Issues in Integrated Accounting System

Issues in Integrated Accounting System

Purpose

The article critically examine the issues related to the implementation of ERP in the Organization which may not attain the full integration of the Organizational activities due to absence of Integrated Information system approach at each organizational level. Further, it also provides uses and characteristics of Integrated Information system and approach needs to be taken for implementing integrated information systems in the organisation, so that it may be catering to all the business needs.

Arguments / Findings

1.) When the companies implement ERP system in the organisation with a view to integrate the organisational activities, it focuses on recording of transactions and quick retrieval of real time information. The drawback in real time information system is of recognition of errors.

2.) There exist difference between focus of accounting system which caters to accurate recording and transparency whereas information system is implemented with the focus of the connectivity among business units. To become more efficient and effective , the companies are investing in new software's to achieve accounting results, on contrary , the companies adapt to old management accounting system in order to reduce complexity in implementing ERP system.

3.) In-order to achieve the business process needs and considering the complexity of ERP system , the companies implement certain modules conventionally in the ERP system i.e. performance management system (balancescorecard), budgeting and some systems outside the ERP system which questions the overall integrated the organisation by one system.

4.) Further, the ERP system are effective in respect of transaction processing whereas less effective when it comes to reporting and decision support whereas softwares related to management accounting is more inclined towards analysis or task oriented jobs.

5.) There is a difference between use of information as the management accounting is utilizing information on the basis of task i.e. customer profitability, ABC, contribution margin analysis, supplier management. On other hand, it is used in Accounting purpose for recording transactions in journals, sorting of transactions according to chart of accounts of general ledger and preparation of financial statements.

6.) It is also emphasized that the advances in information technology add new paradigm shift to ERP system which could be utilized by functional integration of financial accounting, management accounting at fiscal management and tends to become an integrated accounting i.e, transaction oriented system as well as analysis oriented systems.

7.) There is also an argument that financial accounting is required to prepare mandatory financial statements which is required by Law inorder to assist with external customers i.e., Investors, Government Authorities whereas the management accounting systems are maintained for internal decision making.

8.) The growing importance of management accounting by general managers and management accountants indicates their involvement in more business related tasks which require multidisciplinary knowledge and usage of advanced systems which may assist decision making and provide line manager with accounting knowledge of their own spend and budgets.

9.) The ERP system only affects financial indicators of the business i.e., recording of transaction but it does not impact the non-financial indicators i.e., quality of information etc. which are critical for decision making.

10.) It is also suggested that the systems can be utilized as per hierarchical requirements of modules i.e., if Management accounting is providing initial insight to allocation of costs then it can be further utilized by the accounting for valuation purposes and the same will lead to integration of data .

Major Agreements / Disagreements

The companies implement ERP in view to integrate all the business related activities but could not evaluate the effectiveness in terms of coverage of business processes within the Organization. The benefit of real time information and financial reporting undermines the sensitivity other business processes which are the building block of decision making. As suggested