Impact of Enterprise Resource Planning (ERP) on Roles of Management Accountant in

Organizations

Researchers

Roll # 01 Zainab Mehmood

Roll # 03 Aakfa Nudrat

Presentation Overview

2. Introduction

1. What is ERP?

i/ Why Use It?

4. ERP system implementation

6. Attributes of a good management-accounting system

5. The main role for management accounting in the organization

7. The impact of ERP implantation on management accounting system

8. The impact of ERP systems on the role of management accountants

9. Benefits and Issues

10. Change in the Role of the Management Accountant

11. Recommendations for management accountants in an ERP environment

12. Findings and Conclusion

13. Limitations

14. References

ERP system and ERP software ERP system and ERP software

All components required to establish the All components required to establish the system, such as ERP software, IT system, such as ERP software, IT Infrastructure, business process and so on. Infrastructure, business process and so on. Thus, ERP software is part of the ERP system.  Thus, ERP software is part of the ERP system. 

What is ERP?What is ERP? Enterprise resource planning (ERP) is an integrated Enterprise resource planning (ERP) is an integrated

computer based system used to manage internal and computer based system used to manage internal and external resources including tangible assets, financial external resources including tangible assets, financial resources, materials, and human resources. resources, materials, and human resources.

Its purpose is to facilitate the flow of information Its purpose is to facilitate the flow of information between all business functions inside the boundaries between all business functions inside the boundaries of the organizationof the organization

ERP systems consolidate all business operations into ERP systems consolidate all business operations into a uniform and enterprise wide system environment.a uniform and enterprise wide system environment.

IntroductionIntroduction

Enterprise Resource Planning is the latest high Enterprise Resource Planning is the latest high end solution, information technology has lent end solution, information technology has lent to business application. to business application.

The ERP solutions seek to streamline and The ERP solutions seek to streamline and integrate operation processes and information integrate operation processes and information flows in the company.flows in the company.

Synergize the resources of an organization Synergize the resources of an organization namely men, material, money and machine namely men, material, money and machine through information. through information.

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Today many companies in India have gone in for Today many companies in India have gone in for implementation of ERP implementation of ERP

It is expected in the near future that 60% of the It is expected in the near future that 60% of the companies will be implementing ERP since this will companies will be implementing ERP since this will become a must for gaining competitive advantage. become a must for gaining competitive advantage.

The aim of this paper is to demonstrate the impact of The aim of this paper is to demonstrate the impact of ERP implementation as a new system on management ERP implementation as a new system on management accounting practices. accounting practices.

Why Use It?Why Use It? ““Our sales guys can never make up their mindsOur sales guys can never make up their minds. They keep changing their . They keep changing their

product requirements on a daily basis. How can I ever manage my production product requirements on a daily basis. How can I ever manage my production under such a situation?under such a situation?””

""Our manufacturing people are in a world of their ownOur manufacturing people are in a world of their own. They are more . They are more interested in reporting high capacity utilization, rather than meeting the interested in reporting high capacity utilization, rather than meeting the

delivery schedules committed to customers. We end up facing the flak with our delivery schedules committed to customers. We end up facing the flak with our customers”customers”

““I never seem to get the right informationI never seem to get the right information. Each department presents me their . Each department presents me their own picture. Which never matches another department's information. Am I own picture. Which never matches another department's information. Am I

supposed to spend all my time reconciling data, or take decisions!”supposed to spend all my time reconciling data, or take decisions!”

Back EndFinance and Accounting

Human ResourcesManufacturing

PurchasingDistributionMarketing

Front EndCustomer Relationship

ManagementE-Store

E-AuctionE-marketing

Service Management

Front End E-Procurement

Reverse AuctionExchange

Supplier SelectionSupplier

RelationshipsE-Sourcing

CustomerSupplier

Supplier

Supplier

Supplier

Customer

Customer

Customer

Customer

E R P A P P L I C A T I O N S

EXTENDED ENTERPRISE MANAGEMENT SYSTEM

ERP = Extended Enterprise Management System

Supplier

ERP system implementationERP system implementation

Four major phases are:Four major phases are:

1.1. Detailed Discussion Phase Detailed Discussion Phase

2.2. Design and customization Phase Design and customization Phase

3.3. Implementation Phase Implementation Phase

4.4. Production Phase Production Phase

Implementation Phases of ERP

Detailed Discussion Phase

Design and customization Phase

Implementation Phase

Production Phase

Logical Framework

The main role for management accounting in the The main role for management accounting in the organizationorganization

““Management accounting is a system of Management accounting is a system of measuring and providing operational and measuring and providing operational and financial information that guides managerial financial information that guides managerial action, motivates behaviors, and supports and action, motivates behaviors, and supports and creates the cultural values necessary to achieve creates the cultural values necessary to achieve an organization’s strategic objectives”[ Jan, an organization’s strategic objectives”[ Jan, Shahid, Homas and Arol 1999].Shahid, Homas and Arol 1999].

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Management accounting is often defined as a Management accounting is often defined as a system that provides useful information for system that provides useful information for managers in terms of decision making, managers in terms of decision making, planning, control and performance evaluation planning, control and performance evaluation (Drury, 2004, p. 20 )(Drury, 2004, p. 20 )

Attributes of a good management-accounting Attributes of a good management-accounting systemsystem

The impact of ERP implantation on management The impact of ERP implantation on management accounting systemaccounting system

The involvement of management accountants The involvement of management accountants is seen as another important success factor for is seen as another important success factor for ERP implementations. ERP implementations.

The more active the role played by the The more active the role played by the management accountants, the higher the level management accountants, the higher the level of perceived success for the ERP of perceived success for the ERP implementation. implementation.

. The impact of ERP systems on the role of . The impact of ERP systems on the role of

management accountantsmanagement accountants The Institute of Certified Management The Institute of Certified Management

Accountants (ICMA, Australia) describes the Accountants (ICMA, Australia) describes the management accountant as someone who management accountant as someone who applies his or her professional knowledge and applies his or her professional knowledge and skill in the preparation and presentation of skill in the preparation and presentation of financial and other decision oriented financial and other decision oriented information in such a way as to assist information in such a way as to assist management in the formulation of policies and management in the formulation of policies and in the planning and control of the operation. in the planning and control of the operation.

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The changes which are affecting the core role The changes which are affecting the core role of the management accountant are in large part of the management accountant are in large part due to the popularity of ERP due to the popularity of ERP

Benefits of ERPBenefits of ERP Reduction in stock levels due to improved planning Reduction in stock levels due to improved planning

Monthly accounts closing in fewer daysMonthly accounts closing in fewer days

Improved financial accuracy and financial efficiencyImproved financial accuracy and financial efficiency

Meaningful reportsMeaningful reports

One version of the truthOne version of the truth

Improved visibility and access to informationImproved visibility and access to information

Continue……Continue…… Improved financial controlImproved financial control

Reduction in staff due to automation of tasks Reduction in staff due to automation of tasks

Cost saving through shared servicesCost saving through shared services

Reduction in cost of maintaining multiple systemsReduction in cost of maintaining multiple systems

More time for managing the businessMore time for managing the business

Change in the Role of the Management Change in the Role of the Management AccountantAccountant

Reduction in time spent on data collectionReduction in time spent on data collection

Increase in time spent on data analysisIncrease in time spent on data analysis

Increased involvement in decision makingIncreased involvement in decision making

Improved focus on internal reportingImproved focus on internal reporting

Improved focus on external environmentImproved focus on external environment

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Shift in focus from historical to forward looking analysisShift in focus from historical to forward looking analysis

Shift from domain specific to cross-functional analysisShift from domain specific to cross-functional analysis

Changes required in communication skillsChanges required in communication skills

Improved long term job satisfactionImproved long term job satisfaction

Recommendations for management accountants Recommendations for management accountants in an ERP environmentin an ERP environment

Should have appropriate and adequate accounting training vis-Should have appropriate and adequate accounting training vis-à-vis the skills needed by management accountants in ERP à-vis the skills needed by management accountants in ERP environments.environments.

A formal accounting qualification is very desirable.A formal accounting qualification is very desirable.

The need for good communication and interpersonal skills.The need for good communication and interpersonal skills.

Analytical skills and the ability to focus on objectives and Analytical skills and the ability to focus on objectives and prioritize work (work management) were also deemed prioritize work (work management) were also deemed important. important.

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The increased importance in understanding the The increased importance in understanding the business was also emphasized. business was also emphasized.

That is, the management accountants need to That is, the management accountants need to be able to communicate with the management be able to communicate with the management team and synthesize and explain the results team and synthesize and explain the results (the impact of the financial data) in a way that (the impact of the financial data) in a way that can be easily understood. can be easily understood.

Findings and ConclusionFindings and Conclusion

ERP system has had a positive effect on the role of the ERP system has had a positive effect on the role of the management accountant.management accountant.

ERP systems has not changed the ultimate responsibility of ERP systems has not changed the ultimate responsibility of accountants which is the end of month figures. accountants which is the end of month figures.

ERP effortlessly communicates information across various ERP effortlessly communicates information across various departments and improves efficiency, performance and departments and improves efficiency, performance and productivity levels. productivity levels.

When management accountants are involved in the When management accountants are involved in the implementation of an ERP system there is an increased implementation of an ERP system there is an increased likelihood of success.likelihood of success.

The management accountants become more closely involved The management accountants become more closely involved in business decision-making in business decision-making

LimitationsLimitations

The scope of customization is limited in several The scope of customization is limited in several circumstancescircumstances

The present business processes have to be rethought The present business processes have to be rethought to make them synchronize with the ERPto make them synchronize with the ERP

ERP systems can be extremely expensive to ERP systems can be extremely expensive to implementimplement

There could be lack of continuous technical supportThere could be lack of continuous technical support ERP systems may be too rigid for specific ERP systems may be too rigid for specific

organizations that are either new or want to move in a organizations that are either new or want to move in a new direction in the near futurenew direction in the near future

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