Financial Reports EGN 5622 Enterprise Systems Integration Fall, 2015 Financial Reports EGN 5622 Enterprise Systems Integration Fall, 2015

Financial Reports Concepts & Theories Financial Reports Concepts & Theories

3 Financial Reports Type of Financial Reporting in Enterprise Systems (ES): - internal reporting, and - statutory (external) reporting.

4 Financial Reports (- continued) Internal Reporting: Provides reports that meet a wide range of internal informaton needs and enable managerial decision-making. Examples: inventory stock overview and plant maintenance reports External Reporting Provides reports to meet regulatory and external reporting requirements. Examples: balance sheet, income statement

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. 5 Target Audience Internal Executives Senior Management Account managers Administration Staff Employees External Legal Authorities Banks Auditors Shareholders Insurance Taxing Authorities Media Financial Analysts

6 Financial Reports (- continued) Guidelines for efficient and cost-effective reporting processes Ensure optimal decision making through the improved use of information Reduce data complexity and promote handoffs through smooth data flow Concentrate on data analysis instead of scanning printed reports

7 Financial Reports (- continued) Reports are a tool: through which internal and external stakeholders can understand the organization’s financial performance Two categories of financial accounting reports: ◦displaying accounting information, and ◦generating financial statement.

8 Financial Reports (- continued) Accounting Information Accounting information can be obtained at three levels according to the “Introduction to Financial Accounting”:  balance display,  line item list, and  original FI document

9 Financial Statements The goal of financial accounting is to report data in order to meet legal and regulatory requirements. The reporting takes the form of financial statements including ◦Balance sheet ◦Income statement (profit and loss), and ◦Cash Flows statement The specific accounts that need to be included in these statements are determined by the external requirements.

10 Financial Statement Financial statements can be generated for different organizational levels including one or more company codes and business areas. Financial statements are created from financial statement versions. ◦A financial statement version is a hierarchical grouping of general ledger accounts that must be included in the financial statement. ◦Several financial statement versions can be defined, and each is defined to meet different reporting requirements.

11 Financial Statement Version

12 Financial Statement A conceptual framework for financial analysis In the analysis of external financing for example, one is concerned with firm’s needs for funds, its financial condition/performance, and its business risk. Upon analysis of these factors, senior managers are able to determine the firm’s financial needs and to negotiate with outside suppliers of capital.

13 Financial Statement Balance sheet summarizes ◦Assets, ◦Liabilities, and ◦Owner’s equity of a business at a point in time. Income statement summarizes ◦revenues ◦expenses of a firm over a particular period of time ◦incomes before and after tax

14 Financial Statements Balance sheet accounts include assets, liabilities, and equity. Assets = Liability + Equities Profit and loss accounts include revenue and expenses within a given period of time (e.g., monthly, quarterly, or yearly) Cash Flows (Statement)

15 Balance Sheet – Assets Assets Value that a company owns or controls in monetary terms. Examples of these accounts include: Current assets: Cash Accounts receivables Inventory Prepaid expense Fixed assets Land Building Equipment

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. 16 Balance Sheet – Liabilities Liabilities: Company owes or must provide services in monetary terms. Examples of these accounts include: Accounts payable Notes payable Bonds payable Unearned revenue

17 Balance Sheet – Equity Equity is simply the mathematical difference between assets and liabilities. It includes the monetary amounts collected with respect to all preferred and common stock transactions, the aggregate net income reported since organization of the company, and a reduction for dividends that have been paid to stockholders.

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC 18 Balance Sheet – Sample Assets Cash1,000 k Accounts Receivable3,000 k Equipment 1,500 k Total Assets 5,500 k Liabilities Accounts Payable2,250 k Taxes Payable 250 k Total Liabilities 2,500 k Equity Stocks 1,750 k Retained Earnings 1,250 k Total Equity 3,000 k Total Liabilities and Equity5,500 k

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. 19 Balance Sheet

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC 20 Income Statement Presentation of an organization’s Revenues, Expenses, and Income for a given period of time (e.g., monthly, quarterly, or yearly) Revenues: - Inflows of cash as a result of selling activities or the disposal of company assets Expenses: - outflows of cash or the creation of liabilities to support company operations Net Income before TAX= Revenue–Expenses Net Income after TAX= Revenue-Expenses -Tax

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. 21 Income Statement – Revenues The monetary amounts collected from customers in settlement for goods purchased from a company or services rendered by the company to them during a period. Examples: ◦Sales amount ◦Deduction (Negative sign)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. 22 Income Statement – Expenses The monetary amounts paid to vendors in settlement for goods purchased by a company or services rendered to the company by other companies during a period. Exaqmples: Cost of Goods Sold (COGS) Payroll Utilities Taxes Interest

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC 23 Income Statement - Sample Revenue Sales11,000 k Deductions -750 k Total Revenue 10,250 k Operating Expenses Cost of Goods Sold 4,500 k Operating Expenses 3,750 k Total Expenses 8,250 k Net Income Before Taxes 2,000 k Taxes -750 k Net Income 1,250 k

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. 24 Income Statement

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC 25 Statement of Cash Flows Changes, both inflows and outflows, that have occurred in cash – the most important of all assets – over a given period of time (e.g., monthly, quarterly, or annually)

26 Financial Ratios Financial ratios are the tools used to analyze financial condition and performance. Financial ratios can be divided into five basic types: Liquidity, leverage (debt), coverage, activity, and profitability. No one ratio is itself sufficient for realistic assessment of the financial condition and performance of a firm. With a group of ratio, reasonable judgments can be made. Comparing one company with similar companies and industry standards over time is crucial. Such a comparison uncovers leading clues in evaluating changes and trends in the firm’s financial condition and profitability. This comparison may be historical, but it may also include an analysis of the future based on projected financial statements.

27 Financial Ratios

28 Financial Ratios

29 Financial Ratios

30 Financial Ratios

31 Financial Ratios

Financial Reports SAP Implementation Financial Reports SAP Implementation

SAP Module View Integrated Solution Client / Server Open Systems Financial Accounting Controlling Fixed Assets Mgmt. Project System Workflow Industry Solutions Production Planning Sales & Distribution Materials Mgmt. Plant Management Quality Maintenance Human Resources

34 SAP Reports Tools  SAP Standard Reports (in focus)  Asset Explorer  SAP Report Painter Report  SAP Query  ABAP Report  Data Warehouse)

35 SAP Standard Reports SAP has thousands of reports available to use. Each report can be customized by the user to meet different report requirements, by setting different report selection criteria.

36 SAP Report Painter Report Used to deliver many tabular style management reports to produce various financial statements.

37 SAP Query Used to run queries on SAP tables to return data. Before engaging in SAP Query, the user should look at the available standard reports in SAP; those reports that are based on the same tables should be able to return the same type of data the user is looking for.

38 ABAP Report ABAP (Advanced Business Application Programming) is used to code SAP software and can also be used to customize reports. The downside of ABAP may not be automatically compatible with upgraded versions.

39 SAP Data Warehouse SAP Netweaver Business Intelligence (BI/BW) is SAP’s own data warehousing tool One benefit of using a data warehouse is that it reduces the load on SAP ECC (ERP Central Components) system. The downside is that the data warehouse solution will be only updated overnight, then the data to be used may not be updated to the moment.

40 SAP Standard Reports Three basic steps to running a standard report: 1. Access the report (find the SAP command transaction (T) code) 2. Enter selection criteria 3. Execute the report

41 SAP Standard Reports Accounts Payable Reports Accounts Receivable Reports Asset Accounting Reports General Ledger Reports Cost Centers: Actual/Plan/Variance Report Profitability Analysis: Plan/Actual Comparison Report Balance Sheet Profit and Loss Statements

42 Accounts Payable Reports It revolves around the reporting of invoices due for payment. The information is important from a cash flow point of view, as each vendor invoice contains payment terms that determine when the invoice is due for payment. ◦Vendor line item report shows all the vendor items.

43 Accounts Receivable Reports It revolves around the reporting of unpaid (customer) items. This is more of an internal requirement than an external requirement. The information is important from a cash flow point of view. Customer line item report shows all the customer’s items. Customer balance statistics report monitors customer’s payments, especially pass-due items.

44 Asset Accounting Reports Asset Explorer is the primary tool used to run asset accounting reports. ◦It provides analysis for a particular asset. ◦In addition, users can use its Asset History Sheet, which is very detailed asset register.

45 General Ledger Reports The most important reports of general ledger are: ◦balance sheet ◦income statement, and ◦cash flow. They can be generated monthly, quarterly and annually

46 Balance Sheet (Assets)

47 Balance Sheet (Liabilities & Equity)

48 Income Statements

Lab 5 Exercises: (Due date 10/10/2015) 1.Run Balance Sheet / Profit and Loss Statements 2.Create customer inquiry with a probability 3.Create customer quotation 4. Create Sales Order referencing a quotation 5. Check stock status 6. Display sales order 7. Start delivery note process 8. Check stock status 9. Picking materials on delivery note 10. Post goods issue 11. Check stock status 12. Create billing for customer 13. Post receipt of customer payment 14. Review Document Flow 15. Run balance sheet/profit and loss statements 16. Assign general ledger accounts to financial statement version 17. Run Balance Sheet / Profit and Loss Statements with your own financial statement version