published in the SICASA Newsletter of the Mangalore Branch of ICAI in the month of December 2013
Business Expansion and Development is a continuous phase for any Enterprise. In this era where there is technological growth, we now observe a “Big Bang” explosion among the enterprises present all over the world. Enterprises are growing in terms of size and presence, service offerings and product offerings which have all resulted in two things, Economic Growth and Difficulties in Management.
Economic Growth is excellent for any economy as we can witness a better standard of life and many more merits and are welcomed by everyone. However Difficulties in Management of the Enterprise is a matter of great concern as there is considerable amount of items which are at stake. The following are a few difficulties which were faced in common by many growing enterprises, Co-ordination between departments, regulatory compliances, Accounting Frauds, Lack of uniform business processes, communication gaps, privacy of data, data redundancy and too much of paperwork and thus had made the job of managing an enterprise extremely challenging.
Thus a solution called ERP was presented to the enterprises. The magic of the ERP was that literally running the whole enterprise using a single interface. All the business processes, accounting functions, communications etc. were integrated. ERP is an abbreviation for Enterprise Resource Planning. ERP is another genre of software. Major players of the ERP market are SAP (SAP AG), Oracle e-business suite (Oracle Corporation), Microsoft Dynamics (Microsoft) etc. The ERP is used to run the day to day show of the enterprise. Every transaction is passed through the ERP be it an internal transaction or a regular business transaction. General Internal Controls are enforced by the ERP solution. And any and every accounting impact that arises as a result of the above functions is automatically recorded in the required accounting standards are performed by the ERP. Central Administration and a smooth functioning enterprise is an end result.
There is a difference between ‘Installation’ and ‘Implementation’ of an ERP. Installation simply means the representative of the service provider installs the ERP solution on the servers and workstations of the Enterprise. Implementation is a different concept altogether. It refers to configuring the installed ERP to merge the business processes of the enterprise, regulatory requirements, Accounting Functions those are applicable and the Internal Controls that are required to the enterprise. An effective implementation of an ERP would lead to very strict internal controls, accuracy in maintaining books of accounts, savings of time and thus would lead the management to focus more of the time on Business rather than internal affairs.
A Chartered Accountant being an auditor and also as an accountant is aware about the business processes and workflows of an enterprise. A Chartered Accountant can provide consultancy services in implementation of an ERP. A CA can be right best person to provide the correct guidance.
The implementation of an ERP can be broadly categorized into three sections viz. Access, Process and Compliance.
Compliance: Laws and regulations of various countries need to be followed by the enterprise having its presence in the respective countries. Each country may have its own Generally Accepted Accounting Standards. In India we have the Accounting Standards, Ind AS, IFRS as the GAAP to the enterprises as applicable. Other regulations include the Clause 49, the Sarbanes Oxley Act, Data Privacy Acts’ of other countries etc. It is extremely important for the enterprise to comply with every regulation. The ultimate goal of any regulation is to maintain uniformity of accounts and to showcase a “True and Fair” view of the Financial Statements. A Chartered Accountant is known for his superiority in Accounting Knowledge. It is most crucial that the accounting transaction to be passed at the correct point of the workflow. Deciding the accounting policy to be implemented for the enterprise can be performed by the CA.
Process: All the workflows and Processes of various functions of the enterprise have to be implemented. Implementing an ERP is a time consuming process and not a simple task enterprise would opt for will also be the best time to perform a Business Process Engineering. All existing processes and workflows can be redesigned in order to make it smaller and simpler but to retain the level of inflows that are generated by the said function. A process is a series of workflows of a specific function. A CA can conduct a risk assessment on the controls that is present in the enterprise and the new processes can be designed with the motive of mitigating the risk that is there. Internal Controls also can be redesigned and enforced through the ERP. A CA can design the structure of the process and workflows that would be most beneficial to the enterprise.
Access: Access should be given to the end users in a need to know basis and at a Minimum Requirement to the employees. It is essential to have adequate Internal Controls to prevent data leakage and abuse. Segregation of Duties (SODs) is a concept that is being practiced by the enterprises. SOD in layman’s language means the maker and the checker should not be the same person. Deciding the roles and responsibilities that is possible to be performed at the enterprise can be provided by the CA. The Correct combination of the responsibilities and roles to ensure that there is no conflict of the SOD can be designed by the CA.
The successful implementation of the ERP is possible only if the correct solution is presented. Hence it is essential for a CA to ensure that each and every function of the Business of the enterprise is taken care of. All resources are effectively used and no deviations from regulations are to be ensured. In brief, A CA used to provide services like Auditing, Book Keeping and Compliances to the enterprise. We can now observe that the services that could be provided by the CA are increased and there is a heavy dependence from the enterprise on Chartered Accountants. We can now be an architect for the enterprise, give a solution for running their business. Thus with the continuous improvement of Technology, services of a CA is required at a whole new level by the enterprise.