/3 Architecture are…
 The Presentation Layer: Collects user input and creates process request.
 The Application Layer: Uses the Application logic of Program to collect and process the process request.
 The Database Layer: Stores and Retrieves all Data.
SAP R/3 Architecture

Three-tier client/server:
 Presentation, application, and
database layers run on separate
computers.
 Currently, three-tier client/server
offers the best solution for most
businesses.
 It is highly scalable, and offers
better distribution of process
requests received from the users.
 The computers in the application
layer are often capable of satisfying
the users process requests without
accessing the database, which in
turn boosts performance.
Application Server Architecture

The components of an application server are shown in the figure below. It consists of a dispatcher
and multiple work processes.
Application Server Architecture

All requests that come in from presentation servers are directed first to dispatcher.
The dispatcher writes them first to the dispatcher queue.
The dispatcher pulls the requests from the queue on a first-in, first-out basis.
Each request is then allocated to the first available work process.
A work process handles one request at a time.
To perform any processing for a user’s request, a work process needs to address two special
memory areas: the user context and the program roll area.
The user context is a memory area that contains information about the user, and the roll area is a
memory area that contains information about the programs execution
LOGIN IN TO SAP
LOGIN IN TO SAP
SAP FI Overview

Purpose
Use
Challenges
Purpose
•Financial Accounting (FI) is the key building block to an organization on which most other modules depend on.
•FI Organization Elements ensure that other modules work in sync with business requirements.
•FI Organization Elements enable a thorough analysis of current business operations and enable planning scenarios.
•FI Organization Elements are assigned to Organization Elements from other modules viz. Sales Organization in SD, Purchasing
Organization in MM, Plant in Logistics, this ensures the real time integration of FI with all other modules.
•The central task of G/L accounting is to provide a comprehensive picture for external accounting and accounts.
• Recording all business transactions (primary postings as well as settlements from internal accounting) in a software system that is
fully integrated with all the other operational areas of a company ensures that the accounting data is always complete and accurate.
Use
FI Organization Elements involve defining and configuring
the elements which will enable an organization to:
Purchase materials from vendors (Payables Accounting).
Make sales to customers (Receivables Accounting).
Internal and External reporting of financials to stakeholders
(Balance Sheet, Profit & Loss Account, Cash Flow etc).
Accounting & Control of Fixed Assets -Capitalize and
depreciate (Asset management).
Make and receive payments (Treasury Management) .
Enable planning for future projects (Investment
management).
Profitability & other MIS Analysis for various products,
segments, cost objects (Controlling).
Challenges
It is the most critical decision to define the FI
Organization Structure and its elements
based on business process since all other
modules or business functions are linked to
FI and information is gathered and
consolidated in FI for various reporting
purposes.
 Sub modules in FI /CO

FINANCIAL ACCOUNTING CONTROLLING

FI-GL General Ledger Accounting CO-OM Overhead Cost Controlling

FI-AR Accounts Receivable CO-PC Product Cost Controlling
FI-AP Accounts Payable CO-PA Sales & Profitability Analysis
CO-ABC Activity Based Costing
FI-LC Legal Consolidation
FI-SL Special Purpose Ledger EC - Enterprise Controlling
FI-AA Asset Accounting EC-PCA Profit Center Accounting
EC-EIS Executive Information System
TR - Treasury IM - Investment Management
FM-Funds Management
TR-CM Cash Management
IM- FA – Tangible Fixed Assets
TR-FM Funds Management
TR-TM Treasury Management