DEVELOPING DATA FOR INPUT TO ERP SYSTEM: SUPPORT FOR

FINANCIAL TRANSACTIONS
Julia I. Sialitskaya
cefei@yandex.ru
Boris N. Panshin
panshin@tut.by
Belarusian State University, Faculty of Economics,
ABSTRACT:
Enterprise Resource Planning system is a business management system that integrates all facets of the
business, including planning, manufacturing, sales, and marketing. As the ERP methodology has become
more popular, software applications have emerged to help business managers implement ERP in business
activities such as inventory control, order tracking, customer service, finance and human resources.
ERP system users have indicated a need for support for users responsible for generating financial entries. This
paper presents a prototype case-based system designed to support use of an enterprise resource planning
systems financial entries. That system uses the well-known REA database structure as the basis of capturing
information about the cases. This kind of a system could be linked to users through an ERP portal access.
KEYWORDS: Computer-based system, economic landscape, Enterprise resource planning, ERP solution,
ERP system, financial system users, financial transactions, multiple functional areas, prototype system,
revenue, transaction processing capabilities, transactions.

1. INTRODUCTION
Enterprise resource planning (ERP) is an integrated computer-based system used to manage internal and
external resources including tangible assets, financial resources, materials, and human resources.
ERP system financial modules require that users be able to provide transaction information.
Unfortunately, for a number of reasons users need support in the development of transactions. First, transactions
vary in their difficulty. Interviews with some financial system users indicate that development of transactions for
entry into the system can be very difficult. In some cases, only experts are able to correctly develop those entries.
Second, in some cases, substitute users take responsibility for transaction entry. Original users may be on
vacation or ill [1]. As a result, users may not be adequately prepared to place financial entries into the system.
Third, ERP systems are complex and their use is not easy. Substantial training and user support is necessary to
facilitate system access and use.
Accordingly, the purpose of this paper is to investigate the design of such a system and review a
prototype version of a system designed to assist financial users in the development of transactions.
The aim of this paper is to show the necessity and advantages in using ERP-system. In connection with
the aim the following key questions were set in the paper:
Why companies should install ERP-systems
What is Enterprise Resource Planning System
The main characteristics of financial transactions
What is a prototype system
This paper proceeds in the following manner. Part 1 has provided an introduction to the importance of
this problem, stated the purpose of this paper. Part 2 provides a brief summary of ERP systems. Part 3 discusses
the case-based nature of financial transaction information and knowledge. Part 4 discusses the system design and
prototype implementation.
2. NECESSITY OF USING ERP-SYSTEM
As most companies know, sales are the force behind the growth of a company. If the company has a
product or service, then sales is the key to revenue and the sales force is the key to making that revenue. Over the
last several months, the economic landscape has changed significantly, and companies are looking for ways to

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increase sales effectiveness and maximize profits. That means more scrutiny of sales plans and their financial
impact, revising resource requirements and compensation budgets to control operating costs, and responding
quickly to new business strategies and incentive programs. However, most companies lack a formalized process
or system to do this.
Leading organizations are making the move from spreadsheet-based and homegrown solutions to a
scalable ERP solution and are realizing significant business benefits and greater sales performance. ERP
solutions can offer speed, flexibility and visibility into an organization's variable compensation programs while
providing business users the capability to perform sales performance planning, reporting and analysis.
ERP solutions are a mixture of strategy, process, behaviors and technology that focus on incentive
compensation, territory management, quota management and performance analytics and help organizations link
corporate strategy to sales initiatives. The right approach to ERP considers process, people and enabling
technology in order to align individual metrics to business goals. ERP solutions not only help companies
improve business agility and respond to change quickly, but they also enable organizations to attract and retain
top talent, increase productivity and drive business results.
Every year, errors in forecasting and misaligned sales incentives cause companies to overpay or underpay
their sales force, costing them millions of dollars.
ERP solutions have the ability to automate data feeds, calculate commissions and close out transactions
that have been paid, reducing the errors due to duplicate payments. This solution will also give the team the
ability to compare period to period, and catch any changes or duplications in the data. Instead of spending hours
reviewing and comparing Excel spreadsheets across periods, the system could identify and produce a daily report
each morning for review.
Another issue companies face is when sales managers receive overrides or roll ups on the sales of their
sales representatives. When a sales managers incentive is based solely on the sales of their representatives and
not on the profitability of the unit, they are more likely to push through sales that may not be profitable for the
company. Usage of the ERP software allows the company to increase profitability and make each sales manager
more responsible for his/her branchs profitability and not just sales.
As more companies move into a customer relationship management world with on-demand reporting for
customer management and sales management, the need to manage sales performance and incentive
compensation with a touch of the fingertip increases. Imagine a world where with a click of the mouse, a sales
executive can analyze his teams sales to quota by product or region. He can see where he needs to spend his
time and where to concentrate his resources to get the greatest growth from his team.
ERP systems and performance analytics tools give companies the ability to tie compensation to sales and
sales to revenue. There is a clear traceability between the source system, through the integration and into the
sales performance management system. Data should be massaged as little as possible between the ERP system
and the performance analytics tools. The ability to view reporting metrics will give key executives the tools to
make business decisions based on facts, not hypothetical judgments. The Chief Financial Officer can look at a
report that ties sales to revenue, and compensation back to sales. This gives the Chief Financial Officer the
comfort that he can explain revenue and compensation that affect his financial statements. The Chief Executive
Officer can see if sales are growing as targeted, or if the company needs to review their targets and identify why
they are not making them. The sales executives can review how the compensation plans are affecting sales, and
if they are performing for the company as expected.
3. ENTERPRISE RESOURCE PLANNING SYSTEMS
One of the most rapidly growing areas of software implementation is what is referred to as
"Enterprise Resource Planning" (ERP) Systems. Perhaps the best known of the ERP systems include those
known as the "big five ERP firms" or BOPSE firms: Baan, Oracle Applications, PeopleSoft, SAP (the
largest ERP firm) and J. D. Edwards.
ERP systems provide firms with software that integrates multiple functional areas, focusing on processes,
rather than function. ERP systems provide transaction processing capabilities that help to integrate a firm's
information systems. Typically, ERP systems employ a relational database. Using a relational database and
appropriate process design, allows the firm to capture data once and then make that data available for use
throughout the firm, by all appropriate users.

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ERP systems have been well-received. It has been estimated that virtually all of the Fortune 500 firms
have either implemented an ERP system or are implementing an ERP system. Implementation of ERP systems
has grown to be huge business.
Implementing ERP systems has become a major consulting activity. It has been estimated that roughly
50% of the consulting done by the major consulting firms has to do with choosing, designing, developing,
testing or implemented ERP systems. As a result, there is a large potential for knowledge-based support of
these systems.
An ERP system can either reside on a centralized server or be distributed across modular hardware and
software units that provide "services" and communicate on a local area network [4]. The distributed design
allows a business to assemble modules from different vendors without the need for the placement of multiple
copies of complex, expensive computer systems in areas which will not use their full capacity.
Businesses have a wide scope of applications and processes throughout their functional units;
producing ERP software systems that are typically complex and usually impose significant changes on staff
work practices.
Implementing ERP software is typically too complex for "in-house" skill, so it is desirable and highly
advised to hire outside consultants who are professionally trained to implement these systems. This is typically
the most cost effective way [5]. There are three types of services that may be employed for - Consulting,
Customization, Support.
The length of time to implement an ERP system depends on the size of the business, the number of
modules, the extent of customization, the scope of the change and the willingness of the customer to take
ownership for the project. ERP systems are modular, so they don't all need be implemented at once. It can
be divided into various stages, or phase-ins. The typical project is about 14 months and requires around
150 consultants.
A small project (e.g., a company of less than 100 staff) can be planned and delivered within 39 months;
however, a large, multi-site or multi-country implementation can take years.
The length of the implementations is closely tied to the amount of customization desired.
To implement ERP systems, companies often seek the help of an ERP vendor or of third-party
consulting companies. These firms typically provide three areas of professional services: consulting;
customization; and support. The client organization can also employ independent program management,
business analysis, change management, and UAT specialists to ensure their business requirements remain a
priority during implementation.
Data migration is one of the most important activities in determining the success of an ERP
implementation. Since many decisions must be made before migration, a significant amount of planning must
occur. Unfortunately, data migration is the last activity before the production phase of an ERP implementation,
and therefore receives minimal attention due to time constraints.
4. FINANCIAL TRANSACTION CHARACTERISTICS
An important characteristic of financial transactions is that they tend to repeat themselves. First, some
transactions occur at regular intervals over time. Second, other events frequently occur. For example, an
overwhelming majority of a firm's financial transactions are purchases or sales. Third, even transactions that are
not frequently occurring, may repeat themselves, if only occasionally [2]. This repeating nature leads us to
suggest that a case-based reasoning approach is an appropriate vehicle to capture and represent knowledge about
financial transactions.
Because transactions repeat themselves, capturing previous transactions and reusing those transactions
can provide support to financial system users. This capability suggests that previous entries could be used to
guide user construction of financial entries.
Although transactions basically "repeat themselves" they are not always identical, even if it is only the
amounts that change. As a result, case-based information about financial transactions is not intended to replace
the user, but only provide support.

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5. A PROTOTYPE SYSTEM
A preliminary system design that exploits the basic underlying database requirements for financial
transactions was developed. In particular, research suggests that ERP systems employ a database schema that
generates information on resources, events, agents and locations from the financial transactions. As a result, the
underlying database structure is used as the basis of the cases.
In particular, the Resources Events Agents Location (REA/REAL) is used as the basis of capturing
information about the entries for the case library. REA and its extensions REAL provide a theoretical structure to
accounting and other database applications.
The initial and driving matching criteria for the cases in the system are the events (E), which the system is
designed to process. Additional information in the cases includes the resource (e.g., cash) and the direction of
change in the resource (e.g., cash increasing), the external agent (e.g., the particular client) and the location for
which the event is occurring (e.g., central office). In addition, the resulting financial system entry, in terms of
debits and credits also is captured. Although REA/REAL does not require a debit credit structure, ERP systems
still employ that approach. As a result, the system is designed around a debit credit structure.
5.1 Extensions
This paper has focused on supporting ERP system users in the area of financial transactions using casebased reasoning. Additional system support could be generated to support users of other modules.
A prototype system design, based on REA, was presented for capturing case-based knowledge about
financial transactions. That approach centered on the event of concern. At this point, the system has been
developed as a proof of concept. As a result, the systems case base in support of that system is minimal and
could be further extended.
In addition, ultimately for such a system to be used as part of an ERP system would require integration
into the ERP system or into the portals that are being generated by ERP vendors.
Figure 1 - Lawson's ERP Portal

One approach would be to embed the system into an ERP portal, such as the one developed by Lawson
and illustrated in figure 1. Similar to other knowledge support that is available from the portal, a simple virtual
tab or link could tie the portal to the transaction system support system [3]. Using this approach, such a system
could be loosely linked, rather than tightly integrated into the ERP.

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6. CONCLUSION
Having analyzed the data we have come to the following conclusion.
In todays economy and with the viability of so many companies hanging in the balance, a company cant
ignore the impacts of ERP systems on managing the performance of their sales teams. Leading companies are
realizing the limitations of Excel for developing, managing and analyzing sales performance.
The following key answers were found in the paper:
Companies install ERP-systems because ERP can help companies accurately calculate, compensate and
manage the impact of sales on their bottom line, enabling the sales force to focus on selling while
reducing the overall cost of sales.
ERP is an integrated computer-based system used to manage internal and external resources including
tangible assets, financial resources, materials, and human resources. It is a software architecture whose
purpose is to facilitate the flow of information between all business functions inside the boundaries of the
organization and manage the connections to outside stakeholders.
Enterprise resource planning (ERP) systems are receiving widespread adoption. Unfortunately, these
systems are complex. As a result, systems are being developed to facilitate use of those ERP systems. In
particular, there has been concern by ERP firms and client firms about supporting users of different
modules.
This paper has investigated the opportunity of supporting financial transactions. A prototype system
that employed an REA/REAL structure was developed and discussed. A number of extensions were
examined, including the potential for linkage of such a system to users through an ERP portal.
5. REFERENCES

1.Daniel E. OLeary Enterprise Resource Planning Systems: Systems, Life Cycle, Electronic Commerce, and
Risk Cambridge UP, 2000, pp. 5-232;
2.Daniel E. OLeary Knowledge Management Across the Enterprise Resource Planning (ERP) Life Cycle
International Journal of Accounting Information Systems, Volume 3, 2002, pp. 99-110;
3.Daniel E. OLeary On the Relationship Between REA and SAP International Journal of Accounting
Information Systems, Volume 5, Number 1, 2004, pp.65-81;
4.Daniel E. OLeary, M. Lynne Markus Microsofts Management Reporting: SAP, Data Warehousing and
Reporting Tools? - Journal of Emerging Technologies in Accounting, Volume 3, 2006, pp. 129-141;
5.McCarthy, W., The REA Accounting Model: A Generalized Framework for Accounting Systems Shared
Data Environment Accounting Review, July 1982, pp. 554-577.

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