FCA Coursework

FACULTY OF ACCOUNTANCY, FINANCE AND BUSINESS ACEDEMIC YEAR 2014/2015 BACHELOR OF COMMERCE (HONOURS) GROUP COURSEWORK BBFA3124 FINANCIAL & CONTROLLING APPLICATION

GROUP:

RPA 6

TUTOR:

MS YONG CHEOW LING

SUBMISSION DATE:

13 APRIL 2015

NAME

STUDENT ID

DANIEL LOW BOON KYEAT

13WBR12511

CHIAM TOW YEE

13WBR13120

HENG SIANG KIN

13WRB13123

LAW KHA CHU

13WBR12779

Plagiarism Statement

We, the undersigned, confirm that the submitted work are all our own and are in our own words. Name

Registration

(Alphabetical Order and Capital

Number

Letters) 1. DANIEL LOW BOON KYEAT 2. CHIAM TOW YEE 3. HENG SIANG KIN 4. LAW KHA CHU

Tutorial Group: 3 RPA 6 Date: 13 April 2015

13WBR12511 13WBR13120 13WBR13123 13WBR12779

Signature

Form A Assessment criteria and grid for group assignment (25%) Criteria

(a) Technical MA

(b )

(c)

(d )

knowledge: comprehension and numerate skills 15% of total assessment Report writing: Layout (structure, organization and presentation of issues) and fluency of the language used (sentence construction, grammar, etc) 2.5% of total assessment Evidence of research and reference 2.5% of total assessment Peer Review 5% of total assessment

039% Very poor

4049% Poo r

50-59%

6069% Goo d

70-79%

>80%

Excellen t

Exceptionall y outstanding

Very poor

Poo r

Average

Goo d

Excellen t

Exceptionall y outstanding

Very poor

Poo r

Average

Goo d

Excellen t

Exceptionall y outstanding

Very poor

Poo r

Average

Goo d

Excellen t

Exceptionall y outstanding

Average

Marks awarded

QUESTION: Prepare a REPORT to the management of GBI on this proposal. Your report must include the following:

1. The advantages and disadvantages of SAP software and the likely problem encountered if GBI Asia decided to buy SAP software for office use.

2. Discuss the advantages of using non-financial performance indicator (NFPI) to evaluate staff performance and recommend three NFPI performance measures that is suitable for GBI Asia. Justify your recommendation.

To:

GBI’s Board of Directors

From:

Management Consultant

Date:

1 April 2015

Subject:

The Financial Impact for GBI Asia

Introduction Background GBI expansion plan to venture into South East Asia region and had decided in Malaysia to set up a GBI Asia Sdn. Bhd. (GBI Asia), a wholly owned subsidiary as the regional office. The Subsidiary The GBI Asia is expected to commence business from its rented office cum shop at the heart of Kuala Lumpur and is expected inject a paid up capital of RM1, 000,000 by GBI. Business Operation All the bicycles sold by GBI US will be imported and the Asia region sales orders and enquiries will be handled by GBI Asia Analysis We had been appointed to carry out a details study on the financial impact on GBI Asia on: 1. The advantages and disadvantages of using SAP software in GBI Asia, 2. The likely problem encountered if GBI Asia decided to buy SAP software for office use, 3. The advantages and disadvantages of using non-financial performance indicator (NFPI) to evaluate staff performance, and 4. Recommend 3 NFPI performance measures that are suitable for GBI Asia.

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SAP System An enterprise resource planning system, or ERP, gives businesses an information technology tool that combines and integrates the various information systems it uses into one comprehensive system to manage operations. An ERP typically includes finance and accounting, human resources, supply chain and inventory, and manufacturing information systems. Its purpose is to facilitate the flow of information among all departments in an organization, and manage data sharing with outside systems, such as suppliers, business partners, clients and regulatory agencies.

1. The advantages and disadvantages of using SAP software in GBI Asia 1.1

Advantages

A global solution SAP supports global functionality with 45 standard country versions and eight add-on country editions. The application is also scalable to support thousands of concurrent users across multiple locations. Flexibility One advantage of SAP is its flexibility. SAP allows GBI Asia to create their own rules within the SAP structure. These rules set the parameters for acceptable and unacceptable transactions. For example, the system will not allow a journal entry to process if it doesn't balance. GBI Asia can determine which employees access each area in the SAP environment. Only qualified personnel receive access to personnel data, such as wage rates. Cost reduction It reduces cost only if GBI Asia took accounting and reporting seriously even before implementation and had put a lot of manual effort in it. If they didn't care about it, if they just did some simple accounting to fill mandatory statements and if internal reporting did not exists of has not been financially-oriented, then no cost is reduced. Features SAP allows businesses to manage financial transactions, product life cycles and supply chain activities. The software has various analytical features, such as evaluating performance, reporting and decision making. SAP can analyze data from any source and 2 | Page

conduct collaborative decision making. By all these features, it allows GBI Asia to meet the needs of many complex businesses and government organizations.

1.2

Disadvantages

Expensive SAP is the high cost of purchasing and implementing this program. The company must purchase the software and hardware necessary to run the programs company-wide. Costs include labor costs of internal information technology (IT) employees or external consultants overseeing the process. Once GBI Asia implements the software, employees need to be trained. This involves training each employee in the functions they have access to. Ongoing costs include software maintenance and periodic upgrades. Complexity Another disadvantage of SAP is the complexity built into the software. GBI Asia implements one feature or function of the software at a time, allowing employees to gain familiarity with the software before moving forward. The complete implementation process may take several months or years. Hard to customize One of the biggest problems with the system is that it is hard to customize. Some customization may involve changing of the software structure which is usually not allowed. Very few companies can effectively use the system right out of the box. It must be modified to suit their needs, and this process can be both expensive and tedious. Even when GBI Asia does begin changing the system, they may limit in what they can do.

2. The likely problem encountered if GBI Asia decided to buy SAP software for office use There are several potential problems that may arise when GBI Asia purchases SAP software for office use. Problems may arise due to the mistakes made by SAP or GBI Asia. The potential problems of buying SAP office software are mainly due to the fact that SAP software needs to be tailor made before implemented. There are many past 3 | Page

incidents that give us a glimpse of the potential failures of SAP software such as Hershey, Nike and Waste Management Inc. SAP software is very costly to begin with. Moreover, Software modifications are well known to lead to project failures in accounting software implementations. SAP has a bad record in attempt to curb this problem. There has been evidence that SAP allegedly attempted to avoid software customization to reduce the risk of implementation failures in the case of Waste Management Inc. Failure in accounting software implementations could lead to further implications as it is a complicated task to correct specific errors. Effort to rewriting codes may not provide a solution, it may even backfire, and causing the problems exacerbated and contributes to further failures. Problems are usually identified during the pilot project carried out by the company. In worse scenarios, GBI Asia may fail to identify potential problems during the pilot stage and the problem could lead to serious financial impacts since it is presumably that GBI Asia uses SAP software for back office accounting, receivables processing, payables processing, inventory management, etc. Some errors may be left undetected that may create a trail of undetected mistakes.

SAP software is notoriously well known for their high total cost of ownership it consists of high acquisition costs, very high deployment costs, recurring maintenance costs and very high internal support costs. GBI Asia must carefully analyze each option before making a purchase decision; otherwise it is unlikely that GBI Asia will achieve their software investment objectives and exceed their software investment budgets. GBI Asia must be prepared to face deployment risk as SAP software is complex, it has been historically proven that on time budget SAP implementations are extremely rare. As for recurring maintenance cost. GBI Asia should take into consideration the nature of recurring new updates. New updates often exceed the purchase price of original SAP software. SAP upgrade cost can sky rocket based on the extend of software 4 | Page

customization, business process design, and system integration. Most SAP users will not upgrade to the newer updates before the prior version is retired as they are fearful of the huge cost and the complexity involved in upgrading the SAP software. GBI Asia may face a dilemma as to upgrade to the latest software or not. If GBI Asia opts to forfeit the upgrades to defer the short term costs, further additional cost will ultimately catch up with them.

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3. The advantages and disadvantages of using non-financial performance indicator (NFPI) to evaluate staff performance

4. Recommend 3 NFPI performance measures that are suitable for GBI Asia. Choosing non-performance measures are challenging. They are becoming important in evaluating performance or making decision. Besides, they are leading indicators which provide useful information for future performance purpose not contained financial measures. Apart from that, NFPI is used to evaluate staff performance. Thus, GBI Asia carefully choosing the right measures and should not simply copy the measures used by others. There are three NFPI performance measures that suits GBI Asia. First of all, absenteeism rates. In short term, it refers to the staffs who arrive late. If it is a serious problem, it refers to the number of unexpected absence days of staffs for 6 | Page

a particular period. On the other hand, it means that they are still in working conditions but not around the workplace to work. When this condition occurs, it indicates that company is losing the commitment of staffs. Management need to spend more hours in resolving the absenteeism among the staffs on asking the reasons of absenteeism. If absenteeism does not solved effectively, it will affect the whole workforce. On top of that, staff turnover is another measure for NFPI. This measure can help GBI Asia to evaluate staff performance based on their satisfaction level on their job scopes. A high level of staff turnover indicates that the staffs are not happy at work. It requires the company to incur costs to hire and train new staffs. Subsequently, it will affect the financial performance of GBI Asia. Thus, by attempting to concern the issues, it will help GBI Asia to reduce the time taken and effort to hire and train new staffs. The last measure is competency. It is used to test the staff’s ability to use their knowledge and skills to handle their jobs efficiently and effectively. There is a relationship between competency and staff performance. Staffs play important role in achieving the performance of the organization in short term or long term view. Time taken to complete a task is depending on staffs’ productivities. By reviewing the time period, GBI Asia can evaluate its staffs’ performance on the completed tasks. In order to maintain maintaining staff productivity, GBI Asia should address their satisfaction levels.

Adam Lambert Management consultant

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Reference Text Book: 

Amir, E. and Lev, B. (1996). Value-relevance of nonfinancial information: The wireless



communications industry. Journal of Accounting and Economics, 22(1-3):3–30. C. Jayan (2006), Emotional Competence, Personality and Job Attitudes as Predictors of Job Performance, Journal of the Indian Academy of Applied Psychology, February 2006, Vol.32, No. 2, 153-144.

Website: 8 | Page



http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Non

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%20Performance%20Indicators%20%28NFPIs%29.aspx http://www.academia.edu/3480967/Job_Performance_Relationship_between_Competenc

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y_and_Attitude_towards_Achieving_Tnb_s_Vision http://hqasia.org/insights/can-performance-appraisal-help-reduce-turnover-and-

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Financial

absenteeism

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