Implementation process of ERP  for Medium, Large Enterprise companies.

An ERP software has selected after Consultation, Demonstration, Price talk negotiations etc and WHAT is Next?

What are the various process to Implement an ERP system?

Why some ERP system fails even if you select the best ERP?

An ERP implementation system process starts when installation of your software, data migration , user privilege define, business flow and training.

We follow these steps to implement an erp system for our clients

  • Analyze existing software system and manual practices at corporate office and sample branches
  • Software requirement study from top management, middle managers and software entry level users.
  • Defining Work Flow System for organization and proposed erp software
  • Defining data flow and process mapping for proposed erp software
  • Defining technical architecture for proposed erp software
  • Proposing change management processes and policies
  • Defining approvals and alerts at various levels in the proposed erp software
  • Collecting collaterals and formats (Print format, report format, statutory norms etc)
  • Documenting Software Requirement Specification (Business Process)
  • Presenting the software requirement documentation to the management
  • Integrating requirements in ERP Software
  • Implementing the selected ERP Software based on requirements
  • ERP Project Management
  • Implementing Change management policies
  • User training
  • Migration Support (No data entry work included)
  • Testing and quality checking of the configured product
  • Trial run of the system
  • GO Live Support

An ERP model of standard Business flow

Lets take a look of a Manufacturing Company Business Flow chart by ERP consultant Ramaswamy V Krishnamurti and its implementation process by us.

An organization is an entity that is created to deliver products or services to a customer.
For Example A Manufacturing Company

Main departments include:

  • Purchasing
  • Stores
  • Manufacturing
  • Sales
  • Finance and Accounts

Business Flow in an Organization

Procure to Pay process flow

It consists of the following process steps

  • User dept raise a purchase requisition
  • Purchase req approved by dept manager
  • Purchase order from supplier
  • Purchase manager approval
  • Purchase order sent to supplier store and accounts dept
  • supplier ships the material using an invoice
  • Store receive the goods GRN (goods receive note)
  • Copy of GRN to accounts dept
  • Supplier invoice to accounts dept
  • Accounts dept record the supplier invoice
  • Accounts dept matches supplier invoice, purchase order, GRN (3way) inspection certificate (4 way matching)
  • Accounts dept makes payment to supplier

Procure to Pay: Diagram

Procure to Pay document flow

The documents involved in P2P Cycle are:

  • Purchase requisition, internal
  • Purchase order, external
  • Receive the material (gate pass), internal
  • QC, internal
  • Deliver to store, internal
  • Supplier payment, bank advise form, external
  • Supplier invoice, external

Additional info

  • Other material purchase
  • Service purchase
  • Expense purchase
  • Asset purchase
  • Reversal flows Include:
  • Gate pass to store
  • Purchase returns
  • Cash balance/replacement

Procure to Pay Accounting

The accounting flows involved in P2P Cycle are:

  • Purchase requisition, no accounting
  • Purchase order, no accounting
  • Receiving material, contra
  • Quality inspection, no accounting
  • Delivery to inventory, contra
  • Supplier invoice, accounting
  • Supplier payment, accounting

Demand to Build Process Flow

Demand to Build flow handles the production process in an Organization

  • Planner raise a production order and send to production supervisor
  • Production supervisor raise a request to store for raw materials
  • Store send raw materials to production dept using MIN material Issue note
  • Production supervisor consumes material
  • Production supervisor consumes resources
  • Quality control user quality check
  • Production supervisor received FG from production
  • production supervisor transfer the FG to store MIN material issue note
  • Store receive FG MRN material receipt note

Demand to Build

Demand to Build Document Flow

The documents involved in D2B Cycle are:

Process, document, Type

  • Create purchase order, purchase order, internal
  • Store issues RM to production, MIN, internal
  • Production issues FG bak to store, MIN or material transfer note, internal
  • Quality check by quality control team, quality certificate, internal
  • store receives FG, MEN, internal

Demand to Build Accounting

The accounting flows involved in D2B Cycle are:

Process name, accounting, debit, credit

  • Create production order, N
  • Store issue raw material to production, acc Y, Work in process debit, RM inventory credit
  • Production consume resources, acc Y, WIP debit, resources control Account credit
  • Production orderis completed, acc Y, FG inventory debit, WIP credit

Demand to Build Key Reports

  • Planned production order report
  • Work in process report
  • Production orderS closed in period report
  • Yield report
  • Scrap report

Order to Cash Process Flow

Order to Cash flow handles the order fulfilment process in an Organization

It consists of the following process steps

Key entities : Customer, sales order, clerk, store, Dispatch, Collection, Accountant

  • Customer raise the demand for product
  • Sales ordering By clerk or executive
  • Sales order to store to issue product
  • Store clerk prepare a pick list
  • Warehouse picks the material based on pick list send to despatch Dept
  • Despatch section verify it with sales order
  • Despatch section prepares a pack slip and print the sales invoice
  • Product are loaded to truck
  • Pack slip and invoice handed to driver
  • Truck driver verify and accept the materials
  • Despatch sec confirmed the shipment
  • Collection dept fw up payment from customer
  • Customer makes the payment against invoice
  • Accounts dept record the receipt of payment against the invoice

Order to Cash Document Flow

The documents involved in O2C Cycle are:

  • Process, document, type
  • Clerk creates sales order, Sales order, Internal
  • Store print pick list, pick list, internal
  • Despatch print packing slip, packing slip, external
  • Despatch print sales invoice, sales invoice, external

Additional information:

  • There are two varients of sales Material and service
  • Sales return
  • Local Tax

Order to Cash Accounting

The accounting flows involved in O2C Cycle are:

  • Sales order, no account,
  • Store moves Inventory to despatch, (despatch inventory debit) (Store inventory credit)
  • Material is shipped (Cost of goods sold debit) (despatch inventory credit)
  • Generate sales invoice (Receivable debit) (Revenue credit)
  • Customer make payment no account
  • Customer payment recorded (Bank debit) (Receivable credit)

Key reports

  • Customer balance report
  • Sales report
  • Collection report
  • Material consumption report
  • Sales return report
  • Receivable reconciliation report

Costing to Inventory Valuation Process Flow

Costing to Inventory Valuation flow handles the costing process in an Organization

It consists of the following process steps

  • Costing to Inventory Valuation flow handles the costing process in an Organization
  • Clerk creates sales order, Sales order, Internal
  • Store print pick list, pick list, internal
  • Despatch print packing slip, packing slip, external
  • Despatch print sales invoice, sales invoice, external

Costing to Inventory Valuation

Costing to Inventory Valuation Documents Flow

There are no documents involved in the Costing to Inventory Valuation process flow

Costing to Inventory Valuation Accounting

Costing to Inventory Valuation process flow do not create any Accounting impact

However both Cost Adjustment and Inventory Revaluation creates accounting entries

Costing to Inventory Valuation: Key Reports

Following are the key reports in C2V Cycle

  • Inventory Valuation Reports
  • Cost Details Reports
  • Costing Process Error Report
  • Material Consumption Report

Record to Report Process Flow

Record to Report flow handles the Financial Accounting and Reporting processes in an Organization

It consists of the following process steps

Record to Report

Additional Information

Month-end adjustment entries may include:

Allocation: Allocating some expenses from one head to other heads based on usage. For example Finance Department pays the rent to the landlord and allocates the rent to various user departments by the floor area used. Another example will be the allocation of salary expenses to various department based on the number of employees in each department.

Provisions: If the company a huge payout in the near term, for example they are facing a court case which may lead to payout, they may want to ‘Provide’ for that
‘Contingent Liability’. Banks regularly make provisions for expected NPAs for example

Record to Report Documents Flow

  • Adjustment Journals
  • Provision Journals
  • Allocation Journals
  • In some companies, journals will go through Approval Process.

Record to Report Accounting

  • The accounting entries are generated in the application where the original transaction is created
  • There are no system generated accounting entries specific to the R2R Cycle
  • During the final review, the Finance Manager may pass some period end adjustment entries manually.

Record to Report: Key Reports

Following are the key reports in R2R Cycle

  • Trial Balance
  • Balance Sheet
  • Profit and Loss Statement
  • Budget Versus Actual Statement
  • Cash Flow Statement

Trial Balance and Budget Versus Actual Reports are generated by the system
Other reports may have to be configured manually