Year ends on March 31- Due priority should be given by all stakeholders

Year-end procedure.  In India, the accounting year is April to March.  Accounting year 09-10 has ended on 31st March 2010.  Important procedure is given below to plan the ‘year ending’ in ERP.  The following procedure for ERP rollout is very important.  Due priority should be given by the stakeholders.

The procedure will vary depending on your current status as follows:

1.    ERP status is ‘go live’.  Users are online and entering transaction in real-time.  The closing stock was already entered.

2.    ERP is being implemented.  Conference Room Pilot (CRP) run is done.  You have to  decide on the cut-off date.  You may think of considering 31/03/2012 as cut-off date, or any suitable date.  The day after the cut-off date, users go online.  That is ‘Go live’, and embraces New Year 2012-2013 with more accuracy in inventory management and tighter discipline.   There are two kinds of closing balances that are required:

Accounts closing balance:  Debtor.  Creditors.  Closing balance of stock.

It is important to note that both inventory and accounts are tightly linked in ERP.

·         FAQ: “Can we enter creditor / debtor balance and closing stock, later?”  The answer is NO.

1.    Before doing anything take backup.  Copy on once writable CD; take the backup media to another location (different building).

2.    Task:  Enter closing stock for Inventory items.

3.    Count stock.  This exercise should be done very carefully.  This is important for ‘going-live’.

4.    Enter the closing stock, as on the cut-off date, from that date onwards, ERP will prepare the inventory related books, as well as accounts books, automatically.

5.    E.g. closing balance as on March 31, mid night is opening balance for April 01.
6.    Task: Enter ALL items in the item master.
It is strongly recommended that for EACH location stock balance be taken.  E.g. stores, rejection location, scrap location, WIP (work-in-process), third party (subcontractor location), etc.

7.    Task: Take location master printout (excel sheet showing all locations) from the ERP (not from Tally).  The list will also show names of subcontractor locations.

8.    Bought out items, raw material, consumables, spares, etc.  Items that are supplied by vendors (supplier).

9.    Sub-assemblies, semi-finished goods, factory made item, etc.  This may include items that are received from third party, if it is semi-finished goods. (WIP).

10.  Finished Goods, (FG or product that usually appears in the sales invoice).

11.  Task: Prepare the Item list using ERP software instant excel sheet option.  You can prepare category, sub-category wise, separate list.  Give to concerned person to take physical stock (count) and write on the excel sheet itself, put date and sign.  This is strongly recommended to avoid confusion of item code / description.

12.  Use this list (hard copy) to enter closing stock figures in ERP.

13.  From that moment onwards, every transaction must go through ERP.

14.  Depending on your judgment, estimate time required to do the physical count and the exercise to enter the data in ERP.  This will depend on number of persons allocated for the task.

15.  During the stock taking activity, there should be NO material movement.  All goods inward and sales issue has to be suspended.  For instance some companies would like to do this exercise on 1, 2 and 3 April and start the year on 4 April 08.  Some companies stop the manufacturing activity on 30 and 31 Match.

16.  You may find items that are physically present but not in the list – enter in the item master and enter closing balance.

17.  Account Closing Balance are required for the following:
• Debtor (customer),
• Creditor (vendor, service provider, and third party) balance pertaining to 11-12 balance will be carried forward automatically.
• Pass JV (cr. Note or debit note if necessary to get the correct balance).  Make sure the bank-reconciliation exercise is done well in time for ensuring correct ‘Trial Balance’ statement in ERP.

18.  In case you have already gone “Live”:
Count physical stock for each item and write on the excel sheet printout, next to ERP stock statement (book stock) figure.  Ideally, both should be same.  If not write the difference (plus or minus).  You will have to get explanation from stores-in-charge and pass SAN (stock adjustment note) to get the book stock same as physical stock.

19.  You may find item that are shown as stock in hand but there is no such item.  Check that there is no confusion in item name.  Any case one must reconcile the stock.
20.  You will have to do this exercise for each location.  Especially stock lying with the third party (if any).

21.  Print separate list for FG, WIP, Stores items, consumables, packing material, etc. from ERP software.

22.  You will need people so plan in advance, inform your team (staff), this is not one or two persons task.  More people are required depending on number of location, size of the inventory, and so on.

23.  At the time of login, into the ERP, select appropriate year (the first screen where you give log in name and password).

24.  New document number series will start from the New accounting Year – e.g. April 1, 2012.

25.   ERP System will allow you to enter 11-12 transactions even in April 2010, (for this select year 11-12).  Finally, when the audited Balance Sheet is available one can make a “closing JV (Journal Voucher).  This may be sometime in April / May 12.  Whereas the current year (11-12) transaction can be entered from 1^st April itself (these will be in new document series).

26.  Cut-off date is ‘as on’ date in the Closing Balance data entry screen.

27.  In item ledger and item stock statement ‘From’ date should NOT be less than Closing Balance, date that is used for entering closing balance.

28.   User must press ‘enter’ key after entering the closing balance stock.

29.  Once closing stock is entered, user should check, and if mistake is found, then enter again; this will over-write previous figure.  Once all closing balance is checked, printed and confirmed then REMOVE access to the closing Balance menu-using user manage.  No one should enter again cl. Bal. because this is one time exercise.
30. Only after disabling, the cl. Bal. menu user should be allowed to enter inventory transactions.
31. Closing balance Rate or value:
• While entering stock closing balance, user also should enter rate.  This is required to calculate the value.
• For item that are purchased from outside – pl. enter the Weighted Average Rate (WAR) rate (weighted average rate), or last purchase Rate, if WAR rate is not available.
• For all factory made items – SFG (Semi-Finished Goods or sub-assemblies) or FG (Finished Goods)– user should enter ‘cost rate’.

For additional information study The Sarbanes–Oxley Act of 2002

The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation’s securities markets.

In India PWC and Satyam is recent examples of accounts manipulation.

Replacing ERP Software?

Are you planning to change your ERP vendor?

ERP Implementation tips

Replacing system management software is like visiting a medical clinic for injection, painful but necessary.  First, try to get upgraded version if any, from your existing ERP vendor.  Probably this means more investment, but worth considering.  Once you rule out this option, and decide to look for new ERP software, consider the following points:

1. Once again define the new requirements, this time make a function wise list.  For instance, accounts, material, sales, and so on.  It is important to do the ABC analysis, A essential list, and C is wish list.  Remember if everything is A, you will have to pay for the customization, so let go of some point as wish list.  Share the list with the new ERP vendors, and try to match.  Here the trusting the new ERP partner is important that you want the truth.
2.   Do some business process improvements.  Do not (do not, no this is not a spelling mistake, just to emphasise) automate without improving your existing methods.  Chances are you will automate the mistakes; this means ERP will do mistakes faster.  This exercise is called BPR (business process re-engineering).  All the problems with the existing system are in fact opportunities for improvement.  Ensure that you are aware of the issues, and that the new ERP software system will help resolve them.  Learn more about BPR here  http://www.dnserp.com/b__p__r_.htm.
   

   Do some BPR before ERP

3. Stay focused in defining the scope.  Module wise write down master, transactions, and reports.  Again, do ABC analysis of the same.  See sample scope given here http://www.dnserp.com/dns_scope.htm.  FAQ: Can I change the scope?  Ans: Yes, but after discussing with the ERP supplier and before starting to implement.
4. Select your task force.  Motivate them, yes allocate a budget.  Offer incentive.  Involve key people at the start.  Write important milestones.
5. Size of the ERP company is not that important, small or big, what is important is how important it is for them to make your ERP a success.
6. Arrange for a demo with your own inputs and try to match the report – at this stage without customization.  About eighty percent of your requirements should be met.  So prepare your own data to input for the demo run.
7. Brainstorm with your senior management to identify potential reasons of failure, and take steps to guard the same to reduce risk.
8. Assign one (or better two) main ERP coordinator/s, dedicated resource/s.  Consult domain expert and other consultants such as tax, ISO, 6-sigma, etc.  Ensure their valuable time is available.  Study http://www.dnserp.com/implement_erp.htm.
9. While evaluating make sure the implementer/s are also interviewed and their time is committed.
10. ERP implementer and ERP coordinator team should have project management skill.  Ask ERP vendor to show their track record of other similar size ERP success story, I mean show the document that was used to track ERP project management in the past.

Hope you will find this ERP tips useful and will share with others, by using the social icons given below.  Let us know your comments, add point that we might have missed out, your feed back will be appreciated. 

In SAP ERP conference, Dabbawala explained supply chain management

Supply chain management without software ?

Mumbai Dabbalwala has six sigma

Learn about this amazing organization
 which got six sigma.
They deliver even in rainy season in Mumbai, India,
 without any excuse.

View this document on Scribd
Here is a short presentation of 15 slides.
Let us know if any of you have actually
 experienced this 'lunch box' service.

I lost one hour. Seriously, whole of America did.

At 2 a.m. this morning, clocks moved forward an hour with the shift from standard time to Daylight Savings Time (DST).   This is logical change and not adaptive change. This is logical because everyone is changing their timetable.  For instance, getting up one hour early due to ‘Daylight savings Time’ is logical.  No huge adjustment of life priorities is triggered.  Our body clock can change without much difficulty.  But if you decide to get up one hour early to do meditation or go for swimming is difficult, because it is adaptive change.  In both examples same thing ‘get up one hour early’ is involved.

Using new technology such as Blog is adaptive change.  No matter how hard you try some people are not comfortable using facebook or LinkedIn.  You must have seen the clip that shows expert secretary changing from typewriter to a PC, and throwing monitor, because she is used to do the carriage return.  Or changing from manual system to automatic ERP system is a painful transformation.  Changing from legacy way of marketing and using the digital platforms is not an easy because it requires adaptive change.

Daily we make logical changes.  We use our training to solve routine problems, such as dealing with customer’s negative feedback, or altering action plan when sales target is not achieved.  We do customer survey and make a road map to address the issues.   But note that these examples are pertaining to external changes.

On the other hand adaptive changes are transformative, which compels us to change from inside, in the mind.  We want to reign in our temper because it is affecting our relationships with customers and colleagues, but not matter how hard we try we cannot ‘control’ it.  Our frustration spills over, and now we have to fix the damage.

Anupreksha or the cognitive behavioral therapy is a psychotherapeutic approach, which aims to solve problems concerning dysfunctional emotions, behaviors and cognitions through a goal-oriented, systematic meditation procedure.  There is empirical evidence that this is effective for the treatment of a variety of problems, including mood, anxiety, personality, eating, substance abuse, and psychotic disorders.   We can treat ourselves by a meditation technique; there are treatments for specific psychological disorders.

Only by fixing our inner feelings of frustration can we make an adaptive change.  We could decide to use cognitive behavioral therapy or Anupreksha, or some other method for the internal change.  To make such changes you need to recognize when you are facing an adaptive change, that requires subconscious level of thought and effort.

The real leadership, the kind that surfaces conflict, challenges long-held beliefs, and demands new ways of doing things-causes pain.  When people feel threatened, they take aim at the person pushing for change. As a result, leaders often get hurt both personally and professionally.

(Reference: Leadership on the Line, renowned leadership authorities Ronald A. Heifetz and Marty Linsky, Wikipedia, and Preksha meditation system).

Why change before ERP?

BPR or Business Process Re-engineering is also referred as ‘change management’.

Change legacy method before you automate

If you automate a procedure with ERP,  it will speed up the results.  But, what if the legacy procedure itself was ‘incorrect’?  After ERP, now the ‘incorrect’ procedure will do wrong things  faster.  Is that what you wanted to achieve by deploying ERP?  Correct method to implement ERP is first to identify a process, second improve.  Third automate with ERP.

Let me give you few examples:

In one small company, the purchase officer was in habit of ordering material on phone.  In ERP that is not allowed.  If PO is not made, stores cannot enter data about material received.  For about three months, everyone tried his or her best to resist change.  Then the MD came to our rescue.  He instructed security that if the truck comes without bill, or without our Purchase Order reference number: “Do not allow the material to come inside the factory”.  After a couple of incidents where the material was returned, all the suppliers understood that the company was serious.  They started writing the PO reference number on their challan-cum-invoice.  Challans alone is not accepted.  Vendors and third-party insisted on getting the PO or JO from the purchase officer.  In other words, change was enforced by the top boss.  Benefit: Return on investment realized.

Classic example: “In DNS ERP software, we gave a link in the Purchase Order (PO), to pickup rate from the Purchase quotation.  User’s reaction: “I do not have time to prepare purchase quotations in ERP”.

Then, how ERP will help you with the pre-purchase module?  You have to change.  As a top person with authority, you should put your foot down and say, ‘nothing doing, we have invested in ERP to improve our business processes and not mimic old way of working in new ERP business logic.’

Another example: In one project, the user insisted on making challan to give materials to customer.  Our team said this is wrong and that you have to make CCI – Challan cum Invoice.  He did not budge.  He made our programmer change.  Now after six months he realized the mistake and again requested for the change back to the way it was.  He was charged Rs. 50,000/- for making changes.

This is a good example (of sticking to bullock-cart): In one company accountant was using an old fashion account-centric program, where she was allowed to change / edit / delete a transaction.  She expected ERP to do the same.  Without realizing, the very benefit of ERP is lost.  ERP is multi-user software.  Now we are planning to give access to branch offices.  The edit facility is a serious problem because user will ‘misuse’.  If you have a motor bullocks are not required, it is that simple (see picture above).

I can go on and on…..ask yourself a question: What are the opportunities for improvement?  Please write down for each function, say in accounts, in purchase, and so on.  Resistance to change is natural but we are intelligent human being, we have the reasoning mind.  Take ERP implementation as opportunity to carry out changes.

Why change? Conventionally, the legacy system that organizations use today, captures only transactional data like ‘what is bought’, at what price and when. The RFID technology enables capturing the event data through wireless sensor (reader) on each item and communicates to the ERP server on ‘Real-Time’ basis. We should “change” our businesses; Use the power of I. T. to radically redesign our business processes in order to achieve dramatic improvements in their performance.

Old rule: “we pay when we get the invoice”.  New rule: “we pay when we get the goods”.   In many growing companies in developing countries like India, they receive material with a ‘Challan’ (piece of paper that just mentions quantity) and later the supplier gives the invoice. The material is accepted, by stores based on (stupid) Challan; and may be even issued to production. While account section is not making any entry because ‘invoice’ was not received at that time. It is necessary to persuade vendors to give the bill along with the material. That is, insist on Challan-cum-Invoice (CCI).  Only if the vendor is under excise rule, stores will receive material with Challan-cum-Invoice. If vendor is not under excise he may send bill with Challan.

What to do? Now these vendors need to be educated for sending the bill so that accounts entry in ERP and that in stores will always match. One of our DNS users understood the significance and importance and took initiative to send some 400 mail merge letters to all suppliers to ensure that they send the bill as per the Purchase Order Schedule (which was prepared in ERP) citing the PO number on the bill. Even the security (security guard) was told not to allow any material to enter if not accompanied by a bill. It took sometime for all concerned to understand the ‘reengineering’ but after sometime everybody said it was a change for better!

Re-engineering while implementing ERP triggers changes of many kinds, not just of the business process itself.   Job designs, organizational structures, management systems, and most importantly ‘Attitude changes’ – anything associated with the process – must be refashioned in an integrated way. In other words, re-engineering is a tremendous effort that mandates change in many areas of the organization .  ”Don’t be afraid to give your best to what seemingly are small jobs. Every time you conquer one, it makes you that much stronger. If you do the little jobs well, the big ones will tend to take care of themselves”.  (by Dale Carnegie).

In ERP, we try to coordinate parallel function during the process – and not after it is completed. Considering the inertia of old processes and structures, the strain of implementing re-engineering plan can hardly be overestimated. But by the same token, it is hard to overestimate the opportunities, especially for established companies.

Before implementing DNS ERP software one must do quite a bit of BPR. In fact, BPR and ERP implementation goes hand-in-hand. On one extreme, we change the software to suit current business processes – known as customization. On the other extreme, user is ready to change the current business processes and does BPR. The sensible way is to strike a balance somewhere in-between. Please instruct the ERP implementation team to carry out only ‘essential customization’. At the same time, identify old inefficient processes for revamp, and tell the users to adapt to new business processes in view of ERP, since some of the tasks that they were doing would now no longer be required.

Example of top management strictness: In one ERP project, we observed that they took the following approach:  After GO-LIVE, everyone was asked to join ‘new’ company. They are working in a new company, in a new role, and if they could not take on the new processes and working with ERP menus, they should leave after the 3 months probationary period was up. While effective, not always possible, and also an extreme example.

Here is a short story that exemplifies need for change.  Some companies keep on changing ERP instead of changing their legacy procedures.

Crow story: Once there was a Koel sitting on a branch.  She saw a crow running away.  She asked him, why are you running?  Crow said, ‘I am fed up with people around here, I am going to a new place’.  She asked ‘Why’?  Crow said, ‘they are  not good, they do not allow me to seat at one place, they always shoo me away by throwing stone and all that, and so I am going to a new place.’  She asked him, ‘Oh, OK, but did you change the old habit of screaming Ka  Ka  Ka and disturbing people’.  He said ‘No’.  Then she said. ‘in new place also perhaps people will drive you away and you will not benefit by running away from this place’.

Moral of the story:  Change before you automate.

You can share your experience, or comment on this blog.  What do you say?