Managerial accounting systems and organizational control

Accounting Software

Inherent in the selection of accounting applications for the two companies, one with sales of $100M and the second with sales of $2M is the need to take into account the significantly different processes each has, the variation in information needs, and the requirements for government compliance if either or both are publicly-traded. On this last point, the chances of the $100M company being publicly-traded are more likely given their size and the need for outside capital. If this is the case the accounting application will need to support Sarbanes-Oxley (SOX) compliance (Armour, 2005). At a minimum each will need to support the core functions of accounting systems including Accounts Payable (AP), Accounts Receivable (AP) and General ledger (GL). The intent of this analysis is to define which are the best possible accounting applications for each of these companies and their significantly different requirements and needs.

Comparing Enterprise vs. Small Business Accounting Systems

The providers of enterprise-wide accounting systems vary significantly in terms of their support of multiple operating systems, licensing strategies, support of on-premise vs. hosted applications, and the corresponding needs of ongoing support and training. The accounting applications for enterprises are also designed for multidivisional and multisite support including multicurrency and Value-Added Tax (VAT) pricing. Enterprise software vendors including Epicor, Infor, Oracle, Lawson, NetSuite, SAP, SSA Global and others have designed accounting applications for ease of integration into Enterprise Resource Planning (ERP) suites (Ivancevich, Ivancevich, Elikai, 2010) as the financial analysis needs often pervade the entire organization. There is also the need on the part of many $100M-level corporations to actively monitor and evaluate the profitability of each of their distribution channels and the lifetime customer value of their top accounts. When financial accounting applications are integrated to ERP and CRM systems this can be accomplished and new insights gained for the first time into how best to maximize value per customer.

Each enterprise software application vendor carefully and thoroughly tunes their application software to the unique needs of a given market. As a result of this the assumption must be made for the $100M company in this example. For purposes of this analysis the company is assumed to be a global distributor of electronic components. This specific company has locations globally and has also defined revenue centers in Europe, throughout Asia, Australia and in the U.S. As a result they need a very agile and easily deployed system that also has compliance and auditing requirements given the need of reporting financials to multiple global governments. The recommendation is to use Oracle eBusiness Suite of accounting applications given their hybrid deployment architecture which can support on-premise licensing in addition to hosted and Software-as-a-Service (SaaS) deployment. Further, Oracle also has templates and process definitions for the electronics components market as well. Lastly the financial modules with Oracle can also be used for local government reporting in addition to SOX compliance.

For the small business of $2M their needs are drastically different than the $100M distributor that has offices across multiple geographies. The $2M company for purposes of this example is a manufacturer of air conditioning spare parts and is heavily manufacturing based. Their customer base is primarily throughout the U.S. Their primary need is for an accounting system that can has Accounts Receivable, Accounts Payable, General Ledger, Billing, Inventory Management, distributed order management and sales order management, all core functions of an accounting system (Collins, 2006). In addition this small manufacturer also needs support for Debt Collection, electronic payment processing, online payroll, timesheets and purchase requisition as well. All of these features can be found in low-end applications from Intuit (Anders, 2006) in addition to Microsoft Dynamics, Syspro and many others that are increasingly relying on the Web as their primary delivery platform (Lin, 2004). Given the highly distributed n nature of the business it is critical for the company to consider hosted or Software-as-a-Service (SaaS) based models as well (Lin, 2004).