ERP has become one of the most popularity systems for a company that planning to implement a full ERP system to increase the productivity and efficiency on current business process flow. This report objective will discuss on the definition and function of ERP system, advantages and disadvantages that will bring to an organization after the implementation. Which and what major element and factor that needs to be well taking care for a successful implementation. The major implication of AIS will also further discuss in this report and how AIS will be affected with the implementation of the software.
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“An Information system (IS) is any combination of Information technology and people’s activities using that technology to support operations, management, and decision making.”(Miranda, E., 2010). ERP which is Enterprise Resource Planning is business software systems in different type of industries and companies. (Vala, P., 2010). ERP system is a process of integration of different data and sources from different department of one organization under one single unit system. ERP software that will make sure this integration to be work accurately and effectively. While AIS which stands for Accounting Information system is a computerized system that gather all the data, stores and then processes it into information used by managers, investor and creditors. This information generated from AIS can eventually help the company decision maker to operate organizations more smoothly.
3.1 Role and Purpose of Enterprise Resource Planning (ERP) systems
With the growth of technology, everything have found in rapidly changing especially for business environment. Most of the organizations have choosing to implement the ERP software as the best solution which ERP is the only system that designed and developed to integrate and linked all the information among the internal department system.
Major role of ERP is to streamline the business operation and workflow. All functional departments that are involved in operations or production can be integrated by using one system, while the elimination of the unnecessary manual work has simplified the business process. Production planning team can directly check for the goods produce process through the latest status updated by production operator.
According to Sheldon D.H (2005), ERP maintain the inventory accuracy that enhance the process of tracking on supplier purchased and planning team are able to predict the demand of the market based on input from various department, the system can even schedule a plan when the product shall start produce and when to buy in extra raw material.
In finance module, ERP allows a company to maintain their financial information, assist a company save a sum of money for long term while efficiency, performance and productivity will be improved as well. A company is also able to study their processes, earnings, and performance by combining the operation information with the financial information. With this information, a company can become more competitive and productive and so it can gain more customer satisfaction.
Perceived benefits and drawbacks for companies of implementing ERPs
There are many different type of ERP that serve businesses’ varying procedure types. With the ERP solution there are numerous benefits after an organization implementing the ERP system example in department of Sales, Human Resource, Finance, Procurement and Production.
The ERP system will integrate all the data from other system so that the information will not have to be entered into several systems which will save a real time and manpower for the manual work. Every department information are linked and the sales person no longer need to take time to check with production or warehouse for the goods delivery status, checking with finance on the term on payment This knowledge indirectly can increase the sales performance and improve customer satisfaction.
HRM system developed in the payroll module, recruitment module and HR Management module to ease the human resource department in operating their daily workflow and help to increase the efficiency and deliver the best service to their employees. They no longer need to manually count for the thousands of employees salary, overtime, incentive and other allowance. Besides saving up a lot of time, this may also reduce the risk of human error and mistake in calculating. The employee’s attendances are now even easier with the punch in/out system. By implement the E-pay statement its help the organization to reduce costs and work load of HRD as well, employees can access to corporate intranet to view, to save or to print the pay slip. (Edward, J., 2008)
In Production department, most of the organization has using the Baan, BPCS, ERPLN, and ERPLX. It has developed solutions for the company that covers the bar-coding of transactions, such as receiving, put away, cycle counting, production order completions, and shipping. This has increased the productivity and cost reducing. From the warehouse to the shop floor, material and manpower processes become easier, complements and extends the existing ERP applications, empowers users in the production department speed up transactions, and ultimately eliminates the root causes of data inaccuracy.
For purchasing department with Purchase Order System, the employees are able to go for electronic market place to order the stationary/ tools and consumable. By clicking a submit button, in about 3 minutes supplier can actually receive the order from the company. This has enhances the information sharing among one company and the supplier. Manager are easily to check which employee are creating the PO and which preferred supplier is selected on the order that its actually ease and shorten the lead time for the process, as lead time is shorten, production operation are able to meet the schedule and on time delivery for orders.
Disadvantages of implementing ERP system:
The most common disadvantages of implementing an ERP system are the high cost. (O’Leary, D. E., 2010). According to Escalle et al, 1999, the cost might be a two o three percent from the revenues for the startup and on-going maintenance fees. Some hidden implementation costs like buying software, hardware, expert consultation fees, staff training cost that will incur to smoothen the project as the implementation process will need the expert consultation and IT administrator in developing this kind of system. (Mabert, V. 2002). The licensing fees can be one of the huge costs that need to be paid annually which depending on the size of the software established. That is why the expensive cost and long times consuming to implement may not be acceptable to each company specially for those small-medium size business. Besides, there is limitation on ERP software customization.
ERP system can be a complex and difficult to use software, the organization daily activities will be impacted and usually will involve business process reengineering to fit the current standard process after the ERP implementation. (Benjamin, B. and Paul, A., 2004)
There is a risk of failure on the implementation process if an organization did not having a proper planning. Inadequate resources, training, inexperience staff and invest not within budget will bring the company down to winding up too.
Role and purpose of Accounting Information Systems (AIS)
A primary role of AIS is to fasten the financial transaction recording, accountants that input the financial transaction into the AIS that will create information and financial reporting for review. Besides, AIS also important in support management to get timely information in decision making. AIS are usually web or server based which provide a centralized place where financial data stored, allowing managers have quicker access to review the financial information for that organization.
Accountants play roles of tremendous significance in the economy. Without information expertise of accountants, business will be unable to evaluate their cost and profit position, gauge product or business unit performance, or to plan future financial success (Martin, B., 1996). Well-organized AIS will make everyday business a lot easier and more effective (Hall, 2001).
How AISs may be affected by the implementation of a full ERP system.
Before ERP implementation, finance department employee are still using the pen-paper basis in recording finance transaction, legacy system that only able to focus on one function and cannot be replaced. After the implementation of a full ERP system with SAP, AIS seems to have bigger changes in all the function.
SAP that will integrates all the business transaction that entered from different area of operation. Thus, employee from different branches or division can automatically access to review the information at whatever place and however often it is necessary while in a discussion or meeting with the accurate and timely information. Thus, it really saves a great deal of time.
AIS will make the accounting activities quicker and accurate as the transaction and records are prepared with the system and this has indirectly reduced human error and mistakes. It is also increased flexibility in information generation and improved quality of reports and financial statements. (Spathis and Constantinides 2003)
AIS help to maintain financial control and accountability. (Joel, D. Wisner et al, 2009). Financial information are reliable and up to date all the time in order to prevent the management had use the old and out-dated information for decision making as with the uses of irrelevant data may seriously affect the decision in reducing cost, raise profit, increase sales and purchase new assets and etc.
The merged of ERP and AIS has also improving the auditor task while auditing task while performing auditing in the company. Each transaction record can link to other related transaction record or softcopy attachment with just a click. (Anon, 2010)
For negative effect, the integration process will be very complex and consume a long period to complete, thus it will incurred a very high cost for an organization. Data security not guarantee safe because info are shared and linked among the module within the ERP system, some of the important financial or business strategic information might easily spread out to the market or competitor that will affect the business strategic.
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Major Implication of AIS
There are several components to the AIS such as transaction processing system, general ledger or financial reporting system and the management reporting system. (Hall, J.A., 2004). Major implications of AIS are to analyzed and determine whether the information should captured by the AIS and its speed up the bookkeeping process which bookkeeping mean to keep track the day to day activities of one organization’s income and expenses, to collect necessary financial information for reporting and tax purpose, thereby improving the company profitability. (Anderson, C., 2010)
After the bookkeeping process, system will automatically generate those data into information to generate a reporting that will use by both internal and external parties and reporting format may vary from different users for different purpose. (Anderson, C., 2010)
The implementation of ERP has a big impact for an organization business performance especially in accounting module that help to make the accounting transaction become easier and manageable, thus many of the other small-medium size organization can actually take consideration for implementation of ERP system in order to improve the productivity and efficiency and most importantly to maintain competitive.
ERP system that will have drawbacks if the implementation process did not manage correctly, if an organization that required a successful implementation, top management should have a plan ahead that consist of the time consuming, the implementation cost, enough expert consultation on the process and special training provided to their staff.
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