This paper will place and look into the major deductions for a company ‘s accounting information system when a full map ERP system is implemented by the house. Companies from different industries will be investigated in order to place the major deductions. Specifically, this paper will look into how AISs may be affected by the execution of a full ERP system and designation of major deductions for AISs. Aside from that, this paper will cover the function and intents of ERP system every bit good as the sensed benefits and drawbacks for companies of implementing the system. In add-on as this paper is related to accounting information system, the function and intent of Accounting Information system will besides be included in order to ensue in a more precise linkage between AISs and ERP.
The Role and Purpose of Enterprise Resource Planning ( ERP ) System.
”An ERP system is a set of concern applications or faculties, which links assorted concern units of an organisation such as fiscal, accounting, fabrication, and human resources into a tightly integrated individual system with a common platform for flow of information across the full concern ” ( Beheshti 2006, pp 184-193 ) with the purpose of accomplishing greater efficiency and conveying greater advantageous to the organisation in run intoing their aims ( Beheshti, 2006 )
The nucleus intent of ERP is to heighten an organisation ‘s fight by helping the direction in doing accurate and perspective determination in a timely mode as the incorporate systems helps an organisation ‘s information and communicating to flux faster, more accurate and more effectual ( Charalambos, S and Sylvia, C ( 2003 )
Another intent of ERP is to enable an organisation ‘s information and communicating to be shared among the sections every bit good as enabling a direct flow of communicating to be attain in an organisation due to the integrating of an organisation ‘s systems and sections into one individual database ( Charalambos, S and Sylvia, C, 2003 ) .
In add-on, as ERP map as incorporating legion functional sections in an organisation into one database, this has consequences in incorporating all the functional sections and employee within an organisation to work as a squad ( Beheshti, 2006 ) .
Benefits and Drawbacks of ERP System
There are legion benefits arises from the execution of ERP throughout an organisation and harmonizing to Shang and Seddon ( 2002, citied in Velcu, 2007, p. 1316-1334 ) the benefits geting from implementing ERP can be assessed at five dimensional degrees which are ; operational, managerial, strategic, IT infrastructural, and organisational.
The nucleus benefit which is assessed at the dimensional degree of operational is an betterment in the public presentation of an organisation ‘s day-to-day operating procedure ( Yang & A ; Su, 2009 ) . The streamline of an organisation ‘s information and communicating has resulted in enhanced visibleness and transparence throughout the full organisation. Therefore, it enable an organisation to better and fix the procedure of planning and tracking information which will ensue in betterment in commanding over stock list and better hard currency direction every bit good as to cut down operational costs ( Yang & A ; Su, 2009 ) .
As for managerial degree, the nucleus benefit is an betterment in ”planning and direction of organisational resources and better monitoring of fiscal public presentation of merchandises ” ( Velcu, 2007 ) . The incorporate systems assist an organisation in accomplishing their organisational ends and aims in an efficient and timely mode which accordingly helps an organisation to to the full optimise their existing resources in a proper and effectual mode so that it can convey greater net income and benefit to the organisation.
”Strategic benefits result from the ERP system ‘s ability to back up concern growing and competitory advantage ” ( Shang and Seddon, 2002, citied in Velcu, 2007, p. 1316-1334 ) . As the information and communicating flow in a direct flow, more accurate and more effectual, this assists the direction in doing accurate and perspective determination in a timely mode which accordingly enhances an organisation ‘s fight.
”IT infrastructural benefits chiefly come from the decrease of IT costs related to the care of bequest systems ” ( Shang and Seddon, 2002, citied in Velcu, 2007, p. 1316-1334 ) . As ERP integrated all functional sections into one database and requires employee work as a squad this has consequences in standardising the information where it helps to get the better of informations redundancy and inaccuracy ( Beheshti, 2006 ) . Besides, as ERP merely requires informations to come in one time, this has finally enhanced the truth of the informations ( Beheshti, 2006 ) .
While ”organizational benefits are related to the system enabling concern acquisition and staff authorization ” ( Shang and Seddon, 2002, citied in Velcu, 2007, p. 1316-1334 ) . Employees are empowered as ERP provides them with existent clip informations by leting the assessing and trailing of information throughout an organisation. ( Davenport 1998, citied in Maguire et Al. 2006, p. 78-92 )
However, even ERP bring legion advantages, there are certain restriction as good. One of the chief disadvantages is the cost factor. Although the cost of purchasing ERP package is low, there are other disbursals required to incur in order to successfully implement the package such as ”process reengineering costs, support costs, developing costs, informations transition costs, and the cost of altering information engineering architecture ” ( Beheshti 2006, pp184-193 ) which will accordingly increase the overall cost of implementing ERP package. This is illustrated in Maguire et Al. ( 2006 ) where large companies such as Avis Europe Ltd ‘s, Ford Motors, and FoxMeyer Drugs have failed to implement ERP as good due to its highly high cost.
Another restriction is where it requires employee to work as a squad. A In order to successfully incorporate different systems and sections under one individual database, employees are required to demo support and work as a squad. Therefore, if the employees failed to make so, it is impossible to successfully do usage of ERP and likely will convey immense effects to the organisation ( Beheshti 2006, pp 184-193 ) .
Cardinal alterations required within an organisation are restrictions of ERP as good. Managements are required to do certain concern alterations throughout an organisation in order to conform to ERP system ( Velcu, 2007 ) . Therefore, if the directions are unable to accommodate and harmonise with the systems, this will do failure in implementing ERP. This is illustrated in ( Beheshti 2006, pp 184-193 ) where companies such as Dell Computer and Applied Materials aborted the package due to mutual exclusiveness and overpowering alterations required.
Role and Purpose of Accounting Information Systems ( AIS )
AIS is a computing machine based system where the nucleus intent of the system is the ”collection and recording of informations and information sing events that have an economic impact upon administrations and the care, processing and communicating of information to internal and external stakeholders ” ( Stefanou, 2006 ) .
One of the basic intents of AIS is to enter the day-to-day accounting dealing and events of concern ‘s procedure in order to help an organisation in coverage, monitoring and controlling every bit good as for internal determination devising in countries such as costing, outgo and hard currency flow ( Mauldin and Ruchala, 1999A cited in Ismail and King, 2005 ) .
In add-on, AIS can supply fiscal related information and information that are required in fixing fiscal statements for the intent of exemplifying an organisation ‘s fiscal place at a given point of clip and an organisation ‘s operation over a period of clip in order to run into legal demand every bit good as helping internal and external users in doing economic determinations.
Furthermore, AIS besides capable of supplying necessary fiscal information every bit good as A ”non-financial, external, and future-oriented informations ” A ( Abernethy and Guthrie, 1994A cited in Ismail and King, 2005 ) to bring forth advanced analysis and study in helping an organisation in pull offing their operational procedure, heighten the allotment of resorts and tracking public presentations within an organisation every bit good as helping an organisation in short term determination devising and long term determination devising.
Major Deductions for a Company ‘s Accounting Information System.
ERP system helps to incorporate different systems within an organisation which accordingly consequences in major deductions in the other systems. One of the systems that will be affected is a company ‘s accounting information system ( AIS ) .
One of the chief deductions for AIS when ERP is implemented is process alterations. Reassignment and segregation of fiscal coverage undertakings are the procedure alterations in AIS due to execution of ERP ( Velcu, 2007 ) . As the chief map of AIS which is the readying of fiscal coverage undertakings are normally falls under the duty of the accounting section, implementing ERP has finally make alterations to this as it reassign and segregate the responsibilities and transferred the responsibilities among several sections within an organisation. This has accordingly resulted in alterations of AIS procedure as the chief map of AIS are now segregated among different sections instead than Accounting section itself. This can be illustrated in the international chromium steel steel and engineering company from Finland that started implementing ERP in 2001 ( Velcu, 2007 ) . Harmonizing to Velcu ( 2007 ) , ERP has causes reassignment in the company ‘s fiscal coverage procedure where the company ‘s gross revenues section is now responsible for the basic accounting undertakings instead than the accounting section and segregation of accounting describing responsibilities to histories payables, histories receivables, and general leger coverage.
Another deduction for AIS due to ERP execution is the sweetening of AIS efficiency in the readying of fiscal statements and in accounting undertakings. As ERP provides existent clip information by enhanced visibleness and transparence and merely requires informations to come in one time, this has finally helps to increase AIS efficiency by cut downing the clip taken in fixing fiscal statement and in executing accounting undertakings ( Spathis & A ; Constantinides, 2003 ) . This can be illustrated in a maker company that implemented ERP from 2000 to 2003 and a structural technology company that implemented ERP in 2003 ( Velcu, 2007 ) . Harmonizing to Velcu ( 2007 ) , ERP has causes clip decrease in fiscal coverage rhythms every bit good as in accounting undertakings.
Besides, ERP besides enhances AIS efficiency in supplying necessary fiscal information to bring forth advanced analysis and study as ERP helps an organisation ‘s information and communicating to flux in a direct flow, more accurate and more effectual ( Charalambos, S and Sylvia, C ( 2003 ) .
In add-on, ERP besides enhances AIS public presentation in bring forthing a accounting information. As ERP enhanced the truth of informations by necessitating informations to come in merely one time this has finally helps AIS to bring forth a more equal, dependable and higher quality of accounting information ( Spathis & A ; Constantinides, 2003 ) . This can be illustrated in a trim parts distributer company that implemented ERP from 2000 until 2003 ( Velcu, 2007 ) . Harmonizing to Velcu ( 2007 ) , ERP has causes sweetening in the gross revenues informations truth as ERP enhances the truth by demanding the information merely enter one time.
On the other manus, the execution of ERP besides caused AIS inefficiency every bit good as it make alterations to AIS processes. This can be illustrated in a nutrient maker from Finland that implemented ERP from 2003 to 2005 ( Velcu, 2007 ) . Harmonizing to Velcu ( 2007 ) , ERP has causes inefficiency where it takes longer clip in accounting undertakings.
In decision, ERP system helps an organisation in doing accurate and perspective determination in a timely mode, enable an organisation ‘s information and communicating to be shared among the sections, integrate legion functional sections in an organisation into one database and heighten an organisation ‘s fight.
However, organisation that wants to implement ERP demands understand that it is expensive to implementation ERP and it requires alterations within an organisation which may do enormous consequence to the company if the execution fails.
This paper is carried out to place major deductions for a company ‘s accounting information system when a full ERP is implemented within an organisation. Companies from different industries such as unstained steel and engineering, maker, trim parts, nutrient and structural technology were investigated and the consequences showed that there are positive every bit good as negative deductions for a company ‘s accounting information due to the execution of ERP.