Question:
Discuss about the Challenges of Accounting in Global Organizations.
Accounting is one of the most integral parts of finance with the help of which an individual intends to identify record, measure and classify the financial information in order to maintain proper database in business profitability. Providing a good quality of services as well as products to the customers is not the only responsibility for a business organization for gaining international image and reputation. The business experts in order to maintain a global business in different geographical locations should focus on business profitability as well as employees performance. Accounting is the systematic way of maintaining both internal as well as external data record with the help of which the entire performance level of the organization can be evaluated. In this specific study the primary concern is to evaluate some of the major challenges that business experts are facing at the workplace while implementing accounting within their business process.
This specific study aims to evaluate the challenges of Accounting in Global Organizations. The primary objectives of this particular study are as follow:
It has been observed that in last five years global business organizations intend to maintain entire process of database by using accounting software for maintaining a proper accuracy within data and information. After the implementation of accounting within the organization global business organizations are facing several challenges in maintaining a proper data record due to some important reasons (Hodges 2012). One of the most raising issues that global organizations are facing currently ensures the lack of technological skills. Large number of senior employees is associated within the global business organizations that are not compatible enough in maintaining financial data record with the help of software. As a result, those kinds of employees are facing innumerable difficulties in providing services within proper time. As a result, the entire flow of business is getting slow day by day.
In order to run an international business the entire structure of tax compliance system is very much crucial. The finance executives have to follow different tax systems, tax rate and compliance requirements (Guthrie, Burritt and Evans 2012). In this kind of situation the finance executives have to face innumerable challenges while following the tax regulations of different geographical countries. Accounting is the key to maximize revenue. The entire data storage procedure is maintained systematically and chronologically only when people are flexible enough in operating data. An effective issue has been identified on behalf of the practitioners that employees are not very much flexible in handling overall database due to the lack of technological efficiency (He, Wong and Young 2012). In this kind of situation, the global business organizations are facing innumerable challenges in maintaining their entire process of business in the global market.
Previous literature review
Balakrishnan, K., Watts, R. and Zuo, L., 2016. The effect of accounting conservatism on corporate investment during the global financial crisis. Journal of Business Finance & Accounting, 43(5-6), pp.513-542.
The article highlights the importance of accounting on a global basis. The purpose of this article was to examine the relationship between accounting and the crisis. This paper critically analysis that may be the implications of accounting must not be properly done on a global basis but accounting plays a very influential role in every organization on a global basis. The accounting development is mostly done in response to the economic pressure within any organization but after enabling accounting system in the organization, it emancipates the further development of the organization. This article reviews the importance of accounting on a global basis until the year of 2012 and states that on global context the transformation of accounting system is based on many factors, which are the social and political pressures. Through this article, we get to know the necessity of accounting in global organization, which is that Accounting helps every organization on a global basis to keep records of all the monetary transactions. The international accounting regulation is the sole regulation that helps in the incorporation of the accounting database in every organization. This article also discusses that the accounting system of every organization is the set of records that helps the organization in crisis management and experience a better financial environment within the organization. In this article, it is found that accounting rules seems to be very critical at the time of credit crisis and this is marked as a very reinforcing factor in the crisis period. From this article, this can be known that there is a vast importance of accounting in global organization and for the chosen topic; this article will help in determining the importance. This article does not clearly identify the reason behind the importance of accounting in the global context, which is necessary as having the reason will help the system to be updated with the changing demographics of the world.
Importance of accounting on global organization
Accounting on a global basis facilitates the international financial regulatory framework and globalization on the other hand is very important issue that has grabbed the hold of the economic state of the world (Beatty and Liao 2014). Implementing of accounting system in the organizations has rendered a profit for the business experts and that is the maintenance of a proper data and information with the help of accounting software. The emerging global system would have failed if accounting was not a part of the organization and that is why the board of the international accounting standard has initiated the development of the accounting system on a global basis (Hall and Lawson 2014). This is to incorporate the set of rules, which are understandable and transparent and have no problem in incorporating the system in organization to have the records of the financial statements. Accounting is an effective key, which helps in maximizing revenue. The data storage procedure of accounting is maintained systematically and chronologically only when people are flexible enough in operating data. However, the employees face an effective issue has been identified on behalf of the practitioners that employees are not very much flexible in handling overall database due to the lack of technological efficiency (Apostolou et al. 2015).
In this kind of situation, the global business organizations are facing innumerable challenges in maintaining their entire process of business in the global market. After the implementation of accounting system within the organization global organizations, it is seen that they are facing several challenges in maintaining a proper data record due to some important reasons. One of the most disturbing issues that global organizations are facing currently ensures the lack of technological skills. There are large number of senior employees who are associated within the global business organizations but they are not still comfortable enough to maintain the record of the financial data with the help of accounting software (Baker, Bloom and Davis 2016). The reason behind why the global organization needs incorporation of accounting system is to note the movement of the funds of the organization in the capital market. This is because in order to maintain the organizations capital recorded properly, every organization needs to have a record of their economic performance. This will keep the account of the economic transaction of the organization for the crisis period (Cingano 2014). The accounting system is a costly process. Many countries are seen to upgrade their national accounting standards to the international accounting standards to avoid any future crisis while being a part of the global market. There are still many organizations that fail to keep the actual records of the company’s transaction and faces many problems (Claessens 2015). Hence, it is recommended that all the company should have the record of their transaction so that they can be efficient enough to dwell in the global market. The accounting system will help them to have their own records which will lead to increase in profit and for the employees who are not efficient enough to keep the records, training must be conducted so that they can be aware of the fact about how to keep the records of the transactions (Lusardi and Mitchell 2014).
Challenges of accounting on global organization
As emphasized by Bebbington, Unerman and O’Dwyer (2014), numerous business experts have faced innumerable challenges in using accounting within the global business organization. This particular scholar believes that a financial reporting system with the support of proper governance, sound regulatory system and systematic auditing system is the key way for economic development. Business executives who are associated with the finance department should know how to operate accounting for maintaining a systematic financial transaction. However, in order to run the entire process of business global organizations have faced innumerable challenges in maintaining a proper financial record properly. The challenges are as follows:
Different regulations and legislations:
Papaspyropoulos et al. (2012) Tax regulation varies from one country to another. Business experts have to follow different forms of tax legislation belonging to different geographical countries. While maintaining the financial record the finance executives should have an in-depth overview about the taxation policies. Based on the regulation the fiancé executives have to maintain database. Therefore, the business executives have to get an in-depth overview about the tax rate policies of different countries for maintaining the data record. In most of the cases business executives do not have detailed knowledge about the taxation policies. Automatically, maintaining a systematic data record on the overall business process has become a major issue for the finance executives.
Finding efficient people
In order to become an eminent part of the finance department an individual should have finance background with efficiency in technology. It has been observed that organizations have to face challenges in hiring efficient employees for maintaining the entire financial data record. Roman, Roman and Meier (2014) opined that senior employees who are already associated with the business process are not efficient enough in operating accounting with the help of advanced technology. In this kind of situation, the business experts are facing innumerable challenges maintaining a global business. This particular study has focused to evaluate some of the major challenges of accounting on global organization. As per the opinion of Guthrie and Parker (2014), organizations can implement a training and development session for employees in order to enhance their technological skill. Otherwise, the entire business process can face a massive consequence in handling the entire situation.
Internal change issues:
Zeff (2012) stated that organizations are facing innumerable challenges in managing internal data properly. Business executives associated with the finance department are not efficient enough in maintaining data record by using accounting software. As a result, the employee performance as well as remuneration record is not marinated properly. Employees are getting deprived of receiving their justified salary as well as incentives properly. In this kind of situation the entire internal structure is getting hampered day by day. Employees are facing issues in receiving their remuneration properly. The lack of motivation is happening at the workplace of global organizations. Automatically, the rate of employee turnover is getting high day by day.
Technology issues:
Bayerlein (2015) opined that maintaining financial database with the help of accounting is highly dependent on technology. If an individual employee has to face a technological error the entire process of business becomes worthless. In this kind of situation, the customers and the employees show the reluctant attitude in being associated with the organization. Due to the technological error the business experts may have to face difficulties in evaluating the organizational profitability. At the same time, the overall performance record of the employees has already been lost due to sudden technological barrier (Schaffartzik, Wiedenhofer and Eisenmenger 2015). This particular issue is a serious concern for the business experts for maintaining global organization systematically.
Literature gap:
The previous article critically discusses the importance of the accounting system in any organization based on global market and it largely influences the using of accounting system in the organizations but the portion this lacks is to provide the brief idea about why the incorporation of accounting system is important in every organization. This study further highlights the reason behind the incorporation of accounting system in every organization and highlights the importance of it in global perspective. Hence, it can be said that over the years the process of accounting system has evolved along with increasing its need in the global sector.
From the above it can be seen that earlier the importance of accounting was seen but the reason behind that was unknown and with changing years the reason has been known. However with due course of time, now it can be said that the reason behind the incorporation of accounting on global basis is that every organization needs to have the record of their financial statements so that it helps them to use their capital according to their needs. Accounting helps every organization to have the full records of the monetary transaction and helps the organization to utilize the capital as per its need.
Conclusion
The entire study has provided an in-depth overview about the necessary challenges of accounting that global organizations have to face for running their entire process of business systematically. With the rhythmic progress of globalization the necessary demands as well as employees are changing gradually. Therefore, implementation of accounting within the business process has rendered a privilege for the business experts in maintaining a proper data and information with the help of accounting software. While evaluating the entire research issue the study has decided to focus on major challenges in implementing accounting software for maintaining financial record.
Reference List
Apostolou, B., Dorminey, J.W., Hassell, J.M. and Rebele, J.E., 2015. Accounting education literature review (2013–2014). Journal of Accounting Education, 33(2), pp.69-127.
Baker, S.R., Bloom, N. and Davis, S.J., 2016. Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4), pp.1593-1636.
Bayerlein, L., 2015. Curriculum innovation in undergraduate accounting degree programmes through “virtual internships”. Education+ Training, 57(6), pp.673-684.
Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the empirical literature. Journal of Accounting and Economics, 58(2), pp.339-383.
Bebbington, J., Unerman, J. and O’Dwyer, B. eds., 2014. Sustainability accounting and accountability. Routledge.
Cingano, F., 2014. Trends in income inequality and its impact on economic growth.
Claessens, S., 2015. An overview of macroprudential policy tools.
Guthrie, J. and D. Parker, L., 2014. The global accounting academic: what counts!. Accounting, Auditing & Accountability Journal, 27(1), pp.2-14.
Guthrie, J., Burritt, R. and Evans, E., 2012. Challenges for accounting pathways in Australia in 2012: an introduction. Emerging pathways for the next generation of accountants, 9.
Hall, J.C. and Lawson, R.A., 2014. Economic freedom of the world: an accounting of the literature. Contemporary Economic Policy, 32(1), pp.1-19.
He, X., Wong, T.J. and Young, D., 2012. Challenges for implementation of fair value accounting in emerging markets: Evidence from China. Contemporary Accounting Research, 29(2), pp.538-562.
Hodges, R., 2012. Joined?up government and the challenges to accounting and accountability researchers. Financial Accountability & Management, 28(1), pp.26-51.
Lusardi, A. and Mitchell, O.S., 2014. The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature, 52(1), pp.5-44.
Papaspyropoulos, K.G., Blioumis, V., Christodoulou, A.S., Birtsas, P.K. and Skordas, K.E., 2012. Challenges in implementing environmental management accounting tools: the case of a nonprofit forestry organization. Journal of Cleaner Production, 29, pp.132-143.
Roman, C., Roman, A.G. and Meier, E., 2014. The challenges of accounting profession as generated by controlling. Theoretical & Applied Economics, 21(11).
Schaffartzik, A., Wiedenhofer, D. and Eisenmenger, N., 2015. Raw material equivalents: the challenges of accounting for sustainability in a globalized world. Sustainability, 7(5), pp.5345-5370.
Zeff, S.A., 2012. The Evolution of the IASC into the IASB, and the Challenges it Faces. The accounting review, 87(3), pp.807-837.
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