Financial Reports EGN 5622 Enterprise Systems Integration Spring, 2013

Financial Reports Concepts & Theories

Version 1.0 January 2007 Financial Reports Financial Reporting in Enterprise Systems (ES) can be classified as either internal reporting, or statutory (external) reporting. Modern management goals aim at real-time decision making, supported by the increased use of online reporting, interactive analysis, and intuitive reporting. While companies are required to deploy ES to handle basic business transactions, they also need to efficiently retrieve transactional data in real-time of a specific information structure around cross-functional business processes. The Rushmore Group, LLC

Financial Reports Reporting Types Internal External Reporting Version 1.0 January 2007 Financial Reports Reporting Types Internal Reporting External Reporting ES Database Real time database, ready to supply with Integrated Information across business processes External Interfaces, ready to download reports in formats ES Reporting Features The Rushmore Group, LLC

Financial Reports (- continued) Version 1.0 January 2007 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 External Interface: Enables download of report lists to several file formats including spreadsheet applications such as Microsoft Excel. Supports other external interfaces including e-mail, Internet, PDAs, and print devices Integrated Information: Supplies real-time information that is fully integrated across cross-functional business processes and uses the same underlying data. The Rushmore Group, LLC

Target Audience External Internal Legal Authorities Executives Banks ECC 6.0 January 2008 Target Audience External Legal Authorities Banks Auditors Shareholders Insurance Taxing Authorities Media Financial Analysts Internal Executives Senior Management Account managers Administration Staff Employees There are two types of audiences: Internal and External. Internally: The employees who run the company. This gives them the information needed to make decisions. Externally: Anyone who has a financial stake in the company. This could be shareholders, creditors, government (taxes, fraud, etc.) insurance companies, or anyone who would like to purchase shares of the companies stock. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Financial Reports (- continued) Version 1.0 January 2007 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 The Rushmore Group, LLC

Financial Reports (- continued) Version 1.0 January 2007 Financial Reports (- continued) Reporting is a tool: through which internal and external stakeholders can understand the organization’s financial performance as a result of the business decisions made by management in the period defined Two categories of financial accounting reports: displaying account information, and generating financial statement. The Rushmore Group, LLC

Financial Reports (- continued) Version 1.0 January 2007 Financial Reports (- continued) Accounting Information Account information can be obtained at three levels according to the “Introduction to Financial Accounting”: balance display, line item list, and original FI document. The Rushmore Group, LLC

Version 1.0 January 2007 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. The Rushmore Group, LLC

Version 1.0 January 2007 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. The Rushmore Group, LLC

Financial Statement The balance sheet summarizes Version 1.0 January 2007 Financial Statement The balance sheet summarizes Assets, Liabilities, and Owner’s equity of a business at a point in time. The income statement summarizes revenues expenses of a firm over a particular period of time incomes before and after tax The Rushmore Group, LLC

Version 1.0 January 2007 Financial Statement A conceptual framework for financial analysis provides the analyst with an interlocking means for structuring the 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. The Rushmore Group, LLC

Version 1.0 Financial Statements January 2007 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) The Rushmore Group, LLC

ECC 6.0 Balance Sheet – Assets January 2008 Assets are things of value that a company owns or controls that accountants have agreed to measure in monetary terms. Examples of these accounts include: Current assets: Cash Accounts receivables Inventory Prepaid expense Fixed assets Land Building Equipment Balance sheets Assets liability Owner’s equity Assets (good guys) generally good Inventory is often an exception (too much is bad) This is what the company owns or has Balance Sheet Invoice-based closing for a group at a specific point in time (financial statements key date) in the form of a comparison of assets and capital (liabilities and owner's equity). Assets and capital reflect the same total value. This is expressed in the balance sheet (assets = capital). © SAP AG and The Rushmore Group, LLC 2008

Balance Sheet – Liabilities ECC 6.0 Balance Sheet – Liabilities January 2008 Liabilities are things that a company owes or must provide services in order to settle that accountants have agreed to measure in monetary terms. Examples of these accounts include: Accounts payable Notes payable Bonds payable Unearned revenue Liabilities Bad guys – What a company owes to settle the accounts Typically debt Balance Sheet Invoice-based closing for a group at a specific point in time (financial statements key date) in the form of a comparison of assets and capital (liabilities and owner's equity). Assets and capital reflect the same total value. This is expressed in the balance sheet (assets = capital). January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

ECC 6.0 Balance Sheet – Equity January 2008 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. Balance Sheet Invoice-based closing for a group at a specific point in time (financial statements key date) in the form of a comparison of assets and capital (liabilities and owner's equity). Assets and capital reflect the same total value. This is expressed in the balance sheet (assets = capital). © SAP AG and The Rushmore Group, LLC 2008

Balance Sheet – Sample Assets Liabilities Equity Cash 1,000 Version 1.0 Balance Sheet – Sample January 2007 Assets Cash 1,000 Accounts Receivable 3,000 Equipment 500 Total Assets 4,500 Liabilities Accounts Payable 2,250 Taxes Payable 250 Total Liabilities 2,500 Equity Common Stock 1,750 Retained Earnings 250 Total Equity 2,000 Total Liabilities and Equity 4,500 January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC The Rushmore Group, LLC

Balance Sheet ECC 6.0 January 2008 Assets top Liabilities middle Owner’s equity bottom Compares one year the next January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Version 1.0 Income Statement January 2007 Presentation of an organization’s Revenues, Expenses, and Income for a given period of time (e.g., monthly, quarterly, or yearly) Revenues, in a simple sense, are inflows of cash as a result of selling activities or the disposal of company assets Expenses, in a simple sense, are 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 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC The Rushmore Group, LLC

Income Statement – Revenues ECC 6.0 Income Statement – Revenues January 2008 The monetary amounts collected from customers in settlement for goods purchased from our company or services rendered by our firm to them during the current fiscal year. Income Statement (Profit and Loss Statement) Comparison of revenue and expenditure of a period to determine the results for the company and the sources of these results. Often called the “P&L” January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Income Statement – Expenses ECC 6.0 Income Statement – Expenses January 2008 The monetary amounts paid to vendors in settlement for goods purchased by company or services rendered to our firm by other companies during the current fiscal year. Cost of Goods Sold (COGS) Payroll Utilities Taxes Interest March 1st 1913 – Many companies have this as their fiscal year. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Income Statement - Sample Version 1.0 Income Statement - Sample January 2007 Revenue Sales 11,000 Deductions -750 Total Revenue 10,250 Operating Expenses Cost of Goods Sold 4,500 Operating Expenses 3,750 Total Expenses 8,250 Net Income Before Taxes 2,000 Taxes -750 Net Income 1,250 January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC The Rushmore Group, LLC

Income Statement ECC 6.0 January 2008 Revenues Expenses Profit on bottom Microsoft’s income statement January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Statement of Cash Flows Version 1.0 January 2007 Statement of Cash Flows Considers the associated changes, both inflows and outflows, that have occurred in cash – arguably the most important of all assets – over a given period of time (e.g., monthly, quarterly, or annually) January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC The Rushmore Group, LLC

Version 1.0 Financial Ratios January 2007 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. The Rushmore Group, LLC

Version 1.0 Financial Ratios January 2007 The Rushmore Group, LLC

Version 1.0 Financial Ratios January 2007 The Rushmore Group, LLC

Financial Ratios Version 1.0 January 2007 EBIT – Earning before interest & Tax The Rushmore Group, LLC

Version 1.0 Financial Ratios January 2007 The Rushmore Group, LLC

Version 1.0 Financial Ratios January 2007 The Rushmore Group, LLC

Financial Reports SAP Implementation

R/3 SAP Module View Integrated Solution Client / Server Open Systems Financial Accounting Sales & Distribution Materials Mgmt. Controlling Production Planning R/3 Fixed Assets Mgmt. Integrated Solution Human Resources Project System Client / Server Quality Maintenance Open Systems Workflow Plant Management Industry Solutions

SAP Reports Tools SAP Standard Reports (in focus) Version 1.0 January 2007 SAP Reports Tools SAP Standard Reports (in focus) SAP Report Painter Report SAP Query ABAP Report Data Warehouse (to introduce) The Rushmore Group, LLC

SAP Standard Reports SAP has thousands of reports available to use. Version 1.0 January 2007 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. The Rushmore Group, LLC

SAP Report Painter Report Version 1.0 January 2007 SAP Report Painter Report Used to deliver many tabular style management reports to produce various financial statements. The Rushmore Group, LLC

SAP Query Used to run queries on SAP tables to return data. Version 1.0 January 2007 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. The Rushmore Group, LLC

Version 1.0 January 2007 ABAP Report ABAP/4 (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. The Rushmore Group, LLC

Version 1.0 January 2007 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. The Rushmore Group, LLC

SAP Standard Reports Three basic steps to running a standard report: Version 1.0 January 2007 SAP Standard Reports Three basic steps to running a standard report: Access the report (find the SAP command transaction (T) code) Enter selection criteria Execute the report The Rushmore Group, LLC

SAP Standard Reports Accounts Payable Reports Version 1.0 January 2007 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 The Rushmore Group, LLC

Accounts Payable Reports Version 1.0 Accounts Payable Reports January 2007 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. The Rushmore Group, LLC

Useful Reports in AP Area Version 1.0 Useful Reports in AP Area January 2007 The Rushmore Group, LLC

Vendor Document Display Version 1.0 Vendor Document Display January 2007 The Rushmore Group, LLC

Accounts Receivable Reports Version 1.0 Accounts Receivable Reports January 2007 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. The Rushmore Group, LLC

Accounts Receivable Reports Version 1.0 Accounts Receivable Reports January 2007 The Rushmore Group, LLC

Customer (Receivable) Balance Display Version 1.0 Customer (Receivable) Balance Display January 2007 The Rushmore Group, LLC

Customer Line Item Display Version 1.0 Customer Line Item Display January 2007 The Rushmore Group, LLC

Customer Document Display Version 1.0 Customer Document Display January 2007 The Rushmore Group, LLC

Asset Accounting Reports Version 1.0 Asset Accounting Reports January 2007 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. The Rushmore Group, LLC

Asset Accounting Reports Version 1.0 Asset Accounting Reports January 2007 The Rushmore Group, LLC

General Ledger Reports Version 1.0 General Ledger Reports January 2007 The most important reports of general ledger are: balance sheet income statement, and cash flow. They can be generated monthly, quarterly and annually The Rushmore Group, LLC

General Ledger Reports Version 1.0 General Ledger Reports January 2007 The Rushmore Group, LLC

Cost Centers: Actual/Plan/Variance Report (internal report) Version 1.0 Cost Centers: Actual/Plan/Variance Report (internal report) January 2007 The Rushmore Group, LLC

Version 1.0 Profitability Analysis: Plan/Actual Comparison Report (internal report) January 2007 The Rushmore Group, LLC

Profitability Analysis: Plan/Actual Comparison Report (in detail) Version 1.0 Profitability Analysis: Plan/Actual Comparison Report (in detail) January 2007 The Rushmore Group, LLC

Version 1.0 Balance Sheet January 2007 The Rushmore Group, LLC

Balance Sheet (Assets) Version 1.0 Balance Sheet (Assets) January 2007 The Rushmore Group, LLC

Balance Sheet (Liabilities & Equity) Version 1.0 Balance Sheet (Liabilities & Equity) January 2007 The Rushmore Group, LLC

Version 1.0 Income Statements January 2007 The Rushmore Group, LLC

Exercises: (Due date 2/25/2013) FI 4A: Post Transfer of funds to Bank Account MM6: Create a new vendor MM7: Create material master for trading goods MM8: Display Stock/Requirements list MM9: Create a purchase requisition MM10: Display stock/requirements list MM11: Create request for quotation for your requisition MM12: Maintain quotation from vendors MM13: Evaluation quotations on price MM14: Rejecting quotations MM15: Create a purchase order referencing an RFQ MM16: Create a goods receipt for the purchase order MM17: Verify the purchase receipt of goods MM18: Create an invoice receipt from vendor MM19: Display purchase order history

Exercises: MM20: Create a goods receipt for purchase order MM21: Create an invoice receipt from vendor MM22: Post payment to vendor MM23: Display vendor line items MM24: Display and review general ledger account balances and individual line items FI 17: Run balance sheet/profit and loss statements FI 18: Assign General Ledger Accounts to Financial Statement Version FI 19: Run Balance Sheet / Profit and Loss Statements