The Accounts Payable Network2100 RiverEdge ParkwaySuite 380Atlanta, GA 30328Phone: 770-984-1184Fax: 770-984-1174membercare@TheAPNetwork.com

February 2009Volume 1, Issue 6

Inside This Issue

AP Answers .........................3

TAPN Tools ..........................3

Did You Know? ...................4

Continuing Education Opportunities......................4

TAPN PollWhat is your organization’s top process improvement

priority for 2009?

.... 30%

T&E Enhancements .... 17%

Electronic Invoicing and/or

Payments ................ 41%

Internal Controls.......... 11%

“What can be added to the happiness of a person who is in health, out of debt, and

has a clear conscience?”

Adam Smith

Lowering Costs with Open Source ERP

...continued on pg. 2

Enterprise software, introduced more than 30 years ago, has become a critical component of doing business today. The ability to coordinate operational

a single system eliminates redundancy, increases visibility and facilitates management.

Another critical component of doing business today is cutting costs. While enter-prise resource manage-ment (ERP) systems typi-cally justify their expenses

the implementation and maintenance costs can be substantial, especially for smaller organizations.

While many of these orga-nizations turn to lower-cost web-based ERP systems – like those offered by large providers such as Oracle and SAP – others are dis-covering another inexpen-sive option: open source. Open source ERP systems give users functionality comparable to traditional systems at a much lower cost. However, there are some challenges, including limited technical support and potentially high main-tenance costs.

How Open Source Works

Open source software is developed by programmers working collaboratively to improve upon previous ver-sions. Once their updated

version is complete, they make that code available for other programmers to improve. No single indi-vidual or company owns the copyright.

Many open source soft-ware suites are freely available, while others are licensed. When the software is licensed, the developer still must pro-vide users with the source code. Where open source software suites are freely available, the developers make money by charging for implementation and consulting services.

“Any user can download the software, but the real value comes from getting technical support,” says Bill Freedman, marketing director for open source ERP software Compiere. “But there are also many people who are quite suc-cessful with the software that never contact us. That’s one of the amazing things about open source.”

What Can Open Source ERP Do?

Some organizations believe that because open source software systems are often free to download that they must also lack necessary features. According to Jim Clark, president and CEO of open source software provider, OpenPro, that’s not the case. Open source accounting modules

can manage the entire procure-to-pay cycle similar to larger proprietary ERP systems.

“The payables module in OpenPro can integrate with general ledger and with purchasing to do three-way matching of invoices,” Clark says. “For invoice entry you can do manual keying, optical character recognition, or attach an electronic document to the payables transaction.” Open source ERP systems can receive invoice data from third party e-invoicing networks like OB10 and DO2 and can interface with third-party OCR engines.

Open source ERP systems also traditionally include comprehensive automated

OpenPro, which is a web-based ERP system, routes invoices to various approv-ers via email and includes features such as escala-tions and reminders, which can be adjusted based on the organization’s busi-ness rules.

In addition, highly-spe-cialized functions like management reports can be generated with open source software. Clark says that OpenPro includes 100 standard management reports and can fully inte-grate with other reporting tools including the open source Jasper Reporting

AP Monthly is an extension of The Accounts Payable

Network (www.tapn.com), the complete accounts payable resource for

© Copyright 2009 Financial Operations Networks

Page 2 www.tapn.com VOLUME 1, ISSUE 6

Open Source ERP continued...

...continued on pg. 3

AP Monthly is a publication of The Accounts Payable Network, the complete resource for executives and managers responsible for accounts payable. TAPN provides deep and comprehensive resources to help you meet your accounts payable objectives and challenges.

VP & Managing Editor:Rob RogersContributing Editor: Patrick HarbinProduction Editor:Mary Arnold

software and proprietary Crystal Reporting suite.

Users interact with the reports via the executive desktop interface, which graphically represents the metrics. “The executive desktop gives you real-time data on invoices that are late, cash balances; that kind of thing,” he says. “It can be represented as little dials or graphs on your screen.”

Other features typically found in open source ERP systems include requisition and purchase order gen-eration, updatable sales tax charts, 1099 reporting and vendor portals. Also, many open source systems have functionality targeted

For instance, Compiere is geared towards retail and distribution centers and features extensive material-management functionality, such as the ability to automatically trig-ger material replenishment orders when necessary.

-ing functions are pretty horizontal and can apply to all industries,” Freed-man says. “But these days people aren’t buying ERP

accounting. They are focus-

aspects.”

There are a variety of open source ERP systems on the market today. While many

others are vanilla and are meant for a broad audi-ence. Like with proprietary systems, open source ERP can be as general or spe-

Open source software pro-viders are often small busi-nesses and lack the brand name recognition enjoyed by larger, proprietary ERP providers. As a result, open source providers often rely on the particular strengths of their market - low cost and software freedom - when promoting their systems.

Cost

and often the reason the buyer initially considers open source technology - is the cost. Many open source ERP systems can be downloaded free of charge. Instead of purchas-ing a license to use the software, the user is pur-chasing implementation and maintenance services from the provider. If the user’s technical skills are high enough, they can fully implement and maintain the system without making a single payment to the provider.

However, ERP providers and independent consul-tants recommend purchas-ing the provider’s imple-mentation services, adding that the costs of doing it yourself can quickly mount.

The cost of bringing in the provider to install the ERP is still low compared to the implementation costs of many proprietary pack-ages. According to Clark, the cost to fully implement OpenPro is $1,000 per user. The annual main-tenance fee adds up to 10 percent of the total software cost. On the other

hand, an Aberdeen report states that the cost per user for the least expen-sive proprietary system, Lawson, is more than $2,000.

An article in CPA Journal states that hardware costs are also typically lower for organizations switching to open source account-ing systems because many of them are built on Linux and UNIX operating systems, which can run on older hardware. In addi-tion, the cost of putting together an RFP is general-ly less because the bulk of most RFP efforts focus on assessing license propos-als, which typically do not apply to open source.

“The fact is that it is costly to implement an ERP,” Freedman says. “The af-fordability of open source is important. But, the most important thing is that the risk and predictability elements of open source software evaluation and deployment are more in line with what mid-market companies are looking for.”

Technology Freedom

Another draw of open source software outside

freedom users have to alter the software. One of the most common open source licenses is called a GNU license, which means the provider gives the user a workable piece of software along with a copy of the source code. Users can make any changes they want, although they are required to share them with the open source com-munity.

© Copyright 2009 Financial Operations Networks

VOLUME 1, ISSUE 6 www.tapn.com Page 3

Open Source ERP continued...

TAPN ToolsCredit and Returns Policy

When a delivery received from a vendor must be returned in whole or in part, it’s important to process the return on a timely basis and ensure that credit is received by your company prior to processing payment of the original invoice that corresponds to the return.

Therefore a company’s accounts payable policy manual should have a credit & returns policy to ensure that it keeps track of and gets credit for merchandise it returned.

TAPN’s Credit & Returns Policy can be used as a guide for the development of your own policy.

Find the Credit & Returns Policy in the AP Tools Suite under AP Policy Manual Templates, at www.tapn.com/APPolicyManual.

AP AnswersQ: Are payments made to an LLC reportable on form 1099-MISC?

A: It depends. Assuming other reporting requirements are present—i.e. you paid $600 or more for services (not merchandise)—you then have to know what type of LLC you are dealing with. The corporate exception could apply. An LLC may be disregarded entity (sole proprietor), a partnership, or a corporation. The revised form W-9 (October 2007) allows a vendor to indicate which of these it is. The W-9 prior to October 2007 did not allow reporting of this level of detail. If the LLC is a corporation for tax purposes, then you do not have to report payments to it. However, most LLCs are either disregarded entities or partnerships and are reportable.

“That’s the way open source works,” Freed-man says. “Everything is transparent. People have the ability to add and enhance.”

Although users can change anything they want, Freed-man says that few users ever make code-level alterations. Most open source software can be

user’s business rules (such

process) without the need to access the source code.

source is that the user is not locked into an agree-ment with their provider. In a traditional ERP relation-ship, the buyer has a license to use the propri-etary software. If they do not renew the license, they lose functionality, if not to-tal access to the software.

In an open source environ-ment, regardless of what happens to the software provider, the user will always have access to their ERP. “Open source code can’t be bought or merged out of existence,” Freedman says. “From a user-perspective, that means your investment has guaranteed long-term value.”

Source

open source technology, there are some pitfalls that potential users should be aware of. Perhaps the most common mistake is turning to open source only for cost reasons with no

your business. This can lead to implementing a so-lution that you do not fully understand or is not suited for your needs.

According to Ross Patter-son of Panorama Con-sulting, some third-party bolt-on solutions cannot integrate easily into an open source ERP system, which puts a burden on the user’s IT department to make the two pieces of software work together.

support outside of the provider, limited features compared to some more expensive systems, and handling potentially high IT costs if you implement the system on your own.

“One of my clients was interested in open source and we looked at it closely,” says Eric Kimber-ling, owner of Panorama Consulting. “The cost of

and writing all the code erased the savings he would have seen [over] a licensed ERP.”

The key to a successful open source ERP project is the same as with any system. Buyers should thoroughly research the pros and cons of each system, seek testimoni-als from other users, and schedule demos to see the system in action. While the cost of an open source ERP system is typically a fraction of proprietary software, it does not mean it requires a fraction of the effort.

Open source can help organizations save money while managing their back-

low cost of operation, open

small organizations. How-ever, the broad freedom to customize the software might overwhelm small organizations with limited IT resources. Be sure to research each alterna-tive and realize that open source software does not mean free software.

Do you have experience with an open source ERP system, good or bad? Let us know. Contact pharbin@theapnetwork.com.

© Copyright 2009 Financial Operations Networks

Page 4 www.tapn.com VOLUME 1, ISSUE 6

Continuing Education Opportunities

Accounts Payable Conference & Expo

When:

March 11-13, 2009

Where:

Hyatt Regency Hill Country Resort & SpaSan Antonio, TX

What:

Two hard-hitting events, IOMA’s Advanced AP Institute and RECAP’s Enhancing AP Operations Conference have once again combined to give you more sessions, more pre-conference workshops, more sponsors and exhibitors, and more networking opportunities! Register at www.tapn.com/APOperations2009 or call 770-984-1184.

for AP managers and specialists

The Accredited Payables Manager (APM) and Accredited Payables Specialist (APS) designations set the standard in the Accounts Payable profession and are international symbols of excellence. The IOMA/TAPN

signify that an individual has demonstrated the knowledge and skills required to perform well in today’s complex AP environment.

group of accredited AP professionals around the world whose skills are recognized and acknowledged – you get the respect you deserve. For more information on

The IRS has made something easy!

and magnetic 1099 forms with the IRS is Feb. 28, 2008 while the deadline

March 31, 2008. However, the IRS makes it easy for businesses that need a little extra time to receive a

you have to do is provide

8809.

By obtaining an extension, you have 30 extra days

the IRS. This provides time to make revisions to 1099s issued to payees, instead of having to make corrections – and possibly face penalties – later. For more, including a link to form 8809, see www.tapn.com/1099extension.

For tax year 2008 and beyond, the IRS requires

forms 1042-S, 1098 and 1099 via its FIRE program, Filing Information Returns Electronically. The IRS no longer accepts magnetic

an easier and more cost-effective alternative

magnetic media or paper.

electronically for 250 or more returns applies

each form. For instance: if

and 300 1099s, you are

electronically, but you do not have to meet this requirement for the 1098s. If you have less than 250

fact the IRS encourages it.

The IRS requires companies obtain software

in the proper format as required by Publication 1220. For a list of software providers, access the IRS Web site and go to Approved IRS e-File for Business Providers.

Form W-9 Reminder

Make sure you’re using the IRS’s updated Form W-9 (October 2007), which

tax status of LLCs, or solicit that LLC detail on your own substitute W-9.

For more information on the FIRE system, including links to the FIRE system, go to www.tapn.com/FIRE.

Did You Know?

© Copyright 2009 Financial Operations Networks