ERP Definition
ERP (Enterprise Resource Planning) is an integrated software system that helps an
organization manage and automate its core business processes — such as finance,
sales, purchasing, inventory, production, and human resources — by storing and
sharing data in a single common database, so all departments work with the same
real-time information instead of separate, disconnected systems.
One-line version (for quick recall):
"ERP is a software system that integrates all departments of a business onto one
common platform so data and processes flow smoothly between them."
Break it down word by word (helps you remember it):
Enterprise → the whole organization/company, across all its departments
Resource → the company's assets — money, materials, people, machines, time
Planning → planning and managing how those resources are used efficiently
What is SAP?
SAP stands for Systems Applications and Products in Data Processing. SAP, by
definition, is also the name of the ERP (Enterprise Resource Planning) software as
well as the name of the company. SAP Software is a European multinational, founded
in 1972 by Wellenreuther, Hopp, Hector, Plattner, and Tschira. They develop software
solutions for managing business operations and customer relationships.
SAP ERP is an ERP software product developed by the German company SAP SE that
integrates a company's core business processes — like Finance, Sales, Purchasing,
Inventory, Production, and HR — into modules that share one common database,
allowing real-time data flow across the entire organization.
"SAP ERP is SAP's own ERP software product, which integrates a company's business
processes into modules like FI, CO, SD, MM, PP, and HR— all connected through a
single database."
Breaking down "SAP":
SAP stands for Systeme, Anwendungen und Produkte (German), which translates to
"Systems, Applications, and Products in Data Processing."
Systems → the software framework that runs everything
Applications → the business functions it handles (finance, sales, etc.)
Products → what it delivers to run and manage a company?
SAP FICO is a module of SAP ERP used for financial reporting, both externally and
internally. Its objective is to record every financial transaction posted by an entity and
produce accurate financial statements at the end of each trading period. The SAP
FICO full form is FI (Financial Accounting) and CO (Controlling) or called as
Management accounting.
SAP FI is made of several tightly integrated sub-modules. A trial balance can
extracted at any time and will always balance because every sub-module posts to the
general ledger automatically.
What is a Company in SAP?
A company is the highest organizational unit in SAP used to consolidate the financial
statements of several company codes. It sits above the company code in the
enterprise structure and identified by a unique company ID within the corporate
group.
In SAP, IMG stands for Implementation Guide.
The SAP Reference IMG is the central configuration menu in SAP where system
administrators, functional consultants, and developers configure, customize, and set
up all the rules, processes, and organizational structures for an enterprise.
What is a Company Code in SAP?
A company code is the central organizational unit of Financial Accounting in SAP. It
represents an independent legal entity for which a complete set of accounts and
statutory financial statements, such as the balance sheet and profit and loss
statement, can be prepared.
Creating a company code is a two-step process: first define the company code, and
then assign it to a company.
In SAP, the complete set of general ledger accounts used by a company or group of
companies called a chart of accounts. These accounts feed directly into financial
statements.