Impact of Enterprise Resource Planning (ERP) on Roles of Management Accountant in Organizations


Want create site? Find Free WordPress Themes and plugins.

1. Introduction

Enterprise Resource Planning is the latest high end solution, information technology has lent to business application. These days we are living in a globalized world, where competition is not absent. This is why it is essential for managers of the enterprise to develop different strategies to satisfy client needs, many of which have become hard to see. They are trying to anticipate what clients will want or need, and in that way they work to offer customized products. Companies are looking for software that can be capable of administrating every aspect of their business integrally. Many of them have been seeking new technological tools that can optimize their internal procedures and make them more efficient.The ERP solutions seek to streamline and integrate operation processes and information flows in the company to synergise the resources of an organization namely men, material, money and machine through information. The emergence of ERP systems offer businesses a set of integrated application modules which span most business functions (Scapens and Jazayeri, 2003).  Today many companies in India have gone in for implementation of ERP and it is expected in the near future that 60% of the companies will be implementing one or the other ERP packages since this will become a must for gaining competitive advantage. The aim of this paper is to demonstrate the impact of ERP implementation as a new system on management accounting practices. The management accounting and ERP system will be introduced and clarify how are they working together. This paper will view a definition of an ERP system implementation, defining the management accounting, the dimensions of management accounting such as the roles and attributes of management accounting, finally implications of impact ERP implementation on management accounting.

2. ERP system implementation

ERP (enterprise resource planning) is an industry term for the broad set of activities supported by multi-module application software that help a manufactures  or other business manage the important parts of its business, including  product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service, and tracking orders [  Olson 2004].

Implementing an ERP package has to be done on a phased manner. Step by step method of implementing will yield a better result than big-bang introduction.The normal steps involved in implementation of an ERP are as below:

Project Planning, Business & Operational analysis including Gap analysis, Business Process Reengineering, Installation and configuration, Project team training, Post implementation.

The above steps are grouped and sub-divided into four major phases namely 1) detailed discussions, 2) Design & Customization, 3) Implementation and 4) Production. The phases of implementation vis-à-vis their tasks and respective deliverables are as below:

Detailed Discussion Phase: Task: – Project initialization, Evaluation of current processes, business practices, Set-up project organization 
Deliverables:- Accepted norms and Conditions, Project Organization chart, Identity work teams.

Design and customization Phase: Task :- Map organization, Map business process, Define functions and processes, ERP software configuration and Build ERP system modifications. 
Deliverables :- Organization structure, Design specification, Process Flow Diagrams, Function Model, Configuration recording and system modification.

Implementation Phase: Task :- Create go-live plan and documentation, Integrate applications, Test the ERP customization, Train users 
Deliverables :- Testing environment report, Customization Test Report and Implementation report

Production Phase: Task:- Run Trial Production, Maintain Systems 
Deliverables:- Reconciliation reports, Conversion Plan Execution

3. The main role for management accounting in the organization

“Management accounting is a system of  measuring and providing operational and financial information that guides managerial action, motivates behaviors, and supports  and creates the cultural values necessary to achieve  an organization’s strategic objectives”[ Jan, Shahid, Homas and Arol 1999].

Management accounting is often defined as a system that provides useful information for managers in terms of decision making, planning, control and performance evaluation (Drury, 2004, p. 20). A definition by Atkinson et al.1 (2001) describes management accounting as:

“A value adding continuous improvement process of planning,  designing, measuring and operating a nonfinancial and financial information system that guides management action, motivates behavior, and supports and creates the cultural values necessary to achieve an organization’s strategic, tactical and operating objectives”. Management accounting measures and reports financial and non-financial information that helps managers make decisions to fulfill the goals of an organization.Managers use management accounting information to choose, communicate and implement strategy, coordinate product design, production and marketing decisions, Management accounting focuses on internal reporting, and Management accounting is future oriented.

4. Attributes of a good management-accounting system

The management accounting can be success if contains some attributes which enhance its process such as the following attributes: [Jan, Shahid, Homas and Arol 1999].

The management accounting can be success if contains some attributes which enhance its process such as the following attributes: [Jan, Shahid, Homas and Arol 1999].

Good management accounting information has three attributes:

Technical—it enhances the understanding of the phenomena measured and provides relevant    information for strategic decisions.

Behavioral—it encourages actions that are consistent with an organization’s strategic objectives.

Cultural—it supports and/or creates a set of shared cultural values, beliefs, and mindsets in an organization and society.

5. The impact of ERP implantation on management accounting system

The involvement of management accountants is seen as another important success factor for ERP implementations. Management accountants play a critical role in providing data and information to manage the business, their participation is critical to ensure that the needed data are available and so that the management accountants will know how the data are obtained and reported. Literature review has shown that involvement of the management accountants results in better outcomes in the ERP implementation. – In a number of organizations, the management accountants played a critical role in the implementation and success of the ERP system.  The more active the role played by the management accountants, the higher the level of perceived success for the ERP implementation.  This was consistent across all organizations visited.  If the management accountants were actively involved in the ERP implementation from the beginning, and acted as a change agent, the system was a success.

6. The impact of ERP systems on the role of management accountants

ERP is a broad term for any software application that integrates all business processes and data into a single system (Waxer, 2006). ERP facilitates company-wide Integrated Information System covering all functional areas.ERP provides for complete integration of Systems not only across the departments in a company but also across the companies under the same management. ERP not only addresses the current requirements of the company but also provides the opportunity of continually improving and refining business processes.

ERP provides business intelligence tools like Decision Support Systems (DSS), Executive Information System (EIS), Reporting, Data Mining and Early Warning Systems (Robots) for enabling people to make better decisions and thus improve their business processes. As these ERP systems are integrated, all data are available to all personnel throughout the organization at any time (Aidan O’ Mahony, John Doran 2008)These software packages can be customized to cater for the specific needs of an organization (Esteves and Pastor, 2001; Granlund and Malmi, 2002). ERP systems have become the system of choice for the majority of companies. These systems have changed the way accounting information is processed, evaluated and reported throughout the business. ERP systems are comprehensive systems as they operate throughout the entire company maintaining large amounts of data. They are also modular systems which are based on a client/server technology. Data are stored in a single database, whicheliminates the need to update data in several different subsystems (Davenport, 1998; Rosemann, 1999). By providing universal, real-time access to operating and financial data, the systems allow companies to streamline their management structures, creating flatter, more flexible, and more democratic organizations (Davenport, 1998; Ross, 2000; Jackling and Spraakman, 2006).

The Institute of Certified Management Accountants (ICMA, Australia) describes the management accountant as someone who applies his or her professional knowledge and skill in the preparation and presentation of financial and other decision oriented information in such a way as to assist management in the formulation of policies and in the planning and control of the operation.  The changes which are affecting the core role of the management accountant are in large part due to the popularity of ERP systems such as SAP and Baan, particularly in large companies (Foote, 2006; Jackling and Spraakman, 2006; Bae et al. 2004; Booth et al.  2000; Burns et al., 1999; Davenport 1998).

In this new environment the management accountant must acquire a broad knowledge of the business, and add value to the organization by bringing financial expertise to the management process and participating as team players. The management accountant must now move into the spotlight and become an integral part of the management team by using a broader range of skills, utilizing both financial and non-financial indicators; taking decision-making roles in cross functional teams; and integrating operational and strategic control. The management accountant must broaden the nature of their role and become a strategic manager (Collins, 2000; Murphy, 2004; Parker, 2002; Pierce, 2001).

7. Benefits of ERP

The main benefits of using ERP systems identified could be summarized as follows

The benefits accruing to any business enterprise on account of implementing are unlimited. According to the companies like NIKE, DHL, Tektronix, Fujitsu, Millipore, Sun Microsystems, following are some of the benefits they achieved by implementing ERP packages:

Gives Accounts Payable personnel increased control of invoicing and payment processing and thereby boosting their productivity and eliminating their reliance on computer personnel for these operations. Reduce paper documents by providing on-line formats for quickly entering and retrieving information. Improves timeliness of information by permitting, posting daily instead of monthly. Greater accuracy of information with detailed content, better presentation, fully satisfactory for the Auditors. Improved Cost Control. Faster response and follow up on customers. More efficient cash collection, say, material reduction in delay in payments by customers. Better monitoring and quicker resolution of queries. Enables quick response to change in business operations and market conditions. Helps to achieve competitive advantage by improving its business process. Improves supply-demand linkage with remote locations and branches in different countries.

Provides a unified customer database usable by all applications. Improves International operations by supporting a variety of tax structures, invoicing schemes, multiple currencies, multiple period accounting and languages. Improves information access and management throughout the enterprise.

Provides solution for problems like Y2K and Single Monitory Unit (SMU) or Euro Currency.

8. Change in the Role of the Management Accountant

The suggestions in the literature that the role of the management accountant has changed and that one of the main reasons is the implementation of ERP systems is supported by the interviewees (Aidan O’ Mahony, John Doran 2008). This is in line with similar literature where research shows that ERP systems have only a limited impact on management accounting practices (Fahy and Lynch, 1999; Granlund and Malmi, 2002; Scapens and Jazayeri, 2003). However there are conflicting views as some literature state that the adoption of an ERP system can bring around a redefinition in the tasks and responsibilities of the management accountant (Brazil and Li, 2005; Carruth, 2004;

Gabriels, 2002). It is clear that ERP is influencing the management accountant and is a valuable tool which assists the management accountant in fulfilling their core activities. However the core responsibilities remain and there is still a high priority to provide the financials on a monthly basis. The extent to which the new system has had an impact on the role of management accountants was assessed by several.

Changes in time spent on data collection – All firms agreed that the management accountants spent

significantly less time on data collection following the implementation of the ERP system irrespective of whether the implementation was a success or not. There was also an indication that the type of data collected had changed.  For example, company E indicated that the manual accruals had decreased considerably since implementation of the ERP system.

Changes in time spent on data analysis – Most companies agreed that management accountants are spending a lot more time on data analysis. This was particularly the case for the more successful implementations. Management accountants: a profession dramatically changed by ERP systems.

Changes in involvement in business decision-making – All companies agreed that management accountants were more involved in business decision-making following the implementation of the ERP system. This also varied with the relative success of the ERP implementation, with the changed involvement in business decision-making being scored highly for the most successful implementations. Case studies in literature review showed that the extent to which the new system has had an impact on the role of management accountants was assessed by several criteria:

Changes in focus on internal reporting – The focus of the management accountants on internal reporting (for example performance measures and control issues) increased most companies.

Changes in focus on external environment – The focus of the management accountants on the external environment (for example benchmarking) had increased where it was applicable to the company. This change in focus was not related to the success or otherwise of the ERP system implementation.

Changes in focus from historic to forward looking analysis – In all the organizations that had a successful implementation, the management accountants are involved in significantly more forward looking analyses.  This is most likely a result of the capability of the ERP systems to generate virtually any desired historical-based report. As such, there is limited need for the management accountants to perform this type of task. The management accountants are spending much more time and effort on business planning.

Changes in focus from domain specific to cross-functional analysis – The implementation of ERP systems is viewed as a prerequisite for cross- functional analysis for most of these organizations.  In virtually every instance, prior to the implementation of the ERP system, the data wasn’t available to undertake cross-functional analysis.  Now that the data is available, the management accountants are able to be involved in cross-functional analysis.

Changes in use of time resulting from elimination of routine report generation – Since routine report generation was previously the responsibility of the management accountants, they now have more time available to complete other tasks.  In most organizations, this time has resulted in a change in how the management accountants approach their job, and in how the management accountants are perceived by others in the organization.  In some settings, the management accountant is becoming more of a business partner to senior management.

Changes required in the management accountant’s communication skills – Management accountants need to be technically competent, and must be able to communicate those technicalities.  While communication was always important, the study found that the need for improved communication skills has expanded because of the way management accountants are now involved in discussions with the business management team.  In order to be business partners, management accountants must provide insight and present the information at the time that the manager needs that information.   Changes in the formal and informal communication structure resulting from the ERP system – No link was found between the implementation of the ERP system and the changes in the formal and informal communication structure.  The ERP system, by its very nature, results in significant centralization of data.  This is often associated with a more formal communication structure.  The existing organizational structure and culture seems to have a greater impact on the communication structure than does the ERP system.

Changes in the management accountant’s satisfaction resulting from the ERP system – The ERP systems implementation generally resulted in increased job satisfaction for the management accountants.  Job satisfaction needs to be examined over a period of time, rather than at a specific point in time.  If asked immediately after the ERP system was implemented, most management accountants would be very frustrated with the software, the hours, the task, and many other aspects.

The management accountants’ contribution to the ERP system success – In a number of organizations, the management accountants played a critical role in the implementation and success of the ERP system.  The more active the role played by the management accountants, the higher the level of perceived success for the ERP implementation.  This was consistent across all organizations visited.  If the management accountants were actively involved in the ERP implementation from the beginning, and acted as a change agent, the system was a success.

3. Recommendations for management accountants in an ERP environment

The participants in this research were very consistent with their perception of the skills needed by management accountants in ERP environments.  All of the interviewees started from the perspective that the management accountant has both appropriate and adequate accounting training.  Some believed that a formal accounting qualification was very desirable as a way to signal that a management accountant possesses the requisite skills.  Almost every participant identified the need for good communication and interpersonal skills.  Analytical skills and the ability to focus on objectives and prioritise work (work management) were also deemed important.

The increased importance in understanding the business was also emphasized, as was the need to have ‘entrepreneurial salesman skills.’  That is, the management accountants need to be able to communicate with the management team and synthesize and explain the results (the impact of the financial data) in a way that can be easily understood.  Management accountants need to take on a partnership role with the managers.  This will sometimes result in the management accountants supporting major decisions by influencing managers onto the right area through a thoughtful and reasoned explanation of what the information means.  Along with these skills, other non-traditional skills were identified.  These included being an educator as the management accountants must be able to explain how the numbers were obtained and what they mean, and they might also be asked to explain how the system generates those numbers.  Patience was also identified as needed since the ERP packages are very difficult to use when they are first implemented.

10. Findings

. The findings of this study indicate that when management accountants are involved in the implementation of an ERP system there is an increased likelihood of success. The task is not easy and there was much frustration in the implementation process. However, in the successful implementations, data quality increases, there is more timely access to information, and decision-making is improved. Furthermore, a successful ERP implementation results in significant changes in the tasks of the management accountants. The management accountants become more closely involved in business decision-making and perform other value adding tasks rather than the mundane reporting tasks that are now performed automatically using the ERP.

11. Conclusion

In conclusion the findings suggest that the ERP system has had a positive effect on the role of the management accountant, however the rise of these ERP systems has not changed the ultimate responsibility of accountants which is the end of month figures. The ERP integrates operation processes and information flows in the company to synergize the resources of an organization namely men, material, money and machine through information.  ERP effortlessly communicates information across various departments and improves efficiency, performance and productivity levels.

12. Limitations

There were also a number of limitations of the ERP systems currently used. These include not getting the full capability of the ERP system and the manipulation of information that is needed to generate a final set of accounts. One of the most interesting findings highlighted in the study relates to the problems that can arise where an ERP system becomes too customized towards a company’s needs. This is partly due to the fact that an ERP vendor may not support an over-customized system. It is well documented that there has been a shift in the role of the management accountant. ERP is one of the major contributors to the change in the role of the management accountant. Accounting personnel feel that ERP allows them to expand their roles and instead of producing figures allows time for further analysis and value adding activities in areas such as cost control. An interesting finding in this study is in relation to the idea of non-management accountants becoming accountants. Prior to the introduction of ERP systems accounting was exclusively completed by personnel in the finance area. The introduction of ERP systems has allowed tasks such as reporting and journal bookings to be completed by non management accountants. But despite this, core accounting activities related to finalizing accountants are still completed by the finance personnel. From these findings the authors would argue that ERP is having a positive effect on management accountants. Although there are negatives the overall view is that the positives of ERP far outweigh the negatives.

References

A. A. Atkinson, R. D. Banker, R. S. Kaplan and S. M. Young (2001): Management

Accounting, 3rd edition, Prentice- Hall Inc, Upper Saddle River, New Jersey 07458

A. Caglio (2003): Enterprise Resource Planning systems and accountants: towards

hybridization? European Accounting Review, Vol. 12, Issue 1, pp. 123–153.

A. A. Atkinson, R. Balakrishnan, P. Booth, J. M. Cote, T. Groot, T. Malmi, H. Roberts,

E. Uliana and A. Wu (1997): New Directions in Management Accounting Research,

Journal of Management Accounting Research, Vol.  9, pp. 79-108.

Abdinnour-Helm, S., Lengnick-Hall, M.L., and Lengnick-Hall, C.A., “Pre-implementation attitudes and organizational readiness for implementing an Enterprise Resource Planning system”, European Journal of Operational Research, Vol 146 (2), 2003, 258-273.

B. Light, C. P. Holland, K. Wills (2001): ERP and best of breed: a comparative analysis,

Business Process Management Journal, Vol. 7, No. 3, pp. 216-224.

B. Pierce and T. O’Dea (2003): Management accounting information and the needs of

managers Perceptions of managers and accountants compared, The British Accounting

Review, Vol. 35, pp. 257-290.

Booth, P., Matolcsy, Z., and. Wieder, B. (2000). Integrated Information Systems  (ERP-systems) and Accounting Practise – the Australian Experience.   Paper presented at the Third European Conference on Accounting Information Systems, Munich, Germany, pp. 27-28.

Brazel, J. F. and Dang, Li (2005). The Effect of ERP System Implementations on the Usefulness of Accounting Information.  Managerial Auditing Journal, Vol. 20, No. 6. pp. 619 – 631.

Burns , J., Ezzamel M. and Scapens R. (1999). Management Accounting Change in the UK.   Management Accounting, London, Vol.77 No.3, pp. 28-30.

Carruth, B. (2004). Management Accounting-What’s new?’ Chartered Accountants Journal. Sept. 2004 pp. 29-30.

C. Ma, D. C. Chou and D. C. Yen (2000): Data warehousing, technology assessment and management, Industrial Management and Data Systems, Vol. 100, Issue 3, pp. 125-

135.

G. K. H. Li and E. Jordan (1999): The Information Systems (IS) Role of Accountants: A

Case Study of an On-line Analytical Processing (OLAP) Implementation, paper presented at American Conference on Information Systems (AMCIS 1999), 13-15

August, Milwaukee, Wisconsin, the United States.

G. K. H. Li and E. Jordan (1999): The Information Systems (IS) Role of Accountants: A

Case Study of an On-line Analytical Processing (OLAP) Implementation, paper presented at American Conference on Information Systems (AMCIS 1999), 13-15

August, Milwaukee, Wisconsin, the United States.

Jacobs, F.R. and Whybark, D.C., Why ERP ? A primer on SAP implementation Irwin McGraw Hill, 2001.

J. Burns and G. Baldvinsdottir (2005): An Institutional Perspective of Accountants’

New Roles – The Interplay of Contradictions and Praxis, European Accounting Review,

Vol. 14, Issue 4, pp. 725-757.

K. Lukka and M. Granlund (1996): Cost accounting in Finland: current practice and rends of development, European Accounting Review, Vol. 5, Issue 1, pp. 1-28.

M. Newman, C. Smart and I. Vertinsky (1989): Occupational role dimensions: the

profession of management accounting, The British Accounting Review, Vol. 21, Issue 2,

pp. 127-140

P. Booth, Z. Matolcsy and B. Wieder (2000): Integrated Information Systems (ERPSystems) and Accounting Practice – The Australian Experience, paper presented at the third European Conference on Accounting Information Systems (ECAIS’2000), March 27-28, 2000, Munich, Germany

R.R.K. Sharma “ERP implementation and its effect on a few variables of organization structure and manager’s job“. Journal of the Academy of Business and Economics. FindArticles.com. 12 Dec, 2010.

S. Brignall and J. Ballantine (2004): Strategic Enterprise Management Systems: new

directions for research, Management Accounting Research, Vol. 15, Issue 2, pp. 225-

240.

S. C. Lodh and M. J. R Gaffikin (2003): Implementation of an integrated accounting and cost management system using the SAP system: a field study, European Accounting

Review, Vol. 12, Issue 1, pp. 85–121.

U. J. Gelinas Jr., S. G. Sutton and J. E. Hunton (2005): Accounting Information

Systems, 6thedition, Thomson/South-Western



Source by Zainab Mehmood

Did you find apk for android? You can find new Free Android Games and apps.
What's Your Reaction?
Cry Cry
0
Cry
Cute Cute
0
Cute
Damn Damn
0
Damn
Dislike Dislike
0
Dislike
Lol Lol
0
Lol
Like Like
0
Like
Love Love
0
Love
Win Win
0
Win
WTF WTF
0
WTF

Comments 0

Your email address will not be published. Required fields are marked *

Impact of Enterprise Resource Planning (ERP) on Roles of Management Accountant in Organizations

log in

Become a part of our community!

reset password

Back to
log in
Choose A Format
Personality quiz
Trivia quiz
Poll
Story
List
Open List
Ranked List
Meme
Video
Audio
Image