Enterprise Resources Planning (ERP) Discuss the implication on the accounting system.

m. What are the control problems that might arise from such a system

Introduction Information technology is extensively changing the working practices of an increasing number of companies. For example, HP Incorporated uses information technology via the Internet to bypass wholesalers and retailers and thereby to link itself to customers (www.hp.com). At the same time, HP uses the Internet to link itself directly to suppliers. Accounting aims, as an information system, to provide various users with different forms of useful information to meet their various needs. Therefore, accounting seeks to take advantage of the surrounding circumstances in order to improve the quality and quantity of information and the delivery mechanism to users. The relationship between accounting and the computer began in the sixties of the last century. This relationship continued to evolve, and expanded in the eighties of the last century due to the development of the network and decision-support systems when it took a broader dimension and more flexible known as the computerization of accounting. Recently, as a result, several accounting software developed to be popular on the shelves (off the shelf) shops to become accessible to most interested in them at reasonable cost (Mashhour, 2002, p 9). On the other hand, although there are some organizations that prefer to develop their own programs, either by themselves or through professionals, multi business organizations recently adopted the use of comprehensive business systems contain several sub-systems including accounting system. These systems are known as ERP (Enterprise Resources Planning) system, which is characterized by providing integrated incompatible results to the
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departments and assist them to improve the quality of their decisions and the preparation of comprehensive integrated plans (Brehm and Gomez, 2010). As many software companies produce Enterprise Resource Planning systems (ERP), such systems have spread globally and locally here in Nigeria. Following to the transformation of the companies to the use of accounting computerized systems which become a part of Enterprise Resources Planning system, it became inevitable to recognize such systems and their performance. The high costs associated with the transformation of business organizations to implement the Enterprise Resource Planning (ERP) system, the requirements of requalification of employees and staff, its impacts on working hours and the performance of the work and the management programs and plans, the study has focused to identify the effectiveness of the information system of accounting in light of this transformation. It is known that such system has certain significance in the decision-making processes, whether internal or external, as well as its role in the competition atmosphere, protection of property and confidentiality of operations and the information security. Advantages of Enterprise Resources Planning The accounting module is the heart of an ERP system, typically incorporating applications such as general ledger, accounts receivable and payable, fixed assets, cash management, cost control and budgeting. However, ERP systems offer companies the ability to improve business processes by integrating all the functional areas within an organization. Both financial and non-financial data can be integrated. The fundamental advantage of ERP is that integrating myriad businesses processes saves time and expense. Management can make decisions faster, and with fewer errors. Data

becomes visible across the organization (Spathis, and Constantinides, 2004). Tasks that benefit from this integration include: Sales forecasting, which allows inventory optimization Chronological history of every transaction through relevant data compilation in every area of operation. Order tracking, from acceptance through fulfillment Revenue tracking, from invoice through cash receipt Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced) ERP systems centralize business data, bringing the following benefits:

They eliminate the need to synchronize changes between multiple systemsconsolidation of finance, marketing and sales, human resource, and manufacturing applications

They bring legitimacy and transparency in each bit of statistical data. They enable standard product naming/coding. They provide a comprehensive enterprise view (no islands of information). They make realtime information available to management anywhere, any time to make proper decisions.

They protect sensitive data by consolidating multiple security systems into a single structure (Walsh, 2009).

Benefits of Enterprise Resources Planning Al-Qatawneh, (2005) stated that there is a need to pay attention to training and more researches on this issues. Nicolaou and Bhattacherya (2006) results revealed that companies which implement ERP system showed early
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improvements in the financial performance more than others. Galani, et al. (2010) results showed that the ERP system improves the quality of information and increase satisfaction with the management and users on the performance of their organization. The study also found that the ERP system improves the function of administrative accounting and thus the performance of management, increase their ability to take appropriate decisions, facilitate the proper application of new accounting practice, assist in reducing costs, establishing linkages with suppliers and reduce response time to customer needs. The integration of the accounting information system within the Enterprise Resources Planning (ERP) Systems would increase the relevance of accounting information and reduce the degree of uncertainty to the decision maker. In addition, ERP systems contribute in providing a much clearer picture for the overall activities of the business organization, its financial position and accounting position as well in particular.

ERP can greatly improve the quality and efficiency of a business. By keeping a company's internal business process running smoothly, ERP can lead to better outputs that benefit the company such as customer service, and manufacturing.

ERP provides support to upper level management to provide them with critical decision making information. This decision support allows the upper level management to make managerial choices that enhance the business down the road.

ERP also creates a more agile company that can better adapt to situations and changes. ERP makes the company more flexible and less rigidly structured in an effort to allow the different parts of an organization to become more cohesive, in turn, enhancing the business both internally and externally (O'Brien, 2011).

Disadvantages of Enterprise Resources Planning

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Scapens and Jazayeri, (2003) identified the system as a result of the implementation of Enterprise Resources Planning (ERP) system in the management accounting, especially after the wide spread use of these systems, particularly in large companies. They indicated that there is a lack of addressing the issue of ERP in the accounting literature. They explored the experience of the American system (SAP) and concluded that the implementation of the Enterprise Resources Planning (ERP) system deceases the routine administrative functions, provides the managers directly with useful information and increases of the role of managerial accountants. The control problems that might arise from such a system can be seen as follows:

Customization is problematic. Re-engineering business processes to fit the ERP system may damage competitiveness or divert focus from other critical activities.

ERP can cost more than less integrated or less comprehensive solutions.

High ERP switching costs can increase the ERP vendor's negotiating power, which can result in higher support, maintenance, and upgrade expenses.

Overcoming resistance to sharing sensitive information between departments can divert management attention.

Integration of truly independent businesses can create unnecessary dependencies.

Extensive training requirements take resources from daily operations.

Due to ERP's architecture (OLTP, On-Line Transaction Processing) ERP systems are not well suited for production planning and supply chain management (SCM)

Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning and money (Minefied of Harmonising, ERP 2012).

Recognized ERP limitations have sparked new trends in ERP application development. Development is taking place in four significant areas: more flexible ERP, Web-enable ERP, inter-enterprise ERP, and e-business suites. Each of these potentially addresses current ERP failings. Similarly ERP provide the financial and accounting information in easy and understandable way and on proper time. Alzoubi (2011) found that ERP systems facilitate comparison processes of the financial statements of a business organization over time, which enable the decision makers for better evaluation of the performance. Also, the use of ERP systems leads to the increase the reliability of accounting information systems through maintaining confidentiality, privacy and security of information. The findings of his study highlighted that the use of ERP system increases the possibility of monitoring all financial and accounting operation to make sure of the proper implementation accurately and smoothly by the competent authorities. Thus, it is recommended that to encourage different business organizations in Nigeria to move toward the adoption of ERP application because its benefit to them in the field of control and decision-making. It is also recommended to expand using ERP systems among organizations, business owners and managers to highlight the advantages and benefits of this system in facilitating the work progress and simplifying procedures. It is important to support local softwares companies to develop the various systems and
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deployment of ERP and increasing production in order to reduce costs and improve its performance locally. Eventually, there is a need for more studies on this area to support the results of the current study and to expand the literature on this important issue. In conclusion, although ERP systems are appealing in this highly competitive business environment they have a number of limitations. The managers of companies adopting ERP systems, focusing attention on the changes in the accounting processes brought in. Furthermore, the motives for adopting ERP systems and the benefits sought are explored. The aim is to shed more light on the distinct advantages offered by ERP systems compared to the traditional IS, establishing the best way forward. References Al-Qatawneh, A. (2005) the Effect of Information Technology Using upon Accounting Information Systems Efficiency, doctorate thesis, Unpublished research, Arab academy for Banking and Financial Sciences, Jordan. Alzoubi, A. (2011). The Effectiveness of the Accounting Information System under the Enterprise Resources Planning (ERP), Research Journal of Finance and Accounting, Vol 2, No 11, pp. 10-18 Brehm, Nico and Jorge, Marx Gomez, (2010), Federated ERP-systems on the basis of Web Services and P2P networks, International Journal of Information Technology and Management, Volume 9 Issue 1, October, USA P75-89. Galani Despina, Efthymios Gravas and Antonios Stavropoulos, (2010), The Impact of ERP Systems on Accounting Processes, World Academy of Science, Engineering and Technology , issue 66, Australia, P418- 423. Mashhour, A. (2002), Accounting Information Systems, alqudes opened university publishing, Jerusalem, P9-15. Nicolaou, A.I. and Bhattacharya, S. (2006), Organizational Performance Effects of ERP Systems Usage: The Impact of Post-Implementation Changes. International Journal of Accounting Information Systems , Volume 7, Number 1, Spring, USA, P 18-35.
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O'Brien, J. (2011). Management Information Systems(MIS). New York: McGraw-Hill, Irwin. p. 324. Scapens, R.W., and Jazayeri, M., (2003), ERP systems and management accounting change: opportunities or impacts?, European Accounting Review, UK, http://mpra.ub.uni-muenchen.de/9582/, (September, 2, 2011) Spathis, C. and Constantinides, S. (2004). Enterprise resource planning systems impact on accounting processes, Business Process Management Journal, Vol. 10 No. 2, pp. 234-247 The Minefied of Harmonising ERP (2012). Accessed on http://www.cfoinsight.com/ reporting-forecasting/forecasting/the-minefield-ofharmonising-erp/ Walsh, K. (2009). "The ERP Security Challenge". CSOonline. CXO Media Inc.