Examples from the broadest scope currency … Turkey Nov 2004_Markus...SD Salel s & D s r bution WF...

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November 29, 2004 1 Examples from the broadest scope currency conversion: EURO Examples from the broadest scope currency conversion: EURO Markus Heinen Markus Heinen

Transcript of Examples from the broadest scope currency … Turkey Nov 2004_Markus...SD Salel s & D s r bution WF...

November 29, 20041

Examples from the broadest scope currency conversion: EURO

Examples from the broadest scope currency conversion: EURO

Markus HeinenMarkus Heinen

November 29, 20042

AgendaAgenda

• Introduction• Changeover Risks• Common source of errors• Changeover Opportunities• Summary

• Introduction• Changeover Risks• Common source of errors• Changeover Opportunities• Summary

November 29, 20043

The Euro and its influence on the companyCompany strategy

Timing of Euro introMarketingLogisticsPurchasingPricing etc.

Legal requirementsEuropean and national legislation'sAccounting Principles

Organisational requirementsNew or changed proceduresCommunication- and training requirementsOrganisational Preparation for Euro introduction

IT-requirementsSW/HW adaptionsInterfacesResources for Conversion projects

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Affected areas within the companiesExternal AccountingFinancial Statements

Controlling HumanResources

Tax and Legal

Purchasing andLogistics

Sales andDistribution

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Affected areas (Examples I)

ExternalAccounting

• Changeover of financial accounting• Adjust reporting, notifications and payment

• Adjust planning activities/ budgets• Changeover of orders, projects and internal transfer prices• Changes to the controlling strategy - more transparency

Controlling andinternal reporting

HumanResources

• Change payroll and personal administration systems • Changeover of travel expense systems

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Affected areas (Examples II)• Legal procedures, contracts• Taxes, customs• Long-term contracts

Tax and Legal

Logistics

• Changeover of supplier master, Reconciliation with suppliers• Valuation of Material stock, Small price impacts• Purchasing conditions, Contracts

Sales and Distribution

• Conversion of sales prices, change to new threshold values• Changeover of customer master, Reconciliation withCustomers

• New Sales conditions, changes of invoices, New Price Lists• Changes of Front-End systems (POS, ATM, cash systems)

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AgendaAgenda

• Introduction• Changeover Risks• Common source of errors• Changeover Opportunities• Summary

• Introduction• Changeover Risks• Common source of errors• Changeover Opportunities• Summary

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Changeover principleChangeover principleBasic principle

– Currency translation according to tax and commercial regulations (six digits are cut off)

Problem– Due to the conversion rules, there will be rounding

differences between the total of the converted line items and the converted total amounts

Consequence– Reconciliation and correction activities are required

when changed over

Basic principle– Currency translation according to tax and commercial

regulations (six digits are cut off)Problem

– Due to the conversion rules, there will be rounding differences between the total of the converted line items and the converted total amounts

Consequence– Reconciliation and correction activities are required

when changed over

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Changeover - Major risksChangeover - Major risks

IT system architecture

R/2R/2

RFRF

RKRK

RARA

RVRV

RMRM

R/3R/3Client / ServerClient / Server

ABAP/4ABAP/4

FIFIFinancialFinancial

AccountingAccounting

COCOControllingControlling

PSPSProjectProjectSystemSystem

MMMMMaterialsMaterials

Mgmt.Mgmt.

SDSDSales &Sales &

DistributionDistribution

WFWFWorkflowWorkflow

HRHRHumanHuman

ResourcesResources

AM/AAAM/AAFixed AssetsFixed Assets

Mgmt.Mgmt.

ISISIndustryIndustry

SolutionsSolutions

Legacy systems

Legacy systems

Criticalprocesses

Financial reporting processes

CARGOFAF1

MilleniumFAF1

R/3-EDIFAF1

FuhrparkFAF3

PAISYFAF3

Fz-FaktuFAV1

GW-LOCFAV1

NW-LOCFAV1

IPAS-KDFAV2

AutoPartFAV3

FELFAF1

FSI-SSTFAP1

RM-INVFAP3

LVRFAP3

Bestandsabgl.FAP3

FSI-VGWFAP1

IPS100FAV3Vertriebsber.

FAV1

Schad-Stat.FAV2

GW-KostenFAV2

Markt-Stat.FAV2

HDBFAV1

PES-SAPFAF1

EXC-NWFAV1

IMP-SAP

PWS-Vehicles

PWS-WWS

PAG-Systeme

Mandanten-Systeme

IMP-SAP FI/COFAG2

PWS-VMSFAG2

PWS-ASIFAG2

PWS-WWSFAG2

IDCSFAG2

Teilevw/Regr.FAV2

Betreu.PauschFAV1

PC-ShopFAI

WWSFAV2

TASFAV3

LUZIAFAP2

PATENTFAP2

Prod-Entsch.FAP2

PreislisteFAV1

VAUDIS-PFAV3

PC-Anw.FAI

SAP-R/3 (CO, FI, HR, MM, PM, PP, PS, QM, SD) mit Buchungskreisen PAG, PIF, PIKS,PoCons, (PES)

AktionenFAV2

PETFAV3

Stammdat.Preise

BWLv.Liefererg.PreiseSo-Preise

Inl.Händler

Händl./Imp.Lieferanten

GW-Antr.

GW-Antr.

GW-Antr.Gutschr.FI/CO

PreisbandKontrakt

ImporteurePWS-Vehic.Ausfuhrerk l.PVA (RVS)

PAG-kritisch

KER (VW)

Fracht-ReLieferant

Lieferant-Re

Fax,Internet

ASCING-Leas

3.1H

Frachtbriefe

VDA-DFÜ

Frachtbr.

Frachtbr.Re-Buchg

ExterneinterneSchnittstelleSAP-Schnittstelle€-fähigbuchungsrelev .

Ablösung geplant

Masken-/Listenänd . erf.Keine Prog-Änderung erf.Nur Datenkonvertierung

Bestellung

PAG-kritisch

VALMET

Log-DBFAP3

Fz-PreisPriv.Sachbez.

Fremdsystem

Importeure

Papier

Bewegunge

OFAFAV1

Papier

DFÜ

WWS

1. Legal requirements (tax and commercial) are not fulfilled2. Business processes concerning functional capability /

availability are jeopardized - Going concern

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The Ernst & Young Risk ModelThe Ernst & Young Risk ModelConversion Risk Model

External business risksCompetitors Market Industry Law Politics Availability of capital Shareholder relations

Process risks

Project management• Project organization• Timing and scope• Staff capacity• Other projects

Organization• Authorities / service providers• Internal coordination /

communication• International links

Processes• Classification / prioritizing• Control portfolio / ICS• Test blueprints• Contingency planning

Technology• Technical capacity• Modifications / add-ons• New releases• Interfaces / non-IT

Information, decision and documentation risk

Reporting• Old fiscal year documentation• Control and reconciliation

reports• User reports

Project documentation• Project plan• Error correction

documentation • Changeover documentation

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Principles

+ =

+ =

InternalControl SystemSystem

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AgendaAgenda

• Introduction• Changeover Risks• Common source of errors• Changeover Opportunities• Summary

• Introduction• Changeover Risks• Common source of errors• Changeover Opportunities• Summary

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Common Sources of ErrorCommon Sources of Error

• High changeover costs are incurred through substantial dependency on other systems or migrations that has to be done before

• Insufficient coordination with / flow of information to other areas (other projects, user departments, internal communications, external consultants)

• No project plan that considers all affected areas and technical / organizational conditions

• Lack of detailed knowledge about the actual changeover process and associated risks

• Ensure that all reports are complete in order to create legally compliant documentation (document journal and account journal isnot sufficient)

• High changeover costs are incurred through substantial dependency on other systems or migrations that has to be done before

• Insufficient coordination with / flow of information to other areas (other projects, user departments, internal communications, external consultants)

• No project plan that considers all affected areas and technical / organizational conditions

• Lack of detailed knowledge about the actual changeover process and associated risks

• Ensure that all reports are complete in order to create legally compliant documentation (document journal and account journal isnot sufficient)

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Common Sources of ErrorCommon Sources of Error

• Timing of conversion issues can be different (Purchasing, Sales area, Accounting, Payroll) and is misunderstood very often

• Organizational preparation for changeover (closing date for entries, final transfer of interfaces, billing document runs, close of development for the transport of fixes)

• Underestimation of live system inconsistencies - consequently, comprehensive error analysis and repair must be performed in thepreparation phase to the changeover

• No consideration given to individual tables/reports in the IT-Systems developed by the companies

• Lack of contingency planning• No consideration given to capacity bottlenecks• No appropriate test blueprint to ensure functional capability

• Timing of conversion issues can be different (Purchasing, Sales area, Accounting, Payroll) and is misunderstood very often

• Organizational preparation for changeover (closing date for entries, final transfer of interfaces, billing document runs, close of development for the transport of fixes)

• Underestimation of live system inconsistencies - consequently, comprehensive error analysis and repair must be performed in thepreparation phase to the changeover

• No consideration given to individual tables/reports in the IT-Systems developed by the companies

• Lack of contingency planning• No consideration given to capacity bottlenecks• No appropriate test blueprint to ensure functional capability

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Results from Project Reviews -Examples of Individual Risk FactorsResults from Project Reviews -Examples of Individual Risk Factors

• Availability of resources - in particular regarding creation of financial statements

• Internal communication/coordination of preparation activities

• Consideration of all affected systems/interfaces and projects

• Overview of internal control scenarios and available test blueprints

• Consideration given in release strategy to introduction of new modules/systems, and the changeover

• Company-wide planning to take account of legal requirements affecting changeover

• SAP systems placed in non-participating countries

• Availability of resources - in particular regarding creation of financial statements

• Internal communication/coordination of preparation activities

• Consideration of all affected systems/interfaces and projects

• Overview of internal control scenarios and available test blueprints

• Consideration given in release strategy to introduction of new modules/systems, and the changeover

• Company-wide planning to take account of legal requirements affecting changeover

• SAP systems placed in non-participating countries

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AgendaAgenda

• Introduction• Changeover Risks• Common source of errors• Changeover Opportunities• Summary

• Introduction• Changeover Risks• Common source of errors• Changeover Opportunities• Summary

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Changeover OpportunitiesChangeover Opportunities

Create consistency across systems/modules

Optimize control portfolioin Internal Control System

Harmonize the control/test systemto create Europe-wide / multinational system

Design a cross-arearisk assessment for business processes

Design a comprehensive test blueprintfor future release upgrades / migrations

Functional capability Legal compliance

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AgendaAgenda

• Introduction• Changeover Risks• Common source of errors• Changeover Opportunities• Summary

• Introduction• Changeover Risks• Common source of errors• Changeover Opportunities• Summary

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SummarySummary• The changeover to the euro on a key date was not just a problem of

rounding differences, and not primarily a matter for the IT department to deal with

• Nevertheless it was essential to take the IT infrastructure into account (data backup, system availability, disk capacity, etc.)

• If business processes are highly dependent on the IT system, it is essential that the IT system should work properly after the changeover, therefore minimum of 2-3 test conversions are required

• A proper changeover must attach great importance to verifiability. Corrections and changes in the system must be appropriately documented and the documentation must be kept in a safe place

• It was essential to consider the following before the changeover:– Type of modules used and Degree of integration– Inhouse developments (e.g. add-ons/modifications) that affect the

changeover

• The changeover to the euro on a key date was not just a problem of rounding differences, and not primarily a matter for the IT department to deal with

• Nevertheless it was essential to take the IT infrastructure into account (data backup, system availability, disk capacity, etc.)

• If business processes are highly dependent on the IT system, it is essential that the IT system should work properly after the changeover, therefore minimum of 2-3 test conversions are required

• A proper changeover must attach great importance to verifiability. Corrections and changes in the system must be appropriately documented and the documentation must be kept in a safe place

• It was essential to consider the following before the changeover:– Type of modules used and Degree of integration– Inhouse developments (e.g. add-ons/modifications) that affect the

changeover

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SummarySummary• Project management is imperative

• Organizational / technical interdependency of all company areas has to be taken in mind and leads to increased changeover costs

• Ensure that the changeover complies with all relevant laws

• Experience shows that if a changeover from a local currency is performed correctly, rounding errors remain small

• There is a chance to use the work for the technical conversion to improve and harmonize the internal control system

• Project management is imperative

• Organizational / technical interdependency of all company areas has to be taken in mind and leads to increased changeover costs

• Ensure that the changeover complies with all relevant laws

• Experience shows that if a changeover from a local currency is performed correctly, rounding errors remain small

• There is a chance to use the work for the technical conversion to improve and harmonize the internal control system

The Euro introduction was not only a MUST The Euro introduction was not only a MUST --

it was also used as a CHANCE it was also used as a CHANCE !!

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Thank you for your attention and Good Luck !Thank you for your attention and Good Luck !

YTLYTL