Financial Reports EGN 5622 Enterprise Systems Integration Spring, 2012 Financial Reports EGN 5622 Enterprise Systems Integration Spring, 2012

Financial Reports Concepts & Theories Financial Reports Concepts & Theories

3 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.

4 Financial Reports Internal Reporting ES Reporting Features External Interfaces Integrated Information ES Database External Reporting Types

5 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 Integrated Information: Supplies real-time information that is fully integrated across cross-functional business processes and uses the same underlying data. External Interface: Enables download of report lists to several file formats including spreadsheet applications such as Microsoft Excel. Supports other external interfaces including , Internet, PDAs, and print devices

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) 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 Reporting in financial accounting is broadly divided into two categories: ◦displaying account information, and ◦generating financial statement.

8 Financial Reports (- continued) Accounting Information ◦Account information can be obtained at three levels:  balance display,  line item list, and  original FI document.

9 Balance Display

10 Accounting Information – Balance Display The balance display shows a bank account for the months of January and February. The figure highlights a drill down for a credit amount of $11,507.5 in January. The drill down reveals a list of line items that comprise the credit amount.

11 G/L Account Line Item Display

12 Accounting Information – Line Item Display One of these items is for the value of $5,000. A further drill down of the $5,000 display the data in the original FI document – the original debits and credits – associated with the posting.

13 Original Accounting Document

14 Accounting Document The drilling down to the line item level is possible only if the line item display indicator is set in the general ledger account master. A financial accounting document records the impact (either debit or credit, and in which account) of a transaction step on financial accounting. A financial document consists of a header section and detail or line item section.

15 Accounting Document (-continued) The header includes data that apply to the entire document, such as document number, document type, company code, currency, and reference number. A document type is a two-digit code that identifies the specific business process that generates the document. Common used document types are: ◦customer invoice (DR), ◦customer payment (DZ), ◦vendor invoices (KR), ◦vendor payments (KZ), ◦goods issue (WA), ◦goods receipt (WE), and ◦G/L document (SA). A document type determines ◦the document number range, and ◦the account type associated with the posting.

16 Accounting Document (-continued) The detail section typically consists of two line items, a debit item and a credit item. ◦Each line item includes the amount (number) from the general ledger, a description of the account, an indication of whether the account is debited or credited, and the amount. The debit or credit is indicated by a posting key (shown in next slide), which is two-digit code that determines how a line item is posted. Specially it determines the account type, whether it is a debit or credit posting, and field status of additional data. Account types: ◦Customer (D), vendor (K), asset (A), material (M), and G/L accounts (S).

17 Accounting Document (-continued) Posting Key Examples: Posting KeyDebit/CreditAccount Type 01 (invoice)DebitCustomer 15 (payment)CreditCustomer 40 (debit)DebitG/L account 50 (credit)CreditG/L account 31 (invoice)CreditVendor 25 (payment)DebitVendor

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

19 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.

20 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 and ◦expenses of a firm over a particular period of time.

21 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.

22 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)

23 Balance Sheet – Assets Things of value that a company owns or controls that accountants have agreed to measure in monetary terms. Examples of these accounts include: ◦Cash ◦Accounts receivables ◦Plant and equipment ◦Inventory

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.24 Balance Sheet – Liabilities 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

25 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 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.26 Balance Sheet

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.27 Income Statement – Revenues 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.

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.28 Income Statement – Expenses The monetary amounts paid to vendors in settlement for goods purchased by our company or services rendered to our firm by other companies during the current fiscal year.

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.29 Income Statement

30 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.

31 Financial Ratios

32 Financial Ratios

33 Financial Ratios

34 Financial Ratios

35 Financial Ratios

Financial Reports SAP Implementation Financial Reports SAP Implementation

R/3 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

38 SAP Reports Tools  SAP Standard Reports (in focus)  SAP Report Painter Report  SAP Query  ABAP Report  Data Warehouse (to introduce)

39 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.

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

41 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.

42 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.

43 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.

44 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

45 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

46 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.

47 Useful Reports in AP Area

48 Vendor Accounts Balance Display

49 Vendor Line Item Report

50 Vendor Document Display

51 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.

52 Accounts Receivable Reports

53 Customer (Receivable) Balance Display

54 Customer Line Item Display

55 Customer Document Display

56 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.

57 Asset Accounting Reports

58 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

59 General Ledger Reports

60 Chart of Accounts

61 Individual G/L Account Balance

62 Cost Centers: Actual/Plan/Variance Report (internal report)

63 Profitability Analysis: Plan/Actual Comparison Report (internal report)

64 Profitability Analysis: Plan/Actual Comparison Report (in detail)

65 Balance Sheet

66 Balance Sheet (Assets)

67 Balance Sheet (Liabilities & Equity)

68 Income Statements

Exercises: 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