Managerial accounting systems for informed business decision-making

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Managerial accounting

The fastest growing and developing field in today's society is indubitable the IT sector, which has transformed from a closely regulated and controlled experiment into a force impacting every aspect of the daily life, from the preparation of breakfast to the completion of complex professional chores. Within the business community, technological development has been represented through a wide array of elements, one of the more common ones being the development and implementation of ERP -- enterprise resource planning. ERP is generically defined as "a system which brings all the decision making information from all the departments in a company into one single place in order to increase efficiency, productivity and profit of the company" (ERP Definition, 2010).

The introduction of the ERP is as such expected to have generated tremendous impacts at the level of organizational decision making. Before the introduction of ERP for instance, the organizational departments were perceived as semi-independent constructions, each administering its own budgets, setting its own objectives and making its own decisions. For accounting managers, the process was highly complex and tedious as it involved the collection of information from all separate departments. Such a process required time and implied increased resource consumption.

With the implementation of the enterprise resource planning system however, the organizational departments became more integrated as parts of the greater organizational construction. At the level of the information, this came to be centralized in a single information system, which allowed quick and easy access to all parties requiring the information. For accounting managers then, ERP represented the solution to the informational delays and difficulties in collection. In other words, with the aid of ERP, accounting managers are now able to quickly and efficiently access the information they need, to integrate it in their reports and to increase the efficiency of reporting as well as decision making.

In light of these statements, a question is being posed relative to the complexity of the managerial accounting and reporting processes. Specifically, it is wondered as to whether or not the introduction of ERP -- with all of its consequences -- generated an increase in the reporting complexity. Such an inquiry is based on the fact that the ERP and the adjacent processes have led to an increase in the information available and which is processed and integrated in reports. The answer to such a question is difficult to offer specifically as the mechanisms and complexities, as well as the impacts of ERP implementation, are observable in particular stances at the level of each organizational entity. At a general level nevertheless, it is believed that ERP has improved the organizational process of data collection and processing. Some complexities would be expected to be encountered, such as an increase in the volumes of data to be processed, but these would be counteracted with significant benefits, such as increased operational speed and efficiency, all supported by the improved organizational systems.

Similar to the economic agents testifying to the advantages of enterprise resource planning systems, the academic community has also provided readers and researchers with positive prospects for ERP. Among the most notable benefits associated with ERP, one could pin point the following:

The ERP systems allow accounting managers more time to conduct critical analyses of the information, rather than spend the time completing routine tasks (Granlund and Malmi, 2002)

The ERP systems provide accounting managers and other entities in charge of reporting with more "real-time and accurate information" (Ho, 2006)

Improved management of the overheads through efficient processes of cost assigning

Improvement estimations and administrations of profits and profitability through more accurate valuation processes and more reliable analyses and estimations

Enhanced quality of investment management through the use of embedded technologies, the more efficient management of assets and through more efficient transfers of information (Puthran, 2006).

The advantages of ERP systems are obvious within numerous economic agents and forwarded by various literary sources. Nevertheless, the process is still a relatively new one, and solid information and conclusions have yet to be retrieved. Additionally, some problems still have to be faced. These problems refer primarily to the limitations of ERP, summarized below:

ERP implies additional costs and expenditures which might not be available to all economic agents

The employees have to be continually trained and engaged in the change process, which could sometimes generate dissatisfactions and resistance to change

Data integrity has to be continually ensured

Success of ERP depends strictly on the means in which the employees implement and use it

ERP systems are difficult to customize and they are as such unable to answer specific needs of organizations (Exforsys, 2006).