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Enterprise resources planning (ERP) systems can be regarded as one of the most innovative developments in information technology (IT). With the increasing interest of many organizations in moving to process-based IT infrastructure from functional, in the future the ERP systems will become most widespread IT solutions.
A critical research issue one in the fields of management and accounting decision-making on key issues of research questions the accounting information system (AIS) with the organizational requirements for information communication and control. AIS is defined a processes financial information and supports decision everyday jobs to manage of organizational activities and context of coordination as a computer-based system.
The main objectives of the study were to analyses the role and purpose of Enterprise Resource Planning (ERP) Systems and Accounting Information Systems (AIS). The study also found that the benefits and drawbacks for companies implementing ERPs and the major implications were identified for AISs as well as how AISs was affected by after the implementation of the full ERP system.
Role and purpose of Enterprise Resource Planning (ERP) systems
In this world, many organizations were using Enterprise resource planning (ERP) systems. This is because Enterprise Resource Planning (ERP) software is available for any business. Normally the most company are considering to use the ERP system into their business because within company in different it helps to communicate all information. It simplifies a business process and automates the business process. It makes it easier to achieve the objective. When a company is growing up, it needs a software package to make it easy to control the business. And the ERP software is suitable for it because it link together the disparate functions for example sales and marketing, human resources, and finance and accounting, into a single system environment. A company can make a right decision in a short time .It is very easy for you to keep track whatever where you are at which areas. ERP software for you to keep going, it makes it simple and easy understanding, so that a business can run the process with smoothly and efficiently.
At the organization level, ERP's effective role to ensure accountability. This will make one know that ERP is not just meant to simplicity enterprise operations but take part in a major role in general development of an organization.
Perceived benefits and drawbacks for companies of implementing ERPs
ERP system will help you to produce a better product and reduce the costs, notice what's happening in all area of your business, make smarter decision, get the right customer at right time, keep the promises you make to the customer.
ERP system will help to improve the accuracy of information, facilitates communication within firms, save time and lower costs. Thus ERP systems applications enable companies to increase their productivity and efficiency. The move to enterprise resources planning has given a company a strong foundation for excellence in its core business functions and the support it need for its overall growth strategy as it continues to expand internationally.
ERP system will provide accurate information for the user. For example when a customer places an order it can easily reach the other part which is affected by the order. This application helps as a result businesses to easily manage their day to day operations.
The supply chain management systems are another useful systems application which helps businesses to manage relationship with their suppliers. These systems help provide accurate information between suppliers and companies. It also helps companies to get the right amount of product and take it to place of consumption with no much time and most importantly at a very low cost.
The ERP software needed to achieve strategic insight, increase productivity, and respond flexibly to change markets to compete improved. The raise in automation of accounting, consolidation and reporting, and working capital management processes has eliminate redundant systems for financial reporting. ERP supports financial, workforce and operations analytics, as well as consolidated financial and statutory reporting; planning, budgeting, and forecasting, strategy management and scorecards, and risk management. The employees can complete all their job functions effectively and efficiently with access the critical data, applications, and analytical tools. For instance, Deloitte management is required to analyze the performance of the company on weekly basis. The reports required for management's usage are such as project acquisition, engagement management, incident management and service-level agreement management. The person in charge in finance department only need to click a few buttons in order to produce those reports subsequent to the customization of SAP function to the need of the respective professional service provider to minimize the time in producing the required reports.
The usage of SAP has improved the performance management of the company. Employees are required to do carrier planning by SAP online prior commencement of the each financial period. Goals are sets and expectations from company are clearly delivered to employee. With SAP performance management module, employees are also required to perform engagement evaluation after completion of each engagement. The record is maintained online for evaluation purpose. Evaluation will be done at the end of the financial period. Assessment of the results of evaluation of the staff is restricted to the respective staff; her counselor and the engagement manager for tracking purpose. With the prompt communication and monitor of the employee's progress, the management is able to improve the performance of the staff and subsequently, the performance of the professional service firm.
Drawback of ERP
Purchase and implementing ERP will be very expensive and time-consuming, with many high profile examples of issues with projects going significantly over budget or time, or both. The major players in the market have developed a status for needing huge resources including external consultants to implement an ERP system and get it functioning, not to mention the cost of make changes to the system or only maintaining it.(sources : http://www.unit4.com/erp-systems)
For example, based on according to 'As One' strategy, Deloitte Malaysia has to spend a lot of money to implement an ERP system. The ERP usually is luxurious; a small company can not to afford the cost. It needs to take more than one year to implement it they can also take long time to install and can even contribute to a loss of jobs. The size of the company and the ERP systems such as SAP, the costs of new ERP systems could range from $50 million to $100 million depending on chosen.
By the way, the internal control for ERP will be more make tighter than previous accounting information system. It will be very complex and not flexible. Any customization or revision must be done by ERP consultants instead of Information Technology department. Thus, any amendment would incur additional cost for the company.
Role and purpose of Accounting Information Systems (AIS)
Accounting Information System (AIS) is essential to all organisations (Borthick and Clark, 1990; Curtis, 1995; Rahman et al., 1988; Wilkinson, 1993; Wilkinson et al., 2000 cited Zulkarnain M., 2009) and perhaps, every organisation either profit or non profit-oriented need to maintain the AISs (Wilkinson, 2000: 3-4 cited Zulkarnain M., 2009).
The term 'Accounting Information System', the three words comprise AIS would be elaborate independently. Accounting could be recognized into three components, which is information system, "language of business" and source of financial information (Wilkinson, 1993: 6-7 cited Zulkarnain M., 2009). Information is a valuable data processing that provides a basis for making decisions, taking action and fulfilling legal obligation. System is an integrated entity, where the framework is focused on a set of objectives. "The combination of the three words Accounting Information System indicate an integrated framework within an entity (such as a business firm) that employs physical resources (i.e., materials, supplies, personnel, equipment, funds) to transform economic data into financial information for conducting the firm's operations and activities, and providing information concerning the entity to a variety of interested users." (Bhatt, 2001; Thomas and Kleiner, 1995 cited Zulkarnain M., 2009).'
Wide variety of people that involve in the company's operation within and outside the organisation uses accounting information generated by this system for decision making. Based on input provided by operational level managers, AIS produces monthly projects' income statements, balance sheets and statement of changes in financial position for the strategic and tactical managers to plan, control and make decision on the resources allocation. The role-played by AIS enhanced the organisations' accounting functions, and add information value. The automated AIS speed up the process to generate financial statements and overcome human weaknesses in data processing. The system enhances management of resources and the process of monitoring, control and prediction of business for better future.
Similarly, day-to-day operations managers demand a wide range of financial and non-financial performance measures. Therefore, if an AIS is going to allow today's accountants to provide the information business decision makers need, it should meet the following definition:
"An accounting information system is one that captures, stores, manipulates, and presents data about an organization's value-adding activities to aid decision makers in planning, monitoring, and controlling the organization." (Julie S. D. et al., 1998)
This definition certainly includes financial accounting systems, which have the primary purpose of generating financial statements in accordance with Generally Accepted Accounting Principles. However, this definition recognizes that businesses must perform a wide range of value-adding activities (such as production, distribution, sales, etc.) to be successful, and that the types of information needed to manage such activities will be extensive. Therefore, the scope of corporate systems that are included under the AIS umbrella is much broader than the general ledger system and the programs that prepare journal entries to feed it.
Understanding of how AISs may be affected by the implementation of a full ERP system Identification of major implications for AISs
ERP system change the financial accounting environment significantly as the processes used to record, incorporate and distribute such information all drastically change. The recording process for transactions can usually be traced back to such individuals as an assembly worker on an assembly line, a storehouse worker at a receiving port, or cashiers scanning a bar code that capture the data and trigger the update processes that form the basic financial accounting records. Likewise, accountants would no longer need to construct the financial statements, as the procedures would be encoded into the ERP system in order to automatically generate the financial statements and make them available to decision makers. Also, the process for making closing entries and closing out the books at the end of the financial period is becoming ever more automated (Sutton 2000, cited Steve G., 2006).
Steve G. (2006) further expressed that the role of managerial accountants as the generators of cost reports is retreating in value hurriedly as the report generation is automatable and there is little value in humans doing such work. Likewise, the role of the management accountant adds value in being able to sift through the vast data warehouses of information in order to understand patterns and changes that effect the organization's efficiency, effectiveness, and achievement of operational and strategic goals.
The fact that management accounting tools included in ERP system, such as budgeting and forecasting do not offer such user-friendly functionality as the most sophisticated accounting software may make accountants confused as well as they concerned minor change (Markus and Teemu 2002 cited Sami A., 2005), the ERP system automate and standardize existing conventional practices within existing structures may be secondary effecting. However, fully integrated collapse traditional notions of time and new systems were created and reproduced by conventional accounting systems, tending organizations with less clear functional, destroyed boundaries and integrated central databases may reach management of information that needed (Dr Paolo and Trevor 2003 cited Sami A., 2005) as well as one person can find in accounting system from bookkeeping to develop several reports that are needed (Markus and Teemu 2002 cited Sami A., 2005) under this argument the change into management accounting comes through a changed management practice and changes in business processes, whereby caused by ERP system implementation (Sami A., 2005).
The world of finance and accounting is radically changing, such as convergence of accounting standards and greater expectation for transparency. One must be really accurate with every decision and efficient, while complying with regulatory requirements. In the organization everyone needs entrance to the right information at the right time in order to achieve a competitive edge and make sure better control of business operations.