cut over strategy

Cut Over Strategy – Transactional Data

BSNL ERP Implementation Project

Cutover Strategy

A number of preparatory activities need to be carried out to make

smooth transition to a new operational system in the live production

environment.

The Cutover Strategy seeks to

explain the steps that need to be taken

draw a schedule for the tasks and activities that need to be completed

before transition

Specify pre-requisites and business decisions required to ensure a

smooth transition

Cutover Strategy - Transition

Transition to SAP ECC involves

Execution of all transaction processing from the Go-live date in

SAP ECC system

Switching off all legacy systems for transaction processing from

start of Blackout Period

Ensure no manual transactions are carried out during the

blackout period

Cutover Strategy - Prerequisites

Pre-requisites for Transition

System Configurations complete

System Testing, Roles & Authorisations, End User Training Complete

Ensure all the number ranges for all the modules have been maintained in the

production system

Training for Super users and end users completed

Upload tools wherever applicable are tested and ready

Transfer/creation of all necessary master data in SAP ECC system (Material

Masters, BOM, Routings, Vendor, Customer, Operation and Collection

Bank ,GL Accounts, Employee Master)

Cutover Strategy – Business Decisions

Some important Business Decisions required

Stages and levels at which open documents need to be taken

over in SAP ECC system

Data that are go-live critical and non-go-live critical

Assessing resource requirements and allocation of resources to

supplement efforts of the core team

Recognising limitations on historical data availability

Reconciliation of open items with General Ledger

Feasible dates for cessation of operation in business critical areas

Cutover Strategy – Business Decisions

Black out Period

A smooth transition may warrant a complete suspension of

business activities for a few days in order to control the switch

over process and steer the organisation to its new roadmap in the

ERP environment.

Communicate the blackout period to all major vendors & customers.

Communicate the importance of Cut-over activities & the blackout

period internally within the organization

Cutover Activities – Proposal

Cut Over - Master Data

GL Accounts – Group Chart of Accounts and Operation Chart of Accounts

Bank masters (Collection and Operations Banks) needs to be created in system

Fund centre and commitment items needs to be created in system.

Investment programs and structures needs to be created in system

Vendor Masters including Employee Vendor – the finalized vendor masters including

all relevant details for Sales Taxes, Central Excise, Withholding Taxes Payment

Terms etc.

Input and Output Tax Codes

Custom Table – Electricity master needs to be maintained for each and every

electricity connection

Note: Asset Masters have not been included as they are technically categorized

along with Asset balance upload.

Financial AccountingFinancial Accounting


ControllingControlling

Cost Centers – The standard hierarchy of cost centers together with all the constituent cost centers for BSNL

Internal Orders, BTS / Exchange wise and others needs to be maintained in the system

Material ManagementMaterial Management

Material Masters – all SAP material master codes, together with the information required for the different views

Service masters needs to be maintained in system. All CIN Masters like Central Excise Chapter Ids and relationships to be maintained at various

levels and Tax Condition Records

Real Estate ManagementReal Estate Management

Real Estate Objects – Land, Building, Staff Quarters, Towers Real Estate Contracts Business Partners – Customers and Vendors


Sales and DistributionSales and Distribution

Customer Masters – the finalized Customer masters to be present in the system including all relevant details for Sales Taxes, Central Excise, Payment Terms etc.

Sales Condition Records for Prices, Discounts and Taxes

Customer Credit control masters along with credit limit needs to be maintained in system.

Procurement Activities

Open Purchase RequisitionOpen Purchase Requisition

In Legacy system, Convert all open PR into Purchase Orders for procurements that need to be committed for business requirements and Close all

open PRs that are not approved.

No open purchase requisitions will be uploaded in SAP ECC system. Purchase Requisition needs to be created from respective module (PM,MM,

PS etc.) in SAP by end users after go-live.

Open ContractsOpen Contracts

Only Contracts that are completely unexecuted will be created in SAP with full values and

quantity.

Partially executed Contracts will be created in SAP only for unexecuted balance quantity and

value.

Open Contracts will be created manually or through upload tool based on volume


Open Purchase OrderOpen Purchase Order

Only POs that are completely unexecuted will be created in SAP with full values and

quantity.

Partially executed PO’s will be created only for balance quantity and value.

If delivery on open POs is expected during black out period, inform Vendors to expedite

the delivery latest by cutoff date else the PO’s shall be considered as open

In Legacy system, Short close all POs for which receipts is not expected in future.

Create mapping between the pricing and other terms and conditions of legacy PO’s and

SAP pricing procedures for PO’s to be carried over in SAP.

In Legacy system, Invoice verification should be complete for the goods received till

cutover date.

Where it is not possible to complete invoice verification for open GRN’s the same may be

provided as outstanding liabilities in separate G/L account. After go-live, the invoice received will

have to be entered as non PO financial invoice crediting the vendor and debiting the separate

G/L account made for such GRN’s.

All excise formalities for taking credit in respect to goods receipt should be completed in Legacy.

All Vendors and sub-contractors be informed to send their supply for the cutover month well in

advance.

Open Purchase Orders to be created manually or through upload tool based on volume.


Open Purchase OrderOpen Purchase Order


Open Service Purchase OrdersOpen Service Purchase Orders

All Open Service Purchase Orders of the legacy system should be short closed

In SAP ECC, Service Purchase Order should be created manually or through upload tool based on

volume for the balance unexecuted service.

Where it is not possible to complete invoice verification for open service entry sheet, same logic of

open GRN to be followed.

GRN for Rejected MaterialGRN for Rejected Material

Rejected GR will not be considered for upload in the SAP system. Necessary excise reversal and

return of goods to the vendor will have to be made in legacy before go live and only the net

balance in RG23 A/C registers will be considered for upload.

In case a GRN needs to be re-accepted; the acceptance decision to be taken on or before the

cut off date to be considered for stock upload and steps necessary for normal GRNs be followed

as described above.

Inventory & Production

• No Material Issues/ Transfers/ Receipts/ Returns will be carried out during the Blackout period.

• All Vendors be requested not to send supplies between these dates and expedite supplies for items

required urgently.

• All departments be asked to make estimate of their requirements and requisition the material

sufficiently in advance.

• No dispatches of raw materials or packing materials from Vendor or from BSNL to Sub-contractors

will be made during Blackout Period.

• Break-up of quantity, value, batch /serial no. wherever applicable of Stock needs to be provided for

all materials in order to track them in SAP. If batch numbers are not provided, internal batch numbers

will be used.

• The details of Material stocks lying with Sub-contractor needs to be provided with break-up of

quantity, value, batch no. wherever applicable and Vendor Code. If batch numbers are not provided,

internal batch numbers will be used

• Stock taking, reconciliation and valuation activities for raw material, finished goods etc. be completed

on or before cut off date.

Stocks for all types of materials that are to be dealt with in SAP effective from go live date is required to be present in SAP system.

Project Systems – Internal Projects

• Entire Capital Budget shall be maintained in SAP• For Project’s Budget, it is suggested to use ‘Plan Version’ in SAP to capture budget for the total life of

the project. (In SAP, there can be different Plan versions for different purposes but availability control works on ‘Budget’ figures only)

• In SAP, budget for the Project shall be entered for only; as in SAP, Investment programs for year shall be created. No history of Capex or Opex budget shall be migrated to SAP.

• For Projects started in fiscal year other than, no budget shall be entered for any period before 1st April----. (Plan version shall be used to capture the figures).

BudgetBudget

Actual Expense (Current Year)Actual Expense (Current Year)

• Necessary accounting entries shall be posted using appropriate P&L Accounts at WBS element or network element level

• Other side of the entry will be to a P&L Clearing Account in respective profit centre; offsetting entry will clear the expenses in P&L Account (Clearing P&L Account will not be a cost element).

Project Systems – Internal Projects

• Consolidated accounting entry shall be posted for the total amount of expenses by using a ‘dummy P&L account’.

• This account shall be defined as ‘exempt from budget check’ and shall be used only for posting historical cost on the job.

• Once these costs are posted, this account shall be blocked. Other side of the entry will be to a P&L Clearing Account in respective profit centre; offsetting entry will clear the expenses in P&L Account (Clearing P&L Account will not be a cost element).

Actual Expense (Previous Year)Actual Expense (Previous Year)

WIPWIP

• As total historical cost has been posted on the project as at cut-off date, project will be settled to respective asset under construction. At AUC level, it may not be possible to know cost of each type (by cost element) as costs incurred in previous financial years have been migrated using a ‘dummy P&L account’.

• At the time of capitalisation of asset from AUC, user will have to refer project cost report for defining settlement rule. Based on the defined settlement rules, balance shall be transferred from AUC to final asset

• This exercise need to be done only for migrated projects. For Projects started in SAP, this shall not be necessary.

Plant Maintenance

• Any open notification shall be completed in the legacy system itself. SAP will be used to create new notifications only. No historical data of notifications for any technical object shall be migrated to SAP.

Open NotificationsOpen Notifications

Open Maintenance OrdersOpen Maintenance Orders

• Any open service orders in legacy system shall be short closed and new service orders can be opened in SAP. No historical data for service orders or service related costs with respect to any equipment or notification shall be migrated to SAP.

Human Resources – Other HR Data

Area Details Criticality

PA Data for Appointment and Go-live action is critical for Go-Live. This will be extracted from HRMS. However there will be some missing fields which need to be filled. Rest of the actions can be uploaded later.

Most Critical : Required for Go-live

Organizational Structure

Org Structure of the Circle, Units as of the cut off date will have to built in SAP as part of Cut Over. This is not available in HRMS.

Most Critical : Required for Go-live

Time Details All Employee Leave balances , Work schedules as per the cut off date will need to uploaded.

Critical : This will effect the leave process but can be updated later

Loans and Advances

All current loans will be required with their balances would be required.

Very Critical : Required before the 1st payroll run in SAP and after last payroll run in HRMS

Claims Claims data for Briefcase and Mobile will be required. Critical : This will effect the Claims process but can be updated later

Medical The medical Scheme and any medical re-imbursement would need to be known

Critical : This will effect the Medical process.

LTC People who have availed LTC in the current block , their data will be required.

Critical : This will effect the LTC process but can be updated later

Human ResourcesHuman Resources

Financial Accounting

All Vendor open items, whether belonging to previous financial year or earlier, will need to be

transferred to SAP at line item level

Each line item shall represent an individual transaction like an invoice, a debit or credit note or

an advance or payment etc.

Special GL transactions like advances and deposits will need to be uploaded with appropriate

special GL indicators and posting keys.

Payment terms will need special consideration as various open items may be at different stages

of maturity toward due date for payment.

For open items of vendor accounts, block for payment indicator should be activated. As payment

to vendor will be made on case to case basis.

In case of all vendors subject to withholding tax, all line items should be uploaded before

application of TDS code in the Vendor master.

Open Items in Vendor AccountsOpen Items in Vendor Accounts

All Customer open items, whether belonging to previous financial year or earlier, will need to be

transferred to SAP at line item level

Each line item shall represent an individual transaction like an invoice, a debit or credit note or

an advance or on account payment etc.

Transactions like advances and deposits will need to be uploaded with appropriate special GL

indicators and posting keys.

Payment terms will need special consideration as various open items may be at different stages

of maturity toward due date for payment.

Open Items in Customer AccountsOpen Items in Customer Accounts


Inventory at the cut over date will be uploaded using material master at Plant and

Storage Location level

Separate GL Accounts will be used for initial upload of inventory for the offsetting

entry. None of the GL accounts used shall be active for budget checks; clearing

commitment shall be assigned to these GL accounts and after data is uploaded,

Inventory accounts shall be assigned appropriate commitment account. Offsetting

account shall be blocked for posting in respective company code.

Reconciliation will be necessary to ensure that the value of inventories stated

in the financial accounting is in agreement with the aggregate of values

uploaded at material master records level.

Inventory shall be valued at moving average price at SSA/CTSD level.

Inventory shall be valued at moving average price for all type of materials

Inventory ValuesInventory Values


The Migration of Assets which are active in Asset Register is a two-step process.

In the first step, the account balances for the Asset Control accounts would be uploaded as a

part of GL Account balances

Thereafter, the Asset Masters would be created along with the individual asset wise information

for the following: Original Cost of the Asset for Asset capitalized as at cut off date i.e. 31.03.2011

Accumulated Depreciation of the Asset for Asset capitalized as at cut off date

Depreciation Charged for Asset transactions occurred between April 1st 2011 to cutover date

Original cost of the Assets for asset capitalized during the period from April 1st 2011 to cutover date

Additionally, the above information would be also uploaded for the Group Assets to represent the Income Tax Block of Asset balances.

Fixed Asset ValuesFixed Asset Values


The business will have to identify and break-up the balance in the CWIP account of legacy

system by individual Asset Under Construction (AUCs).

Internal Orders or Projects would be created for all such AUCs

No depreciation recalculations will be made in SAP for any earlier periods or years in SAP and

the configuration settings will be made to assign appropriate transfer date and period up to

which depreciation is posted.

The Depreciation for the last month should be provided and posted in the legacy system (i.e.

Depreciation for the period April-2010 to cut off month end should be posted in legacy system;

Alternatively, Depreciation can be charged in SAP from the start of the financial year and legacy

Trial balance need to be adjusted with this figure.

Capital Work in ProgressCapital Work in Progress

DepreciationDepreciation


Majority of balance sheet accounts (like TDS payable, certain other statutory liabilities etc) will be uploaded with their open items; these balances shall be uploaded duly for all line items per GL as at cut off date

It is recommended that attempt should be made to clear all such liabilities before cut over date and reduce the balance in these accounts to ‘NIL’.

Balance Sheet Open items if unavoidable, in such accounts will need to be transferred to SAP at line item level and clear subsequently through normal payment (No statutory forms will be available in SAP for TDS or TCS for the deduction made up-to cut off date).

In case of Bank balances upload, following steps should be followed Bank Reconciliation should be completed in legacy for balances up to cut off date. Balances as per bank statement to be transferred to the main bank account. Un-reconciled items such as cheques issued but not presented for payment or cheques

deposited but credited shall be transferred to respective bank sub-accounts (incoming/outgoing payment).

Business Area wise cash balances as at cut off date will be transferred as a receipt in the corresponding cash journals.

Other Open ItemsOther Open Items


Individual Balances in Profit & Loss GL Accounts will be uploaded in SAP as at cut off date.

Balances of P&L Account is required at Cost Centre, Business Area and Profit Centre level (i.e.

department/network element, PAU and LOB)

GL Account BalancesGL Account Balances


Summary

Acceptance of Black out period

Provide business-wise volume of open cutover objects (for example open POs, Open Sale orders etc.) to enable us to decide whether upload tools need to be made.

Communicate the importance of Cut-over activities & the blackout period internally within the organization

Communicate the blackout period to all major vendors & customers.

Stock data need to be Complete and Accurate for smooth change over to SAP

Stock/ Customer / Vendor balances/Fixed Asset & other balances to be tallied with Trial Balance before upload; any differences shall be posted to a ‘Suspense Account’ which shall be cleared post go-live.

Questions and Answers?

Thank You

cut over strategy

Documents

asset masters

finalized vendor masters

sap ecc systemswitching

systemvendor masters

sap ecc involvesexecution

sap ecc systemdata

live production environment

employee vendor