ENTERPRISE RESOURCE PLANNING
What is ERP?
Enterprise Resource Planning software, or ERP, doesnt live up to its acronym. Forget about
planningit doesnt do thatand forget about resource, a throwaway term. But remember the
service will see low inventory levels on their screens and tell customers that their requested item
is not in stock. Accountability, responsibility and communication have never been tested like this
How long will an ERP project take?
Does this decision package support and contribute to the goals of the organization?
What would be the result to the organization if the decision package is eliminated?
Can this decision packages objectives be accomplished more effectively and/or
yours with higher salaries and bonus offers than you can affordor that your HR policies permit.
Huddle with HR early on to develop a retention bonus program and to create new salary strata
for ERP veterans. If you let them go, youll wind up hiring themor
plus an extra amount may be incorporating infl ation.
ZBB requires that every item of expenditure be justifi ed in its entirety in order to be included in
next years budget. Besides adopting a zero based approach, ZBB also focuses on programs or
The responsibility for preparation and implementation of the budgets may be fixed as under:
Although the chief executive is finally responsible for the budget programme, it is better if a large
part of the supervisory responsibility is d
The budgetary control is a continuous process that helps in planning, coordination and controlling
of business decisions. A budget is a means and budgetary control is the end-result. The
budgetary control system assists an organization in setting up the g
not-so-real failures. Blaming the failure on a system implementation has become a convenient
excuse for companies that have missed their quarter-end [earnings] target.
MANAGEMENT ACCOUNTING 202
As for blame, it is evenly spread. SAP implementat
unexpected costs that pop up outside the scope of the fixed-price contract. Although they are
simpler than their bigger brethren, the systems are still at the mercy of peopleits essential to
manage expectations and resista
The disbursement section has all the cash payments planned for the budget period. They include
raw material purchase, direct labor payments, overheads, plant purchase and dividend payment
Cash budgets can help avoid cash balances that are
c. Critical success factors will be identifi ed and performance measures devised to monitor
progress towards them.
Roles of budgets
Once a budget has been agreed, it is not merely a go ahead for managers to spend up to the
budget but spen
selection and budgeting of decision packages prepare the organization for operation during the
next year. However, what managers plan to happen in the next fi scal year may or may not occur.
Adjustments may be essential during the year in order to achieve
Activity based budgeting was tested in the following examinations:
Incremental budgeting was tested in 06/03.
a) Differentiate between a feedback control system and a feed forward control system
company performance can be measured.
Budgeted balance sheet
It is developed by beginning with the balance sheet from the beginning of the budget period and
adjusting it for data contained in other budgets.
It is all the above budgets that form the master
vi. Revisions to targets may require revision to standard costs too which in turn would led
to revisions to stock valuations. This could place large administrative effort from the
accounts department every time a rolling budget is being prepared.
A rolling (continuous) budget is a budget that is continuously updated by adding a period, say a
month or quarter, when the earlier accounting period has expired. When making budgets, we are
actually planning for the future but no one is ever certain of t
4.12 BUDGETS AND PERFORMANCE EVALUATION
Budgets are one of the accounting measures which are used to assess a managers performance.
In most cases, the reward schemes in organizations are often linked to the achievement of
certain levels of perfor
What is the business culture at our company and what are its strengths?
What subcultures do we have and what are their strengths?
How can we apply those strengths to business change?
What cultural attributes are weak or will interfere with the change?
When will I get payback from ERP and how much will it be?
Dont expect to revolutionize your business with ERP. It is a navel gazing exercise that focuses
on optimizing the way things are done internally rather than with customers, suppliers or partners.
iii. Management may not be having the skills to perform the techniques required by ZBB.
Thus their training is required.
iv. The organizations information system may not be capable of providing suitable
v. The ranking process could be diffi c
What are the objectives to be achieved?
What are the constraints and to what extent their effects can be minimized?
Having found answers to the above questions, the following steps may be taken for installing an
effective system of budgetary control in
not cooperate and coordinate with other budget holders
put in just enough effort to achieve budget targets without trying to beat those targets.
tolerate poor inaccurate recording and classifi cation of costs
ensure that they spend up to their budget,
contributed to revenues. ERP creates a single version of the truth that cannot be questioned
because everyone is using the same system. To standardize manufacturing processes
Manufacturing companiesespecially those with an appetite for mergers and acquisi
reveal their value until after companies have had them running for some time and can concentrate
on making improvements in the business processes that are affected by the system. And the
project team is not going to be rewarded until their efforts pay off
that few companies have the stomach for). Or they can modify the software to fit the process,
which will slow down the project, introduce dangerous bugs into the system and make upgrading
the software to the ERP vendors next release excruciatingly difficu
a consummation devoutly to be wished.
Hershey, Pa.-based Hershey Foods, for example, issued two profit warnings in as many
months in the run-up to last Christmas. Why? Massive distribution problems following a flawed
implementation of SAPs R/3 ERP system,
resources are incorporated into the budgets.
It is suitable:
In well established organizations
In very large organizations.
During economic boom
When strong budgeting skills are fully inculcated in the managers.
When the organization is well decentralized
even clean data may demand some overhaul to match process modifi cations necessitatedor
inspiredby the ERP implementation.
MANAGEMENT ACCOUNTING 204
4. Data analysis
Often, the data from the ERP system must be combined with data from external s
i. It should lead to the most favorable result when actual is compared with budget. Such
a result should lead to the optimization of personal gain for the individual manager.
ii. Bias can help influence the outcome when the reward structures are based on