Peer Review 04252003

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MIT Biz for TechiesSR

3/28/2003

Bridging the gap between business and technology

MIT Admin 101

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Agenda

Workshop Format- ad-hoc format- open & interactive- focus on knowledge transfer

What is MIT?- mission

- non-for-profit accounting

MIT Accounting- financial accounting- cost accounting- budgetary accounting

MIT Logistics- materials management- sales & distribution- plant maintenance

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Mission To advance knowledge and educate students in science, technology,

and other areas of scholarship that will best serve the nation and theworld in the 21st century

Education and researchwith relevance to the practical world as aguiding principlecontinue to be its primary purpose. MIT isindependent, non-for-profit, coeducational, and privately endowed. It

is organized into five schools that contain 27 academic departmentsas well as many interdepartmental programs, laboratories, andcenters whose work extends beyond traditional departmentalboundaries.

What is MIT?

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Accrual vs Cash Basis

MIT Structure

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Non-for-Profit Organizations

Characteristics of Non-for-Profit organizations

They receive significant amounts of resources from providerswho do not expect either repayment or economic benefitsproportionate to resources provided.

There is neither a profit motive nor an expectation of earning

net income, other than providing goods or services that fulfilla social need.

They do not have defined ownership interests that can besold, transferred, or redeemed, or that convey entitlement toa share of a residual distribution of resources in the event ofliquidation of the organization.

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Operating expenditures

Fiscal Year 2002Operating Expenditures (in millions)

Total: 1,535.9 million

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Operating revenues

Fiscal Year 2002Operating Revenues (in millions)

Total: 1,664.7 million

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Show me the money!

Accounting

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Financial Accounting

Luca Pacioli, 15th century monk- typical accounting period 1 year- double entry bookkeeping

Bookkeeping- chart of accounts- T-account- ledgers (general, subledgers)

Basis for legal reporting (FASB)- submission of financial statements

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Sales &Distribution

MaterialsMgmt.

Production

Planning

FinancialAccounting

Controlling

Fixed AssetsMgmt.

QualityMgmt.

PlantMaintenance

HumanResources

Workflow

IndustrySolutions

R/3Client / Server

ABAP/4 ProjectSystem

The primary SAP R/3application modules thatsupport Accounting are:

Financial AccountingCore financial accounting

General Ledger as well assubledger information

ControllingManagement accounting fortracking overhead andinternal costs

Accounting Modules

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Accrual vs Cash Basis

Accrual basis accounting

Revenue is recorded when earned and expenses arerecorded when incurred. They are recorded at the end of anaccounting period even though cash has not been receivedor paid.

Cash basis accounting

Revenue is recorded in the accounting period in which cashis received and expenses are recorded in the accountingperiod in which cash is paid.

MIT is on modified accrual basis

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Chart of Accounts- balance sheet accounts- profit and loss accounts

For Balance Sheet Accounts:

100000 169999 Asset Accounts - Liquid

170000 179999 Asset Accounts - Fixed

200000 299999 Liability Accounts

300000 399999 Fund Accounts

For Profit and Loss Accounts:400000 499999 Expenses

600100 659999 Calculated Expenses

800000 899999 Revenue Accounts

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What is a financial statement?

Financial Statement represent a picture of the financial position of a firm at a point in time

(usually at the end of a reporting period).

Financial statement = balance sheet + profit & loss statement

Balance Sheet The resources (assets), both financial and property are displayed on

the left side of the balance sheet.

Claims (liabilities and net assets) against those resources aredisplayed on the right side of the balance sheet.

To balance, the assets of the firm must be equal to the claims(liabilities and net assets) against those resources.

Profit and Loss Statement summarizes the revenues generated and expenses incurred for a

given period

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Sample Balance Sheet

MASSACHUSETTS INSTITUTE OF TECHNOLOGY

Balance Sheet - June 30, 2002(in thousands of dollars)

Assets

Cash 38,839.00$

Account receivables 140,374.00$

Pledges receivables 339,345.00$

Contracts in progress (US Gov) 29,176.00$

Deferred charges, inventories and other assets 110,398.00$

Students' notes receivables 80,048.00$

Investments 6,476,513.00$

Land, buildings and equipment, at cost 1,172,731.00$

Total assets 8,387,424.00$

Liabilities & Net Assets

Liabilities Accounts payable 231,920.00$

Liabili ties due under l ife income fund agreements 79,975.00$

Withholdings, deposits and other credits 30,402.00$

Advance Payments 159,467.00$

Borrowings - bonds and notes payable 772,034.00$

Government advances for student loans 31,444.00$Total liabilities 1,305,242.00 $

Net Assets Unrestricted 2,826,827.00$

Temporarily restricted 2,976,337.00$

Permanently restricted 1,279,018.00$

Total net assets 7,082,182.00 $

Total liabilities and net assets 8,387,424.00$

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General Ledger (FI-GL)

Accounts Payable (FI-AP)

Accounts Receivable (FI-AR)

Assets Management (FI-AM)

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General Ledger

The ledger that contains all of the financial accounts of a business;containing offsetting debit and credit accounts (including controlaccounts)

Document principal

Accounting data is always complete and accurate

Account balances are updated each period and carried forward eachfiscal year

Basis for the reporting of financial statements

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Sub-ledger Integration

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General Ledger

Journal Vouchers (F-02)

- transactions that are used to make transfers or corrections fromone account to another- MIT uses these quite regularly, but journal entries are usually usedfor year end corrections

MIT developed web-based JV functionality to support the DLCs- create- change- display- clone/reverse- reporting

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Accounts Payable

Records and manages accounting data for all vendors- sub-ledger with real-time update to general ledger

Integrated with the purchasing system

Payments made via payment program

Account balances are updated each period and carried forward each

fiscal year

Types of payables?

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Accounts Receivable

Records and manages accounting data for all customers/sponsors- sub-ledger with real-time update to general ledger

Integrated with the sales/billing system

Payments received via lock-box

Account balances are updated each period and carried forward each

fiscal year

Types of receivables?

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General Ledger - Demo

1. Display Chart of Accounts (F.10)2. Display GL Account (FSP0)3. Display Account Balance (FS10N)4. Create JV (F-02)5. Show JV impact (FS10N)

6. Reverse JV (FB08)7. Park a JV (FBV1)8. Show Balance Sheet (F.01)

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Accounts Payable - Demo

1. Display Vendor Master (FK03)2. Create Non PO Invoice (FB10)3. Create Credit Memo (FB10)4. Display Account Balance (FS10N)5. Show Open Items (FBL1N)

6. Make Payments (F110)7. Wire Transfers (ZWIRE)8. Show Closed Items (FBV1)9. Show Balance Sheet (F.01)

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Who gets the bigger half?

Cost Accounting

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Cost Accounting

Cost accounting is the structurewithin which costs and revenuesare assigned to different parts ofthe Institute

Facilitates the coordination,

monitoring and optimization of allprocesses in an organization

Intended for internal accounting,not for external reporting purposes

CO

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Cost Collectors

Cost Centers Represents a unit of a department, lab or

center

Tracks costs on a fiscal year basis

Projects Tracks project costs and billings

Can span multiple years (contracts)

Typically represent research accounts

Internal Orders Intended for short term cost

accumulations

Settled to cost centers or projects

May also represent non-sponsored

research accounts

CO

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Cost Elements

Primary Cost Elements Used to classify revenue and

expenditures

Related to the GL account

Secondary Cost Elements

Tracks internal activities Overhead/EB/Settlements

No correlation to General Ledger

CO

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Costing Sheets

Overhead F&A (Facilities & Administration)

Direct Costs, Indirect Costs

Costing Sheets

Base, Rate and Credit

CO

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Funds Transfers

Journal Vouchers

Allows transfer of funds between GL accounts and costobjects

CO Reposting

Allows transfer of funds between cost objects and costelements

What is the difference?

CO

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Commitments

Concept of earmarked funds

Requisitions, purchase orders,funds reservations

Used for planning and budgeting

purposes

CO

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Planning/Budgeting

CO Plan- budgets- versions- NIMBUS

CO Budget

- reporting benefits- actual/plan/budget

CO

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Doing the right stuff

Logistics

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MIT Materials Management

BUY:- via Electronic Catalog- via Procurement Card (VIP)- via Requisitions- via Purchase Orders

PAY:

- receipt of invoice- manual checks- automatic checks- partner feeds- wire transfers

OTHER- inventory- goods receipt / goods issue- internal procurement

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Procurement Cycle

The procurement cycle may consist of eight processes:

8. Payment

3. Requisition assignedto a Vendor

5. Order follow-up

2. Sourcedetermination

1. Requirements

determination

4. Order processing

Purchase OrderPurchase Order

6. Goods receipt andinventory management


7. Invoice verification

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Business Process Flow for Procurement

The main documents and transactions in the Procurementprocess are:

Planning, Reporting, and Analysis

Purchase

Requisition

Purchase

Order

Goods

Receipt

Invoice

Posting

Note: Payments to vendors are usually made at specified times(e.g. at the end of the month).

Payment amounts are determined according to the openinvoices posted on the system.

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Purchase Requisition Processing

Material ResourcePlanning

Direct Entry

Determine source of supply

Purchase requisition Release strategy


Purchase Order

Purchase order

or

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Purchase Orders

A purchase order is a formal request to a vendor to providecertain materials or services under specific conditions(quantity, price, delivery date, etc.)


PurchaseRequisition

PurchaseOrder

GoodsReceipt

InvoicePosting

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Goods Receipt

When goods are received from a purchase order, the itemdata is copied from the purchase order into the goods receiptdocument.


PurchaseRequisition

PurchaseOrder

GoodsReceipt

InvoicePosting

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Results of a Goods Receipt Posting

Transaction documents are created both for materialsmanagement and finance.

Goods Receipt

Posting

Accountingdocument

Stock quantityConsumption statistics

Point of consumptionCost center Order

TransferOrder

Purchasing data:Order item, Order history

Goods receiptslip

Materialdocument

G/L accounts:Consumption account

GR/IR account

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Goods Receipt for Stock Material

Entering the goods receipt increases the inventory level of a

material that is procured for stock.

Inventory Management (MM module) controls

and records all goods movement, formpurchase order receipt through the plant, toconsumption

Purchasingdocuments

Items

1.2.3. Warehouse / storesGoods

Receipt

Vendor

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Purchase Order Processing


Purchase Req.

Service

Consumable material

Stock material Account assignment(cost center, asset,

project)

PurchaseOrder

Standard

Sub contract

Consignment

Third-party

PurchaseOrder

Standard

Sub contract

Consignment

Third-party

Statistics

Order History

Direct Entry

or Purchase

Requisition

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Invoice Processing

This last step in the procurement process includes invoiceverification and updating accounts payable in the FI module.


PurchaseRequisition

PurchaseOrder

GoodsReceipt

InvoicePosting

Payment will then be made later based upon the open invoicesposted on the system

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Invoice Verification Environment

Invoice verification accesses data from purchasing,inventory management, material master, and vendor masterfiles.

Purchase

Order

VendorInvoice

GoodsReceipt


Invoice

verification

G/L accounts

Assets

Cost centers

Projects

Orders

Material master

Vendor master

Posting an invoice in the R/3 Systemupdates purchasing and accounting data

Posting an invoice in the R/3 Systemupdates purchasing and accounting data

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Vendor Payment

Accounts payable reads the invoice file and pays all postedinvoices due. (Payment runs can be automated to occur atspecific times.)

Motor Sports International1234 Main StreetNew York, NY 10181

1 4 4 9

Date _______________

Pay to: ________________________________________

________________________________________________________

_______________

12930 39040 2020 20202 10923 1449

_________________

Vendor

1000

Bank

1000Paymentprogram

Payment

program

ReleasedInvoice

FinancialAccounting

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Procurement Integration

Purchase Order

Goods Receipt

Invoice Verification

PP FI FI

MM

Purchase Order

Invoice

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MIT ECAT Buy-Pay Scenario

S l Di ib i

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The main documents and transactions in the CustomerOrder Management process are:

Order Delivery Invoice Payments

Document flow of a sales doc.

. . . . Order

. . . . Delivery - Picking request, Goodsrequest, Delivery

. . . . Invoice

. . . . Accounting

Document flow of a sales doc.

. . . . Order. . . . Delivery - Picking request, Goodsrequest, Delivery

. . . . Invoice

. . . . Accounting

Pre-sales

Sales & Distribution

Sales Orders

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Each type of sales document represents a different type ofsales transaction.

Different types of sales transactions have differentbusiness requirements.

Schedulingagreement

Cash order

Rush order

Free of chargedelivery

Sponsor

Consignmentorder

Credit / debitmemo requests

Standard

order

Salesdocument

types

Sales Orders

Billi

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Billing

Billing Supports:

Creating invoices for deliveries and services

Creating credit and debit memos on the basis of requests

Transferring posting data to financial accounting

Invoicing usually occurs after the product has beenshipped to the customer.

All the information entered for the

sales and delivery documents are

transferred to the invoice.Invoices

NASA Research Center

Rocket Science Experiments

EB & Overhead $123000Suppliers $1,000,000

Developed neat booster fuel

C t P t

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Customer Payment

The final step of the Customer Order Management cycle.

The Customer Payment step includes:

Posting payments against invoices

Reconciling differences, if necessary

The processing of the customer payment is done in accountsreceivable against open items.

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Puttin it all together

Integration

T ti B d P ti

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Transaction-Based Postings

HumanResources

AssetMgmt.

FinancialAccounting

MaterialsMgmt.

Controlling

Invoices Material

withdrawals Orders

Purchaserequisitions

Repostings

Activityallocation

Statisticalkey figures

Funds

reservation

I t ti Di i

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Automatic General Ledger Entries

General Ledger

Budgeting /Project

Systems

Sales &Distribution

Purchasing CostAccountsPayable

AccountsReceivable

MASTER DATA:

- Fund- Fund center- WBS element- Networks/Activities

TRANS:

- Appropriation,

apportionment,allotment

- Sub-auth

- Track funds

MASTER DATA:- Vendors- Plants

TRANS:

- Purchaserequisitions

- Purchaseorders

- Goods/Servicereceipts

MASTER DATA:

- Cost elements- Cost centers- Internal orders

TRANS:

- Assessments

- Statisticalcosts

MASTER DATA:

- Customers- Credit records

TRANS:- Create invoice- Receivepayment- Apply cash

MASTER DATA:- Vendors

TRANS:

- Enter invoice

- Process &send payments

MASTER DATA:- Customers

TRANS:

- Sales orders

- Invoicing/Billing

MASTER DATA:- G/L accounts

TRANS:

- G/L postings

Integration Discussion

Fi i l I t ti i L i ti

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Financial Integration in Logistics

Some of the relevant financial activities resulting frombusiness events at the different stages in the supply chain

include:

Inventory Production SalesProcurement

Commitmentbookkeeping

Liquidity Exchange ratehedging

Invoice verification Cost management Payments

Inventory Valuation

strategies

Product costing Material usage

Work-in-progress

Credit checking Discounting

Billing Payment clearing Dunning analysis Profitability analysis Marketing budget

SAP@MIT Architecture

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SAP@MIT Architecture

http://web.mit.edu/sapweb/SF2/
http://web.mit.edu/sapweb/SF2/index.shtml

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What did I forget?

Miscellaneous

Discussion:

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Discussion:

Internal Service Providers VIP Card Process

Sales and Distribution (sponsored billing)

Plant Maintenance

Assets Management/Property

Budget System

Peer Review 04252003

Documents