“ As-Is” Phase in ERP Projects Implementation -in General & in Finance and Controlling ( FICO)

Introduction

The As-Is phase in ERP projects serves as the foundational step in documenting current business processes, identifying pain points, and creating a roadmap for the integration or update of an ERP system. This stage is particularly significant in Finance and Controlling (FICO), where financial accuracy, reconciliation, and regulatory compliance are crucial to an organization’s success.

For companies in capital equipment manufacturing and EPC (Engineering, Procurement, and Construction), effective financial management is essential due to the large-scale, project-based nature of their work. In first-time ERP implementations, the As-Is phase reveals inefficiencies and gaps that ERP can address through automation and integration. For ERP updates, it allows businesses to reassess current pain points, optimize financial processes, and introduce recent technologies such as AI and analytics to streamline operations.

This blog will explore the As-Is phase, focusing on Finance and Controlling (FICO), examining key processes, common pain areas, and how to document the current system landscape. It will also address the debate between adopting standard ERP best practices versus pursuing customization during the implementation process.

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As-Is Document Format?

1. Project Overview

?? ???????? The project overview defines the need for ERP implementation or updates. For finance, this often means improving financial reporting, cost control, and regulatory compliance. In capital equipment manufacturing and EPC industries, these challenges are compounded by complex project management and cost tracking requirements. Clearly outlining project goals ensures alignment between the As-Is phase and future system enhancements.

2. Objectives of the As-Is Analysis

? ????????? The goal is to thoroughly document the current state of financial processes, identify inefficiencies, and highlight areas for improvement. This lays the groundwork for deciding whether to follow standard ERP practices or pursue customization in the next phase. The As-Is analysis is also crucial in determining where AI, automation, and analytics can be integrated to address inefficiencies.

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3. Scope of the Document

? ????????? This analysis focuses on FICO-related processes such as General Ledger (GL), Accounts Payable (AP), Accounts Receivable (AR), and Controlling (CO). It evaluates areas like financial reporting, budgeting, and cash flow management. The scope should also consider potential future integration with AI and analytics to enhance financial decision-making and compliance.

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Current Business Processes

A thorough documentation of existing processes in finance is critical for ERP success. Key areas to document include:

Financial Reporting: This involves how financial data is currently processed and reported. The documentation should detail how financial closings (e.g., month-end, quarter-end) are managed, and highlight any pain points, such as delays or inaccuracies in reporting.

Cost Control and Allocation: Understanding how costs are tracked, allocated, and managed across departments, projects, or cost centers is vital. In manual systems, this process can be slow, leading to inaccurate or delayed cost reporting. ERP systems automate cost allocation, making it more transparent and efficient.

Asset Management and Depreciation: Asset management processes include tracking asset purchases, depreciation, and disposal. Documenting this ensures that ERP will capture accurate asset data, allowing for correct valuation and reporting.

Accounts Payable and Receivable: Current workflows for managing creditor and debtor transactions should be captured. In many organizations, this area is prone to delays and manual errors. An ERP system centralizes this data, improving the tracking of payments and collections.

Flowcharts and diagrams (using tools like Microsoft Visio, Lucid chart, or Draw.io ) should be used to illustrate these processes, providing a clear visual representation of how financial operations work and identifying where bottlenecks exist.

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System Landscape

For first-time ERP implementations, it is important to document the current financial systems, which may consist of spreadsheets, homegrown solutions, or legacy software. This helps identify integration points with the ERP system.

For ERP updates, the existing ERP system and any third-party software need to be mapped out. This includes understanding how these systems are integrated with other modules like CRM (Customer Relationship Management) or SCM (Supply Chain Management).

Creating Data Flow Diagrams can provide a clear picture of how data moves between systems and identify areas prone to reconciliation issues or reporting delays. This documentation will be invaluable during the blueprint phase when configuring the ERP system.

Pain Points and Challenges

Reconciliation Inefficiencies: One of the major pain points in finance is the time-consuming reconciliation process, particularly with bank accounts, inter-company transactions, or vendor payments. AI-driven reconciliation tools in ERP can automate these processes, significantly speeding up matching and reducing errors.

Inflexible Budgeting: Many companies still rely on static budget frameworks that do not adapt well to changes in market dynamics or financial health. An ERP update can introduce dynamic budgeting models that adjust to real-time financial data and market trends, helping organizations better manage financial forecasts.

Credit and Debt Management: Managing overdue payments and managing debtor aging are persistent challenges. Predictive analytics in modern ERP systems can flag potential cash flow problems and help streamline credit collection processes.

Manual Data Entry and Reporting: Manual processes lead to errors, delays, and inconsistencies in financial reporting. Automating data entry and reporting through ERP ensures real-time, accurate financial data, reducing the reliance on human input.

Financial Reporting and Compliance?

First-time ERP implementations often experience delays in financial closings and inconsistencies in financial data. These delays can be mitigated with an ERP system that provides real-time visibility into financial transactions and closing activities. Updates focus on improving the speed and accuracy of these processes, ensuring compliance with financial regulations and timely reporting.

In EPC projects, cross boundary operations introduce compliance complexities, especially regarding tax laws and reporting requirements. AI-driven tools in ERP can automate compliance checks and ensure that reports are generated in line with local and international standards.

Data Analysis

Data Consistency: Fragmented data from multiple systems makes financial accuracy a challenge. First-time ERP implementations must ensure data consistency across all financial processes, while updates focus on improving the integration between existing systems.

Data Migration: Migrating historical data from legacy systems is a critical aspect of ERP projects. AI-driven data migration tools can help clean and prepare data, ensuring that it is correctly mapped to the new system and reducing the risks of errors.

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Recommendations for Improvement

Process Automation: Both first-time implementations and updates should prioritize automating manual tasks such as reconciliation, data entry, and financial reporting. ERP systems come with built-in best practices that streamline these processes, though some customization may be necessary for highly specific workflows.

AI for Predictive Insights: ERP systems integrated with AI can provide predictive insights into financial performance, flagging potential cash flow issues, or highlighting variances in budgets. This enhances decision-making at the strategic level.?

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Why As-Is Should Be Done (or Not)?

While the As-Is phase is crucial for understanding current financial processes, it may not be necessary to go into extensive detail if your business processes closely align with ERP best practices. In such cases, it may be better to adopt these standard processes to avoid carrying inefficiencies into the new system, like "old wine in a new bottle."

However, companies with highly specialized needs—such as complex cost allocation, project costing, or unique compliance requirements—should invest time in thoroughly documenting their As-Is processes. This ensures the ERP system can be customized to meet these specific needs without losing efficiency.

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Conclusion?

In both first-time ERP implementations and updates, the As-Is phase is critical to ensuring that financial processes are thoroughly documented, pain points are identified, and the path to ERP integration is clear. By leveraging AI, automation, and analytics, companies can resolve issues like reconciliation delays, inflexible budgeting, and manual reporting. The decision to customize or adopt standard ERP practices will depend on the complexity of your financial processes and the unique requirements of your industry. Moving forward, the next step is to document the To-Be phase, where optimization and system configuration will lead to improved financial management and operational efficiency.?

Thanks for your attention. Looking forward to having your valuable suggestions. Those who want to discuss with me or need any further clarification, may contact me directly.

Happy working with Technology.

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Satish Chandra Gupta

Ex- CEO and CIO

Current – IT & Management Consultant

+91- 8879073766

[email protected]