The Impact of ERP Systems on Accounting Processes in SMEs

This assignment content discusses the impact of Enterprise Resource Planning (ERP) systems on accounting processes, with a focus on small and medium-sized enterprises (SMEs). The articles and resources provided explore various aspects of ERP implementation, including its benefits, risks, and controls. Additionally, they discuss the importance of accounting information systems in managing business processes effectively.

EXECUTIVE SUMMARY
The main purpose behind writing the said report is making B Bakery aware of the fact that it
is losing on its important clients simply because of lack of proper accounting knowledge and
detailed analysis of the various business processes. The firm lacks integration of the business
process simply because it has still the age old accounting system installed. The said report
also discusses about the kind of accounting information system it needs to install and the
benefits it would offer to B Bakery. Hence, B Bakery after analysing these should install the
AIS so that it can beat the competition.
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Table of Contents
INTRODUCTION 4
WHAT IS THE BUSINESS PROCESS OF A BAKERY 4
BUSINESS REQUIREMENTS OF B BAKERY 5
DETERMINE THE SYSTEM REQUIREMENTS 7
SOFTWARE SELECTION 8
VENDOR SELECTION 9
RECOMMENDATIONS………………………………………………………………………………………………………………………10
CONCLUSION……………………………………………………………………………………………………………………………………12
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INTRODUCTION
Organisations long in business will have to understand that globalisation and information
technology has changed the ways businesses are conducted including the mode of
maintaining the accounts as well. B Bakery as is understood has been into the business of
bakery for almost half a century and seen various ups and down. Subsequently the recent
years have been some of the most flourishing years due to the introduction of newer products
which are healthy as well as tasty. Unfortunately, B Bakery had to face the loss of some of
the main account holders as they failed to provide some of its most wanted products at rates
which equivalent to the one was offered by its competition. B Bakery continued to follow the
age old method of accounting for its costs of products which failed to tell the firm about the
places where the cost incurred is most and where they can cut down costs. Also due to lack of
proper expertise as well and the absence of adequate business processes and ERP packages
installed, the firm was unable to supply the goods at competitive rates as they were unable to
find out how much profits can be sacrificed or reduced because of absence of a handy
financial data. The firm lacked availability of instant and analytical information which would
help them to take instant decision so as to retain the client. The said essay defines what the
business of bakery desires of and how the ERP should be selected keeping in mind the
purpose it is expected to serve for the firm. It also discusses about the fact that simply
software selection is not the end, vendor selection is of utmost importance as well.
WHAT IS THE BUSINESS PROCESS OF A BAKERY
Well before the business process of a bakery is understood it is very crucial to understand as
to what does a baker do. Basically a baker is a chef who specialises in baking pastries and
breads of various kinds. He ensures to be the one who is involved in the procurement of raw
materials, to baking the pastries and finally giving it a finishing touch by various kinds of
icing which makes the cake look good. He also ensures to procure goods from the best of the
places wherein the quality is not compromised and the price paid is the least as well.
For every business to run well, it is undoubtedly required to check upon the business
processes being undertaken by the company and so is applicable for the business of B Bakery
too. It is a business process which helps in achieving the goals of any organization and if the
same is not well defined then the business may have to suffer in the long run. In today’s time
of globalisation and increasing competition as well within a small business entity also,
business process management (BPM) plays a crucial role as it helps to improvise various
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processes such as accounting, cost analysis etc (Rouse, 2016). There are various categories of
a business process and each category has a separate role to play in the success of the
organization. First and foremost is the operational process and B bakery’s operational process
is to make the best quality bakery products and to improvise upon the existing range of
products being offered as per the changing tastes of its customers (Borysowich, 2008). With
regards the said process, B Bakery has successfully launched a range of product which is
healthier and tastier as well, thus trying to deal with the operational process. The second one
is the supporting processes which does not provide services or goods to the customers
directly, but indirectly are a crucial part of the entity. They help to support, as the name says,
to the main operations of the concern such as in the case of B Bakery, its main operational
process is being backed up by accounting, workplace safety. The third one is the management
process which help to determine, check upon and organize processes which are linked to the
business procedures and systems, such as budgeting, strategic planning and adequate and
proper communication within the organization (Veyrat, 2016). However in the case of B
Bakery, though the support process was very much evident but the kind of support being
provided was not as per the trend. The entity continued to follow the age old method of
manual book keeping which gave results of the performance at the end of the year and there
was no clue in the middle of the year as to where the costs could be controlled etc. Further to
this, the management process also lacked because B bakery could not manage the activities as
per the trend prevalent due to which the method of costing adopted was an old one which did
not give him fruitful results. Lack of handy details was the main lack in the business process
(Gratch, 2017). B Bakery although had updated its operational process but failed to
understand that the support and the management processes are equally important and hence
needs to be updated too.
Hence it can be rightly said that all these business processes are interlinked. Thus if there is
an issue with the supply production, then it will automatically have an adverse impact on the
sales and in the same fashion, if the business loses some of its customers then also its sales
will decline (Considine et.al. 2005).
BUSINESS REQUIREMENTS OF B BAKERY
All the business processes discussed above are crucial and integral. But the main processes
can be summarised into four different categories i.e. supply chain management, human
resources, production and accounts. Amongst these four, accounts is of utmost importance
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specially from a business man’s viewpoint since it acts as a fuel for the success of the entire
business process. B Bakery has been able to made tremendous profits and grow its business
in the past few years but present scenario shows that it is facing some issues as it is losing its
accounts. Even though the firm has appointed a specific accounting team who is accountable
for the book keeping and the other reporting part of the accounts of the business, but the said
accounting method fails to provide details about certain decision making actions. Because of
the same the company failed to retain some of its key accounts as it could not provide them
products at rates which were competitive with their competition. Finally it has realised that he
company needs to improvise upon its present accounting method so as to be able to get
certain data which would help them to take analytical decisions. Thus the data required for
taking such a decision will come only via proper and in depth business process as well as
market research. Basis these data, B Bakery will be able to take crucial and important
decisions which would help it to regain back the lost customers and gain success again.
The business desires to install an accounting information system within its business and
hence they are looking for investing in some of the available accounting software for the
accomplishment of the said purpose. The key requirements for B Bakery presently is to
improvise their present accounting methods, integration of the business processes and the
accounting systems so that more sound decisions can be taken, putting in money in some of
the accounting software packages which are available and tailoring it as per the business
process and execution of an ERP and AIS for their business. ERP will support in integration
of the business process and will help to provide a stronger base for the AIS (Bragg, 2017).
The bakery business demands for many major details from its various core business processes
which would in turn help them to gain better performance of their business in the market. The
business process cannot work well until and unless adequate information which would help in
taking decisions are collected. Not only transactional data but also operational information is
a must for processing and decision making. Hence the account process can provide adequate
data only if it gathers and collects the same from the other business processes. Information
related to payables, receivables, inventory, the margins that it is presently earning and what it
can sacrifice, cost of production, etc are a must for a sound business decision. These data are
a must for setting the price of its products at competitive rates.
For the acquisition of the said data from the business processes, it would need assimilation of
all the business processes and the systems which are needed for the conduct of these
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processes. The better the assimilation, the better the business process and which would at the
end yield better results financially. The AIS which is being installed over the ERP will help
to give a structure to the entire firm and will in turn help it to gather, process, supervise,
accumulate and recover financial data by the various analysts , managers, accountants,
auditors and such others who need the information for the purpose of business decision
making (Hall, 2016).
Apart from the same, ERP will help to assimilate the jobs and procedures of the business of B
Bakery. The assimilation of both of them i.e. AIS and ERP will ultimately ensure that the
data being presented more useful from the normal business data. Simply putting, AIS will
give business estimating data by investigating past data.
DETERMINE THE SYSTEM REQUIREMENTS
A huge number of resources are at the dispense of the small business houses who are trying
to achieve growth in their operational processes. These resources comprises of the various
tactics that the companies should undertake, which areas calls for improvisation, how can
they control on those things which they already possess etc. B Bakery is a firm which is
lacking only technological expertise and not expertise in the field of baking. It needs to make
an investment in an appropriate accounting information software (AIS) so that it is being able
to beat the competition successful. The firm has a brand name, goodwill, talent but lacks
accounting of its talent due to which it is failing into becoming a cost efficient company.
Thus while investing into IT, the bakery firm should take into account some of the software
features which would help it achieve its goal of price competitiveness.
It is not possible to gain grow and beat the competition, until and unless the age old methods
are left behind. It has to ensure to chose an IT software which serves its various software
purposes. B Bakery is aware that its biggest drawback lies in the field of accountancy, costing
and analytical methodology thereby it needs execution of ERP as well as AIS within its
business process. The accountant it has employed is a person with a conservative mindset.
Thereby the software being selected should be such which would act as a ready reckoner for
the owner to decide upon price cuts of certain products. Bakery firms business structures are
generally very small to medium sized in nature and hence there software requirements would
be one that offers a centralised system of recording transactions. The main thrust is on those
features which are a must for the firm and without which the entire purpose of installing a
software is a waste. Thus one of the main feature that the software should offer to a B Bakery
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is cost accounting. The ERP software will assimilate all the business procedures and hence
there would exist a shared and centralised data center which would all the business
procedures across the firm. This centralisation will ensure that adequate data is also available
for the AIS process as well. This would ensure a more accurate processing.
The AIS helps the business process in conducting three essential functions:
1. It helps to process the information in a more effective and efficient manner. The same
is possible as it collects information from the various transactions being undertaken
by the company. For performing the said function, the AIS will have to gather all
those transactions, their sources, documentations etc. Wherein these dealings will be
written into the journals. A journal is a book keeping process which records all the
transactions in a sequential order and from there these transactions are posted to
various ledgers wherein further sorting is done basis various accounts.
2. The AIS software gives support to the management in taking sound decisions by
collecting and deriving data from these databases and analysing the same (Zheng,
2015). Thus apart from the financial statements, the managerial reports are also
needed by the management which would help them to take various strategic decisions
and not wait for the year to end to get hold of the financial status.
3. The firm’s internal control will strengthen with the installation of an AIS since the
software has the potential to produce very reliable and dependent data. This will
ensure that the business processes are efficient and in line with the main objectives of
the management (Koronapos.com., 2017).
SOFTWARE SELECTION
B Bakery falls under the category of medium of large sized company because it has seventy
employees and the revenue it generates surpassed $13.5 million in the previous year. Thus the
kind of software it would require is one which would help in providing better detailed
information which would help it to take quick decisions and ensure competition is kept away.
Basis the present industrial condition, three kinds of accounting information system software
for such kind of a business is best suited. They are as under:
1. Entry level Solutions: This type of solution is best suited for a small firm where the
number of members does not exceed five. The software for this category has the
capability of delivering basic financial accounting functionalities, review and
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reporting as well. AIS such as Quickbooks, SAGE 50 US Edition, XERO, Freshbooks
and Wave etc. which is best suited for such a kind of organizations.
2. Small to Medium Scale Business Solutions: This class of AIS software is best fitted
for the small and medium scale businesses wherein the users would not exceed
hundred. The software which falls under this category cater to various other functions
as well as compared to the previous one. The software which falls under this category
basically supports a high demanding transactional data support which helps in the
reporting purpose. The software is highly scalable and the connected record will be
vigorous. Example of this category software are SAGE 100 ERP, Exact Max,
Quickbook Enterprise, CYMA, SAP By Design etc.
3. Enterprise accounting Software: This category of AIS is best suited for larger
organizations where the number of users is more than hundred and also helps to cater
to businesses which are spread across the globe. The features they possess are
vigorous and the functions are extended (Bolenta, 2011). Example of such a kind of
software are SAP, Oracle etc.
Basis the above descriptions, it is clear that B Bakery should consider installation of
accounting solutions which fall under the second category i.e. small to medium business
solutions (Diana, 2015).
VENDOR SELECTION
The small and medium business solutions vendors, the most reputed ones are SAGE 100
ERP, Microsoft Dynamics and SAP by Design. Amongst these three, two accounting
packages being chosen for comparing are SAGE 100 ERP and SAP By Design.
SAGE 100 ERP
SAGE 100 ERP offers a number of deviations of the AIS software for these kind of
enterprises. These are SAGE 100 Advanced ERP, SAGE 100 Standard ERP etc. This
software has the capacity to support around half a century of users at the same time and that
too for a varied range of accounting activities to be performed, economic activities, business
intelligence, human resource, manufacturing, marketing and distribution and various CRM
services. The solutions it provides can be tailored according to the requirements offered by
these business procedures. The software is flexible enough to suit to the changing business
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needs as if the same is not then it becomes difficult for the medium enterprise to install new
systems every now and then. Also the same is stable enough (Lobby, 2017).
It demands for Microsoft Windows environment and Microsoft SQL as well which would
help in managing the backend. The same can be implemented and installed basis the platform
used by the client. For the usage of the said software, wizard base support is available which
ensures flawless assimilation within the modules of the software. The said software is less
complicated thereby makes it easy for a novice also to understand its usage module. The
return on investment will be maximum in this kind of a software due to the vigorous features
it has to offer and the reports derived from it is very easily comprehendible. The users can
easily add and delete the various user defined fields, rules of the business which helps to
perform some specific tasks (Accounting Software World 2015).
SAP Business by Design
It is a generalised accounting software package for business such as the size of B Bakery.
Basically it helps to serve those small and medium enterprises which are searching for SaaS
based cloud accounting solutions (Tur, 2013). It provides a huge array of professional
services in conjunction with assimilated procedures for financing, CRM etc. this software has
many advantages to offer such as the software is easily scalable i.e. new users can easily be
added and the number of transactions can be increased to a great extent (Bearingpoint.com
2013). It supports those types of organizations as well who have their business spread across
various places thereby also supports multi-currency transactions also (Sommer, 2017). The
resources across the firm is better controlled. Further to this, since it uses cloud based
software, therefore no specific hardware installation and development is needed (Kulkarni,
2015). Last but not the least is that such a kind of accounting software offers disaster
recovery system as well and better security of data (Rahaman, 2012). The SaaS is very
effective as it entails to provide such services which are needed by bigger organizations as
well hence very useful if the SMB wants to expand its business (McCabe, 2010).
RECOMMENDATIONS
B Bakery is required to put in its money for the installation of a good AIS system as due tot
he lack of the same, the firm is unable to provide its products at competitive rates. The said
software would ensure connection of the various processes of the firm which would enable
analysis of the transactional information and the operational data as well thereby ensuring the
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firm to take decisions which would be best for B Bakery. It is suggested to install SAGE 100
ERP accounting software, as it has various benefits to offer to B Bakery. The benefits it
offers to B Bakery are as under:
1. A well connected, linked and assimilated network which would ensure all the
business processes are put together via the software. Vendors, customers and the
internal staff as well can easily unite to the one single system being installed via
BYOD devices using mobiles and web interface managing CRM, HR, sales,
purchases etc. This is a flawless method where the chances of a mistake is very less
(Galani et.al. 2010).
2. Till date B Bakery had only raw data at its disposal due to which it was unable to take
sound decisions. But the said system would ensure conversion of the raw data into a
more meaningful form which would add benefits to the now business process already
in vogue. The business intelligence functions can be accessed with the help of
specialised and tailor-made dashboards and in turn help to find out the potential
customers, vendors and what the people want from them. Thus the said accounting
software will ensure creation of a strategy which would beat the competition(Peden,
2017).
3. SAGE 100 ERP offers an integrated CRM model which functions as a chaser with
respect to sales, hence improvising upon the firmness, usability, preservation,
incorporating, reporting etc. The users can easily interchange the facts base they
possess with each other with the help of the said unit. Customer relationship is a must
and without the same it becomes very difficult to retain them, hence the said module
being a part of SAGE 100 ERP will be of great help to B Bakery (Sage Software
Solutions., 2015).
4. SAGE 100 ERP offers a mobile sales module which may be required by B Bakery as
the growing trends demands the same. It helps in faster processing of orders and
payments as well which can further be fed into the main system irrespective of the
time (Grabski et.al. 2002).
5. The company will easily be able to know what is its ROI since data is readily
available in processed form. This would in turn ensure that B bakery takes quick
decisions regarding its pricing without wasting much of its time(goism.com. 2016).
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CONCLUSION
Thereby it is understood that for B Bakery to regain back its lost clientele, all it needs is to
install an accounting software which would serve not only the present needs but also cover
the future generation requirements as well. Investing in an accounting software calls for a
huge capital expenditure hence the same should be done keeping in mind the future
requirements as well. The overall business processes needs to be integrated, taken on board,
simplified and scalable.
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