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Accounting Information Systems

Contents

Executive Summary.

Introduction..

Background and Key Business Processes.

System Requirements.

Software Solutions.

SAP S/4HANA for Finance.

Xero.

Compare and Contrast: SAP vs Xero.

Pricing Model

List of Features.

Other Application Integrations.

Supported Device/ OS..

Type of Support

Recommendation..

Conclusion.

References.

Executive Summary of Management Accounting For Business Decisions

This report is based on Woolworths Supermarket with is one of Australia’s largest organization. This report has understood the need for a good accounting software solution by understanding the requirements in the field of finance, inventory management, vendor management, taxation, etc. and have analyzed 2 of leading software solutions in the market- SAP and Xero. After doing a detailed feature set comparison this report has recommended SAP cloud solution as the accounting software that Woolworths should leverage. This will allow them to be part of a software provider which provides dedicated solution for accounting while they also enjoy the option of leveraging a host of other modules and application integrations.

Introduction to Management Accounting For Business Decisions

The following assignment is an attempt to better understand the accounting software that can be implemented for the customer. The company chosen as the customer for this assignment is Woolworths Supermarket Australia. Woolworths Supermarket is the one of the largest entities of the Woolworths Group. This report will make an attempt to understand the business and then analyse the software which can be relevant for Woolworths. This report has been structured in such a way that it begins with a focused description on the company and its key business processes. This report will then provide a systems requirement analysis, in which the feature set needed in a cloud based accounting software would be understood. With this clarity, this report has done a deep dive into different software solutions available in the market and compared and contrasted the difference between 2 of the software solutions. Then in the recommendations section, this report will present the best possible solution out of the given 2 options for Woolworths before concluding the report.

The report will aim to essentially understand the need of Woolworths and understand the Australian market for a cloud based accounting solution and suggest the best possible solution. This would be done keeping in mind that Woolworths is analyzing the report, therefore the information and its presentation would be given a high importance. This report has taken inputs from high quality journals and the software vendors’ websites to ensure that the key information is represented correctly.

Background and Key Business Processes

Woolworths Group is Australia’s second largest company in terms of revenue and has extensive presence across both Australia and New Zeeland. The group which is headquarters in New South Wales has several divisions in which it has its presence. Woolworths operate and manage supermarkets, liquor retail stores, general merchandise retail stores, finance, hotels and gambling. The combined 2019 revenue of this group was 59.98 billion Australian Dollars. For the purpose of this report, Woolworths Supermarket chain has been considered. It is part of the 3200 plus store network of Woolworths. This supermarket chain along with another leading chain Coles manages over 70% of the market. The primary category that is sold include groceries in terms of vegetables, packaged foods, meat, fruits, etc. Besides that, it also sells homecare and healthcare products, beauty products, stationery, magazines, CDs & DVDs, baby and pet supplies, etc. It also has a significant presence in the online business (McGregor, 2012 ; Pearce, 2016 ; Woolworths Group 2019 Annual Report, 2020).

The key business activity is the inventory and the SKU management for all the different categories as part of one supermarket and the group of supermarkets. The inventory needs to be validated on a real time basis to ensure the online as well as the offline sales checks out. The inventory in management is also important from a taxation and auditing perspective. Besides inventory management, it is also important to manage the cost of the inventory that is held which essentially helps realize the actual profits. Other business processes include reordering of inventory once the inventory goes below a specific quantity. This initiates an entire supply chain process involving the vendors from whom the product is to be delivered, the finance department for payments, the retail store managers for inventory checks, etc. Typically speaking, in many cases these activities are done manually or by an MS Excel based solution or a mix of both. The on floor staff tracks the inventory and keeps a count of same which is updated at the end of each day. This is a cumbersome process and for a mammoth like Woolworths which has over 1000 stores this process will be full of manual errors and will for sure lead to losses to Woolworths. With manual or Excel entries there is high possibility of pilferage happening which would be almost impossible to track. Then there is additional risk of doing auditing and reordering (McGregor, 2012 ; Pearce, 2016 ; Woolworths Group 2019 Annual Report, 2020).

System Requirements

For Woolworths to overcome all the hurdles listed in the previous section it is obvious that they need an accounting solution. The role of accounting solution in terms of retail outlets is to ensure that there is efficient and effective tracking. The key features that Woolworths need to consider are to reduce the overhead cost by keeping a track and to ensure that no new investment is needed. Woolworths would have hundreds of vendors and they would have to pay these vendors a monthly or an on demand expense for the products and services consumed. Keeping a track of these on a real time basis is necessary. Other key features that are needed by Woolworths include bookkeeping, invoicing and its management & tracking. expenses. accounts receivable, accounts payable, projects. estimates. bank feeds, etc. They would also need to track and manage the payroll of the employees and that can also be done by leveraging a good accounting software. Probably the most useful feature for Woolworths to manage their supermarket store operations would be to have a track of inventory and to ensure that there is a FIFO (first in first out) mechanism in place to ensure that the inventory with the nearest expiry date goes out the quickest. In a best case scenario, the accounting software should also work as a quasi- ERP solution. This would help Woolworths keep a track of all the aspects of the company on a single platform. Finally, the accounting software should also have option of real time tracking, on demand and customization reporting and an access management solution that will ensure that different levels of employees can have different types of access (Dyt and Halabi, 2007).

A cost effective accounting software would be one which would require minimum investment from the customer side. Therefore, for Woolworths investing in a cloud based solution is going to be the best case scenario. This is because they would eventually just pay per subscription or license and that would mean that they do not have to worry about the initial setup and investment in infrastructure which would not be the case if the accounting software is hosted on their servers in the data centers. A cloud accounting solution would also mean that Woolworths does not have to worry about scalability or addition of new vendors, inventory type & quantity, etc. which again would be a challenge after a point in time in case of an on premise setup (Drury, 2001).

Software Solutions

The following section will help analyses the features of 2 accounting software vendors that are available in the Australian market and do a feature set comparison to understand which of the 2 would be more relevant for Woolworths. Several accounting software were analysed based on the features they provided, the pricing model, deployment duration, integration with other applications, etc. The list of software analysed included accounting solutions from SAP, Oracle, Xero, MYOB, QuickBooks, ReckonOne, Sage Business Cloud Accounting, Wave, Saasu, Rounded, Freshbooks, and ZohoBooks. After looking at the size, scale and requirements of Woolworths the accounting solutions of SAP and Xero have been chosen for a comparison (Harding and Ren, 2007 ; Paff, 2020)

SAP S/4HANA for Finance

By leveraging SAP’s solution Woolworths would be able to achieve a fast solution which also takes care of the financial compliance by proactive management of finances, gaining a complete accounting related view of the business, and increase the profitability. At the bare minimum this software which comes both as a cloud-based solution and an on premise deployment software helps in taking control of the entire cash flow processes, streamline the accounting process and transform the financial data into business insights with minimal manual intervention. SAP’s accounting software solution helps record the different transactions, manage and track the financial data on a monthly and quarterly basis and analyse the flow. It has multiple different modules that can be enabled based on the need of Woolworths. These include accounting, reporting, receivable management, tax management, etc.

This software solution can also be extended to Woolworths customers and they can use it to place order directly in the system. This keeps a track for faster invoicing and management and even the processing time is substantially reduced, and the orders are essentially insulated from external factors like human error and delays. This solution doubles up as an ERP solution as well allowing for a host of other functionalities that can be leveraged by the customer (SAP Accounting, Financial Close and Tax Management, 2020).

While on a high level the features have been captured the below section will help with a complete set of features of SAP S/4HANA for Finance. This solution includes 4 primary modules on Accounting, Budgeting, Financial Services, and Treasury. The different module functionalities include:

  • Accounting- Accounts receivable, bank reconciliation, expense tracking, purchase orders and tax management.
  • Budgeting- what if scenarios including different combinations that the users can select to understand the budget management in case of different inventory movement. Besides that, other features include, consolidation or roll up, forecasting, multi-company management and profit or loss statement analysis.
  • Financial Services- this is more on lines of compliance and risk management
  • Treasury- this helps track and manage the cash flow and liquidity management

Xero 2020

This is an end to end online accounting software designed a lot of feature set as part of its product offering. Since unlike SAP this is available only as a cloud solution, it allows for accessibility on any available computer or mobile device with an internet connection. On a high level this accounting software allows for business finances and cashflow management which is updated in real time basis. It is also super convenient as it helps by importing the different transactions from all the bank accounts which are listed in the financial details section. Xero does not put a restriction on the number of user logins. This software allows for easy and fast integration with more than 600 different business software solutions. Xero also provides a single pane view by showing the entire data by a single ledger, which essentially allows the accountants and users to collaborate the finances. Another important point of consideration is that this is a local company as it is based out of New Zeeland which means that the company will have good understanding of the Australian market and Woolworths can take advantage of this by becoming an exclusive partner with Xero (Online Accounting Software – Free Trial, Free Support | Xero, 2020).

There are several modules that come as part of the base package of this software. These include the Accounting, Accounting Practice Management, Financial Reporting, Quoting, etc. A deep dive analysis of the features as part of each of these different modules has been done below.

  • Accounting- Accounts receivable, bank reconciliation, billing & invoicing, CPA firms, expense tracking, fixed asset management, fund accounting, payroll management, project accounting, purchase orders, and tax management
  • Accounting Practice Management- Approval workflow, billing & invoicing, client management, client portal, document management, due date tracking, and time tracking
  • Accounts Payable and Receivable- Approval process control, cash management, check writing, duplicate payment alert, fraud detection, etc.
  • Financial Reporting- Audit trail, balance sheet, consolidation or roll up, forecasting, multi-company management and profit or loss statement analysis
  • Legal Billing- Accounting, calendar, case and document management, etc.
  • Quoting- Automated quoting, catalog management, client portal, contact management, etc.

Compare and Contrast: SAP vs Xero

The following comparison is done on the pricing model, features provided as part of the base model, other applications integrations, device supported, and the type of support provided (SAP ERP vs Xero 2020 Comparison | FinancesOnline, 2020).

Pricing Model

The pricing model for SAP is on a quote basis. They provide details based on a number of different requirements like features, modules, etc. While on the other hand the pricing for Xero’s accounting solution which may be relevant for Woolworths is between 30 to 70 Australian dollars per user per month. Neither of them has a free version and while Xero has a payment on a monthly basis, SAP provides option of a monthly, annual and onetime payment as well.

List of Features

The base features for SAP includes procure to pay, plan to product, order to cash, request to a specific service, core HR module including payroll and core finance module, etc. In case of Xero, which is a cloud based solution, the features include bank reconciliation, expense claims, inventory tracking, payrolls, purchase orders, etc.

While Xero focusses on a host of different and diverse offerings the solution from SAP has a very accounting focus and they leave the other functionalities as apart of other modules that can be added on top.

Other Application Integrations

Most large enterprises are either on SAP or on Oracle. Thus, in case of SAP it will be an extension of product portfolio with SAP’s Business Suite, HANA, Ariba, etc. all coming under one cloud if Woolworths also has other SAP products. In case of Xero also, there are several other small and medium scale niche solutions with which it allows for integration.

Supported Device/ OS

The cloud solution of SAP is compatible with Windows, Linux, Android, and Mac based devices. In case of Xero, while it is compatible with all of the above listed it is however, not compatible with Linux based devices. Additionally, it also provides a web based browser view which is not available in case of SAP.

Type of Support

In case of Xero it provides support to its customers in form of email, phone call, and live chat. All these are also provided by SAP as well. Both these software solutions also provide assistance in resolution of tickets which may be due to a configuration or a ticket performance issue. In case of Xero there is also an added support in form of training which is also provided besides the other type of support which is not present in case of SAP.

Recommendation on Management Accounting For Business Decisions

In terms of pure features that are provided as part of the accounting software solution Xero’s software is a clear winner. Xero provides a host of other features besides just being an accounting solution. While obviously, all the features are provided by SAP as well. However, these may not be part of the base package and would require additional modules and plugins to be configured. However, in case of Woolworths with the size, scale and inventory that this report has discussed in the previous sections SAP’s cloud based accounting software is a more sensible and relevant choice. Woolworths is also an SAP shop already (Chanthadavong, 2016). This is because it acts as a total enterprise resource planning suite, SAP also enables Woolworths with a supply chain module, product lifecycle module, human capital module, financial management module and customer relationship module.

Also, SAP is more prevalent in case of large enterprises with over 172,000 companies trusting SAP’s solution over others. Xero is a more reliable solution in case small to medium businesses where size and scale does not change drastically. The core SAP modules are also built from the ground up to be fully integrated. So, when a change is made in say finance, if it is related to sales, purchasing, inventory and projects as well. This integration is built into the very foundation of the system and comes by default.

Conclusion on Management Accounting For Business Decisions

This report, which was based on Woolworths Supermarkets, which has over 1000 plus stores, was to suggest a cloud based accounting solution. After careful consideration and analysis of SAP and Xero this report recommendation to Woolworths is to go with SAP as an accounting solution and also to look at its different modules for ERP, CRM, etc. This will also allow for the entire organization to leverage one vendor’s multiple different modules.

References for Management Accounting For Business Decisions

Chanthadavong, A., 2016. Woolworths Upgrades HR System To The Cloud With SAP | Zdnet. [online] ZDNet. Available at: <https://www.zdnet.com/article/woolworths-upgrades-hr-system-to-the-cloud-with-sap/> [Accessed 21 September 2020].

Drury, C., 2001. Management Accounting For Business Decisions. Australia: Thomson Learning.

Dyt, R. and Halabi, A., 2007. Empirical Evidence Examining the Accounting Information Systems and Accounting Reports of Small and Micro Business in Australia. Small Enterprise Research, 15(2), pp.1-9.

Harding, N. and Ren, M., 2007. The importance in accounting of ambiguity tolerance at the national level: Evidence from Australia and China. Asian Review of Accounting, [online] Emerald Group Publishing(15 (1), pp.6-24. Available at: <https://ideas.repec.org/a/eme/arapps/v15y2007i1p6-24.html> [Accessed 21 September 2020].

McGregor, K., 2012. Bill Targets Supermarket Duopoly. [online] Adelaidenow.com.au. Available at: <https://www.adelaidenow.com.au/business/senator-moves-to-smash-duopoly/news-story/ca0d267a4983b65ac052b307d24b7587> [Accessed 21 September 2020].

Xero Accounting Software. 2020. Online Accounting Software – Free Trial, Free Support | Xero. [online] Available at: <https://www.xero.com/> [Accessed 21 September 2020].

Paff, M., 2020. What Is The Best Accounting Software For Australian Small Businesses?. [online] Value Adders. Available at: <https://valueadders.com.au/2020/04/what-is-the-best-accounting-software-for-australian-small-businesses/> [Accessed 21 September 2020].

Pearce, R., 2016. Woolworths Looks Beyond ERP Woes. [online] Computerworld. Available at: <https://www.computerworld.com/article/3458527/woolworths-looks-beyond-erp-woes.html> [Accessed 21 September 2020].

SAP. 2020. SAP Accounting, Financial Close And Tax Management. [online] Available at: <https://www.sap.com/india/products/erp-financial-management/accounting-financial-close.html> [Accessed 21 September 2020].

Financesonline.com. 2020. SAP ERP Vs Xero 2020 Comparison | Financesonline. [online] Available at: <https://comparisons.financesonline.com/sap-erp-vs-xero> [Accessed 21 September 2020].

BusinessTech. 2020. The Importance Of Accounting Software For Businesses | Hashmicro. [online] Available at: <https://www.hashmicro.com/blog/accounting-software-benefits/> [Accessed 21 September 2020].

Tickell, G., 2010. Cash To Accrual Accounting: One Nations Dilemma. International Business & Economics Research Journal (IBER), [online] 9(11). Available at: <https://clutejournals.com/index.php/IBER/article/view/32>.

Woolworthsgroup.com.au. 2020. Woolworths Group 2019 Annual Report. [online] Available at: <https://www.woolworthsgroup.com.au/icms_docs/195582_annual-report-2019.pdf> [Accessed 21 September 2020].

Yau-Yeung, D., Yigitbasioglu, O. and Green, P., 2020. Cloud accounting risks and mitigation strategies: evidence from Australia. Accounting Forum, pp.1-26.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Accounting and Finance Assignment Help

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