Discuss about the Strategic Information System for Accounting Information System.
According to Hall (2012), in today’s diversifying business world it is necessary to keep and maintain all the necessary accounting information irrespective of how the size of the business. There was a time when all the accounting information of a company was maintained on a manual basis. However, with the growth in business operations it has become harder to track and record all the information on a manual basis. Today is the era of computers and businesses around the globe use computerized systems to maintain all the accounting information (Lim 2013).
The two widely used accounting systems are Accounting Information System (AIS) and Enterprise Resource Planning (ERP). This primary aim of the report is to compare the importance of these systems regarding a Sydney-based small business, named Disk4U. The report shows the advantages and disadvantages of both the system; after that, a comparative study has been done between the two systems. Lastly, based on the whole report, the best system suitable for Disk4U has been suggested.
As quoted by Al-Hiyari, AL-Mashre and Mat (2013), an Accounting Information System is the computerize process of collecting, storing and processing of various accounting information such as information about sales, purchase, debtors, creditors, taxes and many others of a business organization. This information is used by the accountants, business analysts, financial managers, investors and others. There are some advantages and disadvantages of AIS. However, the portion of disadvantage is stronger than the advantages. The advantages and disadvantages of AIS are discussed below:
The first advantage of AIS is the processing speed of the system. AIS can process the information very quickly. There is no need to enter the data again and again in the system. One can use the data several times after a single submission. AIS help to generate quick information. This system also classifies the data quickly to provide accounting support to the organization (Soudani 2012).
The second advantage of AIS is the protection of data. Manual accounting system uses to keep all the accounting records on the manual basis. Thus, there is a high possibility of losing the data. However, AIS records all the data in computers so that the data can be recovered later. There is a system of back up in the AIS as the system uploads the data in then internet so that it can be obtained later (Ismail and King 2014).
The first major disadvantage of AIS is complexity in learning. As AIS is totally a computerized system, it demands computer knowledge and time to learn. As a result, it costs the company a lot of money and complicates the accounts operation.
The second disadvantage is a loss of information. Due to power outrage or system crash, there is a high risk that all the information can be lost. However, companies take precaution, but still there is some information that can be lost forever and cannot be recovered.
The third disadvantage is re-valuation. Due to the change in business trend, the accounting standards are also changed. As a result, AIS demands the change in the whole system. This process is time-consuming and also expensive (Demski 2013).
According to Monk and Wagner (2012), Enterprise Resource Planning or ERP is a process of collection and integration of important business data. In ERP system, a central computer is connected to all other computers in the organization and gathers necessary information for coordination. Nowadays, ERP system is preferred by most of the businesses. The advantages and disadvantages of the ERP are discussed below:
The first advantage of ERP is total visibility. As there is a centralized computer in the ERP system, it allows the smooth flow of information from all the departments of the business. As a result, the collaboration and coordination increase (Tsai et al. 2012).
The second most important advantage of ERP is customization. Most of the ERP vendors offer customized ERP system so that it can be matched with the nature of the business. As different companies follow different accounting styles, the installation of ERP gives them the desired result (Kwak et al. 2012).
The third advantage is data security. ERP system provides a high degree of security of the organizational data. This system also provides the centralized backup system of important and sensitive data. Cloud-Based ERP system provides an extra layer of protection to the sensitive data.
The fourth advantage is customer service. ERP provides all the necessary information about the customers to the sales team. This process helps the sale team to mange a better relationship with the customers.
The fifth advantage is the elimination of unnecessary operations. The efficiency of ERP system helps to eliminate extra or unnecessary operations and data from the system. This process makes the system works better and faster (Kanellou and Spathis 2013).
The first disadvantage of ERP is the direct cost. This is the biggest disadvantage of ERP as the setup cost of ERP is very high. The setup process includes the planning, configuration and implementation of the total system (Cereola, Wier and Norman 2012).
The second disadvantage of ERP is the customization. This is a fact that customization is an advantage, but it can become the disadvantage if the system is no carefully handled. The careless handling of the system can damage the system and can cost the company a lot of money (Mezgár and Rauschecker 2014).
In order to compare ERP and AIS, one needs to understand the difference between these two differences. The traditional functionality of these software will help the user to understand that which one is suitable for him. As the name suggests, Accounting Information System is the software that resolves issues related to the accounting transactions like accounts payable, payroll, trial balance, and accounts receivable. The AIS software modules can compute and generate sales order, general order, billing, purchase order, expense, timesheet, and electronic payment (Prasad and Green 2015 p.123-149). Enterprise Resource Planning software is slightly different from Accounting Information System software. ERP software is used as a resource management system. It tracks financial resources, human resources, tangible assets, intangible assets, and materials (Malihi, Movahedi-Sobhani, and Aghdasi 2016 p.37-59). ERP software offers a wide range of functionality, which are not available with the AIS software. ERP software factors in intangibles like performance units, product life cycles, customer relations and human work hours (Gupta et al. 2016).
The traditional concept of Accounting Information System software is fading away in the modern world. The evolutions of technologies have merged the concepts of Enterprise Resource Planning and Accounting Information System. More comprehensive and advanced Enterprise Resource Planning software is replacing the basic accounting software. Today the market of AIS software is fast eaten up by ERP software (Greasley and Wang 2016). Accounting Information System software is nothing but a part of the Enterprise Resource Planning software with less number of features. AIS and ERP software may be two different software, but it does not matter in today’s market. Most of the ERP products available now, come with the accounting software in their basic packages. As the business matures, the requirements increase for more advanced software to execute a process that is more complex with more smoothness and accuracy. Therefore replacing the traditional basic accounts software with ERP software is necessary (Kili, Zaim, and Delen 2015 p.2343-2352). For example, traditional AIS software offers budgeting features, financial management and planning in their entry-level package. However, these same features can be integrated with other features like reporting and analysis, supply chain management, financial resource, and human resource. I.T management can be included as an additional feature in the ERP software. Each module has separate licenses. So before any of these software, the company or the user must check all the aspects of AIS and ERP software and whether the software is meeting the company’s requirements or not.
Every business organization wants better operations and integration in their performance. In the era of globalization of business, even a small firm does overseas business and accounts in other countries. In this scenario, Enterprise Resource Planning software can perform far better than the Accounting Information System software. In recent future, ERP and AIS software will be available as joint software suit, not as separate software. Sometimes basic AIS software cannot deliver the need of the business, whereas sophisticated ERP software is expensive. Therefore, it is crucial to select the right ERP software to best modules to achieve the desired business goal (Nwankpa 2015 p.355-344).
Enterprise resource planning software is a better option for the Disk4U Company. Disk4U is a Sydney-based small company. The major sales of the company are through the shops, orders over phone and email, and recently through EBAY. Therefore, it is important to choose the right ERP software for Disk4U, because there is no common ERP software to meet all kinds of business needs. One Enterprise Resource Planning software good for a particular firm may not be good for another firm. Enterprise Resource Planning software is chosen as per the requirements of the specific business (Bharathi, Raman and Pramod, 2014 p.747-759). Disk4U Company needs to understand how ERP software is going to fulfill their business needs. Based on the business needs of Disk4U Company, It is found that Microsoft Dynamics Enterprise Resource Planning matches the requirements of the Disk4U Company to help them improve the manual process of accounting and business reporting. Some of the Enterprise Resource Planning software is very high priced, and some of them provide better-integrated features at lower cost. It is advised that Disk4U Company should go for MS Dynamics Enterprise Resource Planning software to integrate the accounting process and numerous future growth opportunities because it is fit for varied requirements and will drive Disk4U Company towards more accuracy and profitability (Powell, Riezebos, and Strandhagen 2013 p.395-409).
Conclusion
This report has compared the merits of the Enterprise Resource Planning (ERP) software and the Accounting Information System (AIS) software and suggested the Sydney-based Disk4U Company, which is best for them to get rid of manual accounting process of their organization. The successful running of business needs professionalism. The era of manual record keeping or manual accounting is over. As the business grows, data analysis and accounting tasks become complex and critical. Therefore, good accounts software is very important for smooth processing of the operations. Business organizations get confused whether they should go for the Accounting Information System software or the sophisticated Enterprise Resource Planning software. For this purpose, a self-assessment of the company requirements is necessary. The overall assessment of the ERP and AIS software reveled that Enterprise Resource Planning software is much better than the Accounting Information System software as ERP software has lots of extra modules and better multitasking capabilities. After the need analysis of the Disk4U Company, it is suggested that they should adopt the Microsoft Dynamics Enterprise Resource Planning software for their company as it matches their needs and will help them to resolve accounting issues in a systematic and error-free manner.
References
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Bharathi, V., Raman, R. and Pramod, D., 2014. A FPN Based Risk Assessment Model for ERP Implementation in Small and Medium Enterprises. Middle-East Journal of Scientific Research, 19(6), pp.747-759.
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