Effect of ERP systems on managerial accounting capabilities

¶ … ERP'S IN MANAGERIAL ACCOUNTING CAPABILITIES

Managerial accounting intended provide managers information make decisions run company successfully. The information reliable, timely complete. Its provision, dictated

Effect of ERP's in managerial accounting capabilities

ERP systems are implemented to assist an organization become more efficient in the running of their business and also to integrate the different departments within the organization. The automation of the business processes ensures that a business remains competitive in today's business environment Hitt, Wu, & Zhou, 2002.

Adoption of ERP systems is also widespread because of the advancements made in the technology field. Integrating the different organization departments provides for a centralized management system, and makes it easy for reporting. Barriers that may exist between an organizations function are eliminated, thus providing managers unprecedented access to the organization accounting information.

Managerial accounting capabilities

With an ERP in place, an organization changes the way it processes, evaluates and reports its accounting information throughout the business. With seamless flow of information, an ERP makes it possible for management to get real-time information. This will assist the organization to improve it productivity as decision making will be much faster. The system will allow the organization to process its transactions more efficiently, thus reducing the reporting cycle for its accounts Gattiker & Goodhue, 2005.

This ensures information to external users is disseminated quickly. Data capturing is done once across the whole ERP system, thus there is less time wasted by the accountants in searching for records and the amount of time they spend doing reconciliations is reduced as the system has already made the calculations and they only need to confirm the correctness of the amounts. With single data entry, the system ensures that there are no data capture errors and the data once entered cannot be modified thus ensuring the accuracy of the data in the system.

These systems can store large amounts of data, and this makes them good choices for managers as this data can assist them to find out the past financial situation of the company easily and facilitate for better future decisions. Having all this data in the system allows for easy searching of records, and this saves managers a great deal of time. There is also improved efficiency with the use of ERP systems as most queries can be answered from the system thus reducing the amount of time an accountant spends answering and explaining things to managers which gives them more time to concentrate on their work.

Limitation of ERP systems

For an ERP system to be successful, the organization implementing it needs to tailor its business processes to those of the ERP and not vice versa. Attempting fit the system to the organisation's business needs, leads to too much customization of the system and eventual failure of the whole system as the core business processes of the system is changed. It is very costly to customize the system, and with the failure rate been so high an organization is advised to avoid this if possible Robey, Ross, & Boudreau, 2002()

The amount of data collected by the ERP is too much, and one cannot be able to analyze it in time to produce the required reports, this increases the workload of the management accountant as they have to spend more time analysing data if they are to meet the set deadlines for reporting. With the amount of data in the system, one gets confused as they do not know which data to include in their reports and which one to omit, which leads to poor data analysis and reporting.

Fully utilizing the capabilities of the system is not possible as most users have minimal understanding of the system. This leads to the ERP system not performing as expected and managerial reports are not produced on time or as expected, which greatly affects the decision making of the organization.