2014_MBL93FW

Module overview

Advanced Financial Systems

MBL93FW

IMPORTANT INFORMATION:
This module overview contains important information
about your module.

CONTENTS
1

INTRODUCTION ...................................................................................................... 3

PURPOSE, BROAD AND SPECIFIC OUTCOMES FOR THE MODULE ................. 4

2.1

Purpose .................................................................................................................... 4

2.2

Broad and specific outcomes.................................................................................... 5

LECTURER(S) AND CONTACT DETAILS .............................................................. 8

3.1

Lecturer(s) ................................................................................................................ 8

3.2

Area ......................................................................................................................... 8

3.3

University ................................................................................................................. 8

MODULE-RELATED RESOURCES......................................................................... 9

4.1

Prescribed books ...................................................................................................... 9

4.2

Recommended books............................................................................................... 9

4.3

Electronic Reserves (e-Reserves) ............................................................................ 9

TOPICS .................................................................................................................. 10

STUDY SCHOOL PLAN ........................................................................................ 11

MODULE SPECIFIC STUDY PLAN ....................................................................... 12

ASSESSMENT....................................................................................................... 23

8.1

Assessment plan .................................................................................................... 23

8.2

General assignment numbers ................................................................................. 23

8.3

Due dates for assignments ..................................................................................... 23

8.4

Submission of assignments .................................................................................... 23

8.5

Assignments ........................................................................................................... 24

8.6

Marking guideline/matrix/rubric ............................................................................... 27

8.7

Self assessment questions ..................................................................................... 27

OTHER ASSESSMENT METHODS ....................................................................... 27

10

EXAMINATION ...................................................................................................... 27

11

FREQUENTLY ASKED QUESTIONS .................................................................... 27

12

SOURCES CONSULTED....................................................................................... 27

13

CONCLUSION ....................................................................................................... 28

14

ADDENDUM .......................................................................................................... 29

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INTRODUCTION

Dear Student
Welcome to the elective module Advanced Financial Systems. I hope that you will
find it an interesting and rewarding experience. Please feel free to contact your
lecturer with regard to any part of the contents of the module which you do not
understand.
The aim of this overview is to give you a birds eye view of the subject matter you are
about to study. This material should be read in conjunction with any other material
received on this subject from the SBL. The idea of this overview is to provide you
with a step-by-step guide to all the material you need to cover in order to do well in
this course.
The kind of environment in which a firm operates can have a significant effect on the
type of control and communication system chosen and implemented. A successful
firm operating in a stable environment would tend to emphasise the maintenance of
the status quo, preservation of market share, stable growth and the continuation of
efficient production.
System dynamics is a method used to gain insight into situations of dynamic
complexity, and is used to design more successful policies in companies. The goal is
to find management policies and organisational structures that help resolve system
challenges.
Increasing compliance costs and the emergence of eco-efficiency have intensified
the interest in environmental costing. Eco-efficiency implies that cost reductions can
be achieved by increasing environmental performance, as environmental costs are a
significant percentage of total operating costs.
An information system (IS) depends on data from other functional areas. It includes
the people, procedures, software and computers that store, organise, analyse and
deliver information. More managers are now thinking in terms of business processes
rather than business functions. Remember that a business process is a collection of
activities that takes one or more kinds of input and creates an output that is of value
to the customer.

PURPOSE, BROAD AND SPECIFIC OUTCOMES FOR THE MODULE

2.1 Purpose
The course requires a substantial amount of student-centred learning, so consider
where you may have clashes or other commitments and plan your timetable
accordingly. A subject like Advanced Financial Systems requires you to work every
day instead of trying to cram for the examination.
This course has been designed to reflect the cutting edge of current financial and
strategic cost management accounting thinking, but has been prepared in such a
way that it is accessible to those who do not have a basic understanding of finance.
By the end of this course you should feel comfortable working with financial experts
in your business, no matter what area you are in.
Management control involves anticipating future conditions to ensure that a
companys organisational objectives are achieved. If a manager identifies a better
approach which is likely to assist in achieving the organisations goals, the
management control system should not obstruct its implementation.

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2.2 Broad and specific outcomes

The following outcomes need to be achieved:

Specific outcome 1:
Understand and apply systems theory in the development of advanced financial
systems that will support the strategic planning process of any organisation.
Assessment criteria
-

Evidence shows that learners understand that feedback is a method of

controlling a system and can explain the concept of useless systems.

Evidence shows that learners understand that information from downstream in

the process is fed back upstream.

Specific outcome 2:
Understand strategic management accounting and its importance to strategic
formulation.
Assessment criteria
-

Evidence shows that learners grasp that international issues affect the role of
the management account and executive management.

Evidence shows that learners appreciate that a management information

system provides both financial and non-financial information.

Specific outcome 3:
Understand strategic information for ERP processes and procedures.
Assessment criteria
Evidence shows that learners understand that companies often use activity-based
costing for strategic purposes, while using traditional costing for everyday
accounting.

Specific outcome 4:
Understand strategic management accounting and its importance to strategy
formulation.

Assessment criteria
-

Evidence shows that learners grasp that external failure costs can be more
devastating to a firm than internal failure costs.

Evidence shows that learners understand that the difference between quality
and productivity is essential.

Specific outcome 5:
Understand the principles and application of activity-based costing as a tool to aid
decision making on the cost of production and distribution for different managerial
applications.

Assessment criteria
Evidence shows that learners appreciate that the core of any business value strategy
is the customer-value proposition which describes the unique use of product, price,
service relationship and image that a company offers.

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Specific outcome 6:
Understand the concept of the triple bottom line to develop environmental
management accounting systems in support of environmental stakeholder
requirements.
Assessment criteria
-

Evidence shows that learners understand that the expected benefits of

sustainability reporting will focus the global reporting initiative (GRI).

Evidence shows that learners appreciate that stakeholder theory requires that
managers make decisions that take into account the interests of all the
stakeholders in the firm.

Specific outcome 7:
Distinguish between the main features of your companys management systems to
ensure that there is an improved ability to implement the strategy effectively.

Assessment criteria
-

Evidence shows that learners understand that the companys current

compensation package motivates staff to achieve the organisational
objectives.

Evidence shows that learners appreciate that the main features of companies
management systems must ensure that there is an approved ability to
implement the strategy effectively.

LECTURER(S) AND CONTACT DETAILS

3.1 Lecturer(s)
Advanced Financial Systems:
Mr Greg Dalton
Room 3-14
Email: daltogw@unisa.ac.za
Telephone: 011 652 0235
Cell phone: 082 334 8331
3.2 Area
Finance
3.3 University
University of South Africa Graduate School for Business Leadership

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MODULE-RELATED RESOURCES

4.1 Prescribed books

Monk, E. & Wagner, B. 2013. Concepts in enterprise resource planning 4th edition
Course Technology Cengage Learning.

Slides
Management control systems, corporate social responsibility and the balanced
scorecard (BSC).

4.2 Recommended books

None

4.2 Electronic Reserves (e-Reserves)

None

TOPICS

The following topics are covered in this module

Topic
Number

Topic Description

Strategic planning; systems thinking and its application to the

strategic process.

Strategic management controls and processes for the 21st century.

Strategic management
procedures.

Continuous improvement through ERP accounting systems and

implementation.

Activity-based costing

Triple bottom line reporting and the implications for environmental

risk management.

Strategic-based alignment of management controls.

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information

for

ERP

processes

and

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STUDY SCHOOL PLAN

Students should work through the suggested chapters as per the topic outline.
Additional pre-study school reading material or exercises might be loaded onto EDS
prior to the study school, so please keep an eye on any posts on the module
platform.
All study school presentations and material will be loaded onto EDS prior to the
study school.

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MODULE SPECIFIC STUDY PLAN

Activity

Time period

Advanced Financial Systems

Strategic planning; systems theory and its application to the

strategic process
Firms operating in a rapidly changing environment where products
and processes are constantly being redesigned and improved are
forced to re-evaluate how they do things. Improving performance
translates into constantly searching for ways to eliminate waste.
Thus, the control system for firms operating in a stable environment
should be different from the control system for those firms operating
in a continuous improvement environment.
Self-assessment
An organisation is neither open nor closed. Discuss.
Can interventions in systems result in predictable behaviour?
Reflection
Systems theory suggests that you model natural and human-made
phenomena as a set of interrelated components that work together
to accomplish some kind of process.
Systems are used by humans in everyday life to describe the
operation of a number of diverse phenomena. Systems or models
are also generalisations about reality.
One common way to present how things work is with a graphical
model. Systems tend to have similarities in the way they work.

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Before the first

study school

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Activity

Time period

Conclusion
Adaptive organisations will soon motivate employees to adapt and
grow to share fairly the wealth that innovation creates.
Adaptive organisations eventually replace dynamic and static
organisations in economic competition, so that within a generation
most people will have learnt to expect continuous improvement in
their life experience.
The fact that their ancestors once worked at the same job in the
same way for an entire lifetime will seem almost as incredible as
the fact that people used to stay at jobs that they didn't thoroughly
enjoy.
The concern for excellence will be based upon getting things done
on

time,

staying

close

to

the

customer,

using

hands-on

management and doing what the company knows best.

Ultimately, we need to think of a business as a highly connected
system, where change in one area may have many effects
elsewhere.
This implies that information about value chain activities and
customer sacrifice (such as post-purchase costs) must be collected
and made available.

Before the first

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Activity

Time period
study school

Strategic management controls and processes for the

21st century
Environmental costs are those costs incurred because poor
environmental quality exists or may exist. There are four categories
of environmental costs: prevention, detection, internal failure and
external failure.
The external failure category is divided into realised and unrealised
costs. Realised costs are those external costs the firm has to pay,
and unrealised or societal costs are caused by the firm, but paid for
by society.
Self-assessment
How do Wal-Marts control systems execute the companys strategy
and what is the basis on which Wal-Mart builds its competitive
advantage?
Reflection
"The most exciting and innovative work in management accounting
today is found in accounting theory, with new concepts, new
methodology even what may be called new economic philosophy
- rapidly taking shape.
And while there is enormous controversy over specifics, the
lineaments of the new manufacturing accounting are becoming
clearer every day" (Drucker, P.E. 1990. The emerging theory of
manufacturing. Harvard Business Review, May-June:94).
Senior management requires the organisation to attain its goals, but
individual members of the organisation have personal goals as well,
and these are not in all respects consistent with the companys
goals.

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Activity

Time period

Conclusion
Included in this topic are strategic cost management and strategic
environmental management which, when harnessed together, allow
the adoption of appropriate strategies to maintain cost leadership
while keeping the organisation's impact on the environment within
the minimum standards.
Providing high-quality parts on a timely basis to managers of
production departments is just as vital for the purchasing
department as it is for the company as a whole. This crossfunctional perspective, and its management, is the realm of
strategic management accounting.
Management style also has a major influence on control. The
specific choice of organisational structure influences the design of
the management control system. This allows managers to decide
on the strategic positioning of the company, which will be cost
leadership or product differentiation, or both.
Remember that a business process is a collection of activities that
takes one or more kinds of input and creates an output that is of
value to the customer.
Task control relates to specific tasks, most of which require little or
no judgement to perform. Management control systems involve
information, and companies require an infrastructure to process that
information.
The management control process involves managers and their staff
at all levels in the company. Most of the information in an
organisation is task control information, namely the number of items
ordered by customers, the quantity of material and units of
components used in the manufacturing of products.

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Activity

Time period

Strategic management information for ERP processes and

procedures
The customer for a business process may be an external customer
or it may be an internal customer. For example, what is sold
through marketing and sales is linked to what is procured and
produced by supply chain management.
Self-assessment
Consider how an ERP system can help ease the transitions for
organisations.
Reflection
A successful customer interaction is one in which the customer is
not required to interact separately with each business function
involved in the process.
If companies are not coordinating their business functions, a
customer could receive conflicting information and is likely to
quickly become dissatisfied.
An information system (IS) depends on data from other functional
areas. It includes the people, procedures, software and computers
that store, organise, analyse and deliver information.
More managers are now thinking in terms of business processes
rather than business functions.
Conclusion
The customer for a business process may be an external customer
or it may be an internal customer. For example, what is sold
through marketing and sales is linked to what is procured and

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Before the
second
study school

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Activity

Time period

produced by supply chain management.

An important aspect of this integration is the need to share
information between functional areas, and with business partners.
Enterprise

resource planning (ERP) software

provides this

capability by means of a single common database.

Increasing customer value to create a sustainable competitive
advantage is achieved through a judicious selection of strategies.
The most important distinction between strategy formulation and
management control is that management control is the process of
implementing those strategies.

Continuous improvement through ERP accounting systems

and implementation
The tools for addressing strategic and management control

Before the
second
study
school

systems are quite different. Managers addressing strategic control

issues have a focus primarily external to the organisation.
Managers addressing management control systems, on the other
hand, have primarily an internal focus.
Reflection
In a continuous improvement environment, the financial perspective
translates into continuously enhancing revenues, reducing costs
and improving asset utilisation.
Creating this continuous growth and improvement requires an
organisation to improve constantly its capability to deliver value to
customers and shareholders.
Procurement, product development, manufacturing and customer

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Activity
service are examples of processes.

Conclusion
Uncertainty in the company environment will increase and rapid
changes will emerge all the time. Products and technologies will
rapidly go out of date.
Competition will increase continuously. Flexibility and rapidity will
become primary objects for accounting measurement.
Activity-based costing can be used to trace costs to specific
customers, and the cost of serving the customers can affect pricing
decisions. Activity-based supplier costing uses activity-based
costing to identify the true costs of suppliers.

Activity-based costing
It is clear that the control system selected is contingent on the
environment in which the firm operates. Management accounting
offers three types of responsibility accounting systems: functionalbased, activity-based and strategic-based systems.
Reflection
Functional-based responsibility accounting systems focus on
organisational units such as departments and plants, use financial
outcome measures and static standards and benchmarks to
evaluate performance, and emphasise the status quo and
organisational stability.
Activity-based responsibility accounting systems, in contrast, focus
on processes, use both operational and financial measures and
dynamic standards, and emphasise and support continuous

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Time period

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Activity

Time period

improvement.
Activity-based

responsibility

accounting

adds

process

perspective.
Conclusion
Strategic-based responsibility accounting expands the number of
responsibility dimensions from two to four. Customer, learning and
growth perspectives are added.
The management control process involves managers and their staff
at all levels in the company. Most of the information in an
organisation is task control information, namely the number of items
ordered by customers, the quantity of material and units of
components used in the manufacturing of products.
Also, the performance measures become an integrated set of
measures linked to an organisations mission and strategy.

Triple bottom line reporting and the implications for

environmental risk management
Reporting environmental costs by category reveals their importance
and shows the opportunity for reducing environmental costs by
improving environmental performance.
Reflection
This course will integrate the above so that by using systems theory
and dynamics, you will be able to design, review and recommend
strategic financial systems in the area of strategic management

Before the
second study
school

accounting.
Reporting environmental costs by category reveals their importance

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Activity
and shows the opportunity for reducing environmental costs by
improving environmental performance.
The most important of these factors is an organisations culture.
Every management control system must recognise that an informal
organisation exists alongside the formal one and take this into
account in the system design.
Conclusion
This course will integrate the above so that by using systems theory
and dynamics, you will be able to design, review and recommend
strategic financial systems in the area of strategic management
accounting.
Businesses have had organisational structures that separated the
functional areas. Business schools have been similarly organised.
You might conclude that what happens in one functional area is not
closely related to what happens in others.
As you will learn in this course, functional areas are interdependent,
each requiring data from the others. The better a company can
integrate the activities of each functional area, the more successful
it will be in todays highly competitive environment.
Task control relates to specific tasks, most of which require little or
no judgement to perform. Management control systems involve
information, and companies require an infrastructure to process that
information. The internet provides that infrastructure, making
processing the information easier and faster, with fewer errors.

Strategic-based alignment of management controls

Today, business managers try to think in terms of business
processes that integrate the functional areas, thus promoting

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Time period

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Activity
efficiency and competitiveness.
Thus, management accounting must provide information that allows

Time period
Before the
second study
school

managers to focus on customer value, total quality management

and time-based competition.
Self-assessment
What factors or systems enhance or impede a companys ability to
enjoy economies of scale?
What circumstances lead to learning curve effects in business
operations?
What factors influence employees willingness to support efforts to
increase productivity?
Reflection
The most important distinction between strategy formulation and
management control is that management control is the process of
implementing those strategies.
Management control is concerned with the broadly defined activities
of managers deciding what is to be done within the general
constraints of strategy.
The internet facilitates coordination and control through the efficient
and effective processing of information, but cannot replace the
fundamental processes that are involved in management control.

Conclusion
Management control is facilitated by a formal system that includes a
recurring cycle of activities.
Finally, the management control of projects is considered as the

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Activity
most important difference between management control of ongoing
operations and management control of projects: ongoing operations
continue indefinitely, whereas a project ends.

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Time period

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ASSESSMENT

8.1 Assessment plan

Formative assessments will be in the form of group assignments based on the
learning material, as well as the students ability to monitor and assess his or her
own progress. Students will receive feedback from lecturers.
The student's final mark will comprise a year mark earned from the two group
assignments (40%) and a written examination (60%).

First examiners set and

assess the assignments and the examination. External examiners (markers) may
assist with the marking of the assignments and/or examinations.
8.2 General assignment numbers
Individual assignment 1 Activity-based costing
Individual assignment 2 Enterprise resource planning (ERP)
8.3 Due dates for assignments
Group assignment 1
Group assignment 2
8.4 Submission of assignments
Through the EDS system.

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8.5 Assignments

INDIVIDUAL ASSIGNMENT 1

Question 1

Cybercase - internet exercise

DUE DATE: 09/05/2014

(40 marks)

A consulting company that provides software and services relating to business

intelligence and analytics includes a library of customer success stories on its
website at http://www.sas.com/index.html.
Select the link, more customer success and then customers by solution. Then
click on the financial intelligence/activity-based management link. Choose two firms
and read about their experiences with activity-based costing (ABC) so that you can
then answer the following five questions.

1. What were the reasons offered for implementing ABC?

2. What implementation procedures were used?
3. How many activities were identified?
4. What types of benefits (results) were achieved?
5. What problems were mentioned, if any?

Your report must be a minimum of ten pages, excluding appendices, with 1.5
spacing and Arial font 12.

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Question 2 Cell Cs challenge in the marketplace

(30 marks)

While the South African cellular market has seen remarkable growth, the third
entrant into the market has had a tough job achieving the growth experienced by the
first two cellular network operators in the early establishing years.

1.

Does Cell C have something significantly different to offer the market in order
to attract users?

2.

What is the basis on which Cell C expects to build its competitive advantage?

3.

How could Cell Cs systems help to execute its current strategy?

Question 3

Enterprise resource planning

(30 marks)

Compare customer relationship management (CRM) and supply chain management

(SCM).
1.

How are they similar or different?

2.

What business technology is used in each?

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INDIVIDUAL ASSIGNMENT 2

Question 1 Environmental signalling

Due Date: 08/08/2014

(60 marks)

Is environmental reporting a form of signalling? Does it follow that those firms that
voluntarily disclose environmental information are superior performers, whereas
those who dont are not superior performers? This assignment requires you to
compare the economic performance of firms with environmental disclosure with
those that have no disclosure.

You can refer to sources from South Africa as well as the European Union. Your
report must be a minimum of ten pages, excluding appendices, with 1.5 spacing and
Arial font 12.

Question 2

Enterprise resource planning

(40 marks)

Refer to page 143 of Concepts in enterprise resource planning and answer the
following question:
Use the internet to research the latest news surrounding the Sarbanes-Oxley Act.
Make a list of companies that have been charged with fraudulent activities in the past
three years. Can you see any patterns of an increase or decrease in fraud over the
past few years?

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8.6 Marking guideline/matrix/rubric

Not applicable.
8.7 Self-assessment questions
Not applicable.

OTHER ASSESSMENT METHODS

Not applicable.

10

EXAMINATION
The examination may consist of multiple-choice questions, short questions,
case studies, calculations and scenarios. As a rule, multiple-choice questions
do not exceed 40% of the total number of marks. However, any combination of
the above may apply.
Examination details will be forwarded to students after the examination paper
has been prepared.

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FREQUENTLY ASKED QUESTIONS

Not applicable.

12

SOURCES CONSULTED
Not applicable.

27

13

CONCLUSION

The most important distinction between strategy formulation and management

control is that management control is the process of implementing those strategies.
The management control process involves managers and their staff at all levels in
the company. Most of the information in an organisation is task control information,
namely, the number of items ordered by customers, the quantity of material and units
of components used in the manufacturing of products.
Management control is concerned with the broadly defined activities of managers
deciding what is to be done within the general constraints of strategy. Task control
relates to specific tasks, most of which require little or no judgement to perform.
Management control systems involve information, and companies require an
infrastructure to process that information. The internet provides that infrastructure,
making processing the information easier and faster, with fewer errors.
Situations exist where not all employees, and not even all managers, should be
involved in planning and budgeting processes and, in particular, the setting of
performance targets.
These are those:
First, targets can effectively stem from a top-down process when top-management
has knowledge of the operating business and operational prospects that is either
sufficient for setting properly challenging performance targets or that essentially
subsumes the knowledge possessed by the subordinates.
A second situation that can lead to top-down target setting is where top-level
managers have the information available for evaluating performance on a relative
basis.
Allowing employees to participate in and influence the process of setting their
performance targets can have several benefits. One is commitment to achieve the
targets. Employees who are actively involved in setting their performance targets are
more likely to understand why the targets were set at the levels they were.
Please feel free to contact your lecturers via email with any content related queries.

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14

ADDENDUM
Not applicable.

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