Critique of Sap System
Critique of SAP system Introduction: SAP ERP is an integrated enterprise resource planning (ERP) software manufactured by SAP AG that targets business software requirements of midsize and large organizations in all industries and sectors. More than 2,300 customers are using the latest version of mySAP ERP. It is a real-time process system which all the users log on the central platform server. There are many sub-functions of SAP including SAP ERP Financials, SAP ERP Human Capital, Management SAP ERP Operations, and SAP ERP Corporate Services.
We only focus on the revenue cycle and expenditure cycle of the SAP system which is direct related to the accounting information system. Expenditure cycle: About master records: The expenditure cycle is composed of purchase system and accounts payable system. The creation of material master records and vendor master records makes the purchase system more efficient. While traditional information system has three databases include customer sales A/R (customer database), production scheduling shipping (Manufacturing database) and vendor A/P inventory (Procurement database).
SAP systems a common operational database (customer, production, vendor, and inventory). The problem with traditional system is the lack of effective communication between systems is often the result of a fragmented systems design process. On the other hand,
By using the master record, we can avoid data redundancy, and use the data in many other functions other than purchasing data for ordering. Those include posting goods movements, managing physical inventory, inventory valuation, and material requirements planning. Also material master is divided into three levels: client level, plant level and storage level. The advantage of this is the company can set which information is valid within specific department.
As to vendor master data, all the vendors’ information is recorded and updated. Different department can always have access to synchronous and up-to-date information. But a faulty transported object such as a configuration change or code for an interface can have an effect on other SAP functionality in the production environment. For instance a change to the HR module within payroll can affect functionality in the FI-CO module. A server failure under this model could leave the entire organization unable to process transactions.
However, two linked servers can be connected in redundant backup mode. Just like material master records, vendor master records are divided into three levels: General data (Client level), Purchasing data (purchasing organization level), and Accounting data (company code level). After create a vendor master record, it is linked to the appropriate reconciliation account in General Ledger. The control problem can be who has the authorization to access the data warehouse.
The organization should establish procedures to oversee the authorization of individuals at customer and supplier sites that will be granted access to their data warehouse. Unauthorized access of Material Mater records and Vendor master records can lead to the entire expenditure cycle break down. About purchase requisition: When inventory is below a certain level, the SAP system can generate a requisition automatically when predetermined recorder levels are reached. The problem is the goods may be requisitioned for unauthorized purposes.
It will be better if purchase requisitions are prenumbered (instead of get a number after creating a Purchase requisition) within each originating department as a control over outstanding requisition to ensure that goods requisition are duly ordered and received. For purchase other than inventory replenishment, requisition authority is granted to specific people. This authority should usually restricted to the value and types of goods and services applicable to the person’s function and level of authority. Special procedures usually apply for requisition plant and equipment or for entering into lease contracts.
About purchase order: In SAP, purchase orders can be created with or without reference to a purchase requisition or a RFQ. That increase the risk of purchases made for unauthorized purposes. We can reset the system that except for programmed inventory replenishment, the purchase department issue purchase orders only on the receipt of requisitions properly approved by an employee who has appropriate requisitioning authority. We can also improve the efficiency of the system by centralization of purchasing in a specialized department.
The purchase department is better able to negotiate more favorable terms and prices and, by amalgamating orders, can obtain better volume discounts. About receiving: In receiving goods, SAP can suggest data from the purchase order when the goods receipt is entered in the system. That’s the same effect as the blind copy of PO, it is more efficient because the system can tell the receiving department the right amount immediately. But compare with manual process, the SAP system often eliminates the segregation of duties.
However, SAP is the best ERP system to help resolve the segregation of duties problem, which is a basic, key internal control. SAP currently provides more than 150 predefined user roles, which act to limit a user’s access to only certain functions and associated data. When the user logs onto the system, a role-based menu appears on the functions of limiting the user to the specified task. When an invoice is entered in the system with reference to a purchase order, the system suggests data from the purchase order and the goods receipt.
If there are any discrepancies between order or goods receipt and the invoice, the system warns the users, and blocks the invoice for payment. But sometimes the discrepancies results from mistakes in goods receipt. That would delay the payment too the vendor. So it will be better if the organization set some manual reviews here. When a discrepancy occurs, the special authorized staff investigates the PO, inventory report from warehouse, and the goods receipt report, and defines the mistake as soon as possible.