Organizations Financial Performance and Computerized Accounting System - Example

Findings and Analysis-How will the implementation of computerized accounting system assist, improve or contribute to an organization’s financial performance FINDINGS AND ANALYSIS We provided an objective type questionnaire to the accounting personnel in the Cheng Gong Systems Pte. Ltd. (CGSP) based in Malaysia – a wholesale and retail computer company. We also conducted in depth face-to-face interviews with the accounting staff of the company and with the senior management staff as well. Both the questionnaires and the interviews were formulated to know about the problems being faced by the accounting staff after the implementation of the new computerized accounting system. The staff were also quizzed about the usability, reliability, accuracy and relative ease in work if any after the implementation of the new system. Interviews were also conducted for management staff to assess their feelings and views on the new system. They were specifically asked about the improvement in the productivity and quality of accounting reports after the implementation of the new automated system. Both the staff and managers were asked about the major problems faced due to the new system. See Appendix 1 for the questionnaire and the interview questions. We also specifically asked about the age, experience and educational qualifications of the accounting personnel. The name was kept non essential while the other three items were essential. This is because we wanted to note the impact of age and qualifications on the usage and acceptance of the new computerized accounting system. Literature has shown that the characteristics of the owner or the manager are very important in formulating and shaping the response of the organization to innovations and adoption of IT technology. (Rizzoni, 1991). And as per Thong (1999), Level of IT knowledge and education are important indicators of the organization’s attitude towards new systems. Our results have proved to be in line with the above theory because all of the staff who were interviewed and questioned were familiar with computers before and had absolutely no problem in adopting new technology. We distributed about 30 questionnaires and interviewed around 30 people. These included both the accounting staff as well as the management staff. The return was 100% in questionnaires but we could not complete full interview with 3 management people because of time constraints. FINDINGS AND ANALYSIS We distributed the questionnaire to about 30 people out of which 19 were non management and 11 were from management staff. In the interview section, we interviewed about 19 non management staff and 8 management staff. Many authors have showed that availability of correct and complete accounting information was able to could help organizations manage costing, expenditure and cash flows and supporting monitoring and control. (Mitchell et al., 2000) This is precisely what our study has shown. The staff of Cheng Gong Systems Pte Ltd (CGSP) have unanimously embraced the new accounting system and are very supportive of this computerized system. Our results show 100% acceptance of the new computerized accounting system by the staff and based on their responses it is clear that the new system has been able to improve the financial performance of the company as well helped in making quick and more reliable decisions. See Table 1 below. Table 1   Yes No Training Given 30 0 computer savvy 30 0   Automated Manual Which system would you like to use 30 0 The organization’s performance is directly linked to the effective management of its finances and thus a better financial management can lead to better performance and this becomes another factor for adopting accounting software (McMahon, 2001; Gorton 1999). And our study has found similar results as shown by others before (Gorton 1999; Reid and Smith 2002), that the use of computerized accounting systems improves the business performance. Moreover for large organizations the complexity level of financial transactions is such that a manual system simply cannot cope up with it. And as Burgess (1997) put it, the automated accounting system helps to increase business efficiency and facilitates timely information. Previous research has shown that IT sophistication, the role of owners of small sized firms, external expertise, and firm size play crucial role in success of IT in the organizations. (Thong & Yap 1995; Thong et al. 1996; Igbaria et al. 1997; Thong 2001; Shiels et al. 2003) Thong (1999) gave an integrated model describing the usage and subsequent adoption of IT technology and its impact on the decision making of the management. He provided four main factors affecting decision to embrace computerized accounting softwares as characteristics of the organizational decision makers, the technological innovation, the organization culture and the environment in which the organization operates including its competitors. A quick look at our company that is the Cheng Gong Systems Pte Ltd (CGSP) show that the company is already computer savvy and deals in computer parts. Thus most of its employees are familiar with use of computers and thus the organization culture is very much suited to adopting the computerized accounting systems. In fact, we found that 100% of our respondents both in interviews as well as questionnaires were computer users and were quite familiar with the computers and as a result all of them were in favor of the new system and were able to realize its benefits. Moreover, besides the owner’s IT knowledge and skill levels, there are other factors such as the industry sector, size of an organization, employee’s computer skill level, and amount of data and information requirement in the decision making of IT adoption. (Fink 1999; Burgess 1998; Wenzler 1996; Attewell 1992; Yap 1990; and Delone 1988). This again is supported by our findings as we see that since all employees are computer users ,there has been no problem in implementation and acceptance of the new computerized systems. Moreover, most of the employees are young in the age group of 20-35 and are thus able to quickly adapt to the newer technology. See table 2a and 2b for the age groupings. The accounting staff is generally younger and the management is more experienced. They are also well educated with 82% of them having a Diploma or a Degree. Rest had at least an A level certification. See table 3a and 3b below for the details. Table 2a – AGE   Questionnaire       Non-Management Management Total           19 11 30 AGE       less than 30 13 2  15 > than 30 6 9  15 Table 2 b Age   Interviews       Non-Management Management Total           19 8 27 AGE       less than 30 15 1   16 > than 30 4 7   11 Table 3a. Education Qualification.   Questionnaire       Non-Management Management Total           19 11 30         Degree 3 9 12 Diploma 11 2 13       25 (83.3%) A level 5 0   Table 3b Education Qualification   Interviews       Non-Management Management Total           19 8 27         Degree 3 7 10 Diploma 11 1 12       22(81.5%) A level 5 0 5 Over 80% have reported increase in productivity. And only 6 % termed the increase as satisfactory. No one reported a drop in productivity. See table 4 below. Table 4 productivity Satisfactory Good Excellent   2 4 24   6.60% 13.30% 80% On questions whether the new system was reliable and easy to use, 100% have observed that the new system is reliable and easy to use. See table 5 below. Table 5   Yes No Is Automated system Reliable 30 0 Is automated system Easy to use 30 0 Does automated system provide Accuracy 30 0 The major problem seems to be of the data back up and retrieval on power failures. This is something which is more related to administration than the computerized accounting software problem. All of the respondents admitted to having an easier time after the implementation for the new system and obviously, no one wants to go back to the old manual system. Computer familiarity is an important concern in the adoption of new system. According to the previous literature, it is more likely that people who have used computer before are going to adopt a computerized system more easily. We felt that not being computer savvy might result in users not being receptive to the new computerized system. But our results show that all users that is 100% respondents were familiar with the computer use and had worked on it before. And all of them except only 2 did not feel that not having prior computer knowledge would have been a hindrance in their acceptance of the new system. As per Roger (1983) the adoption of accounting software will only be successful if it is seen as much better and providing better results than the previous manual accounting system. Moreover, it should be consistent and reliable and should also be easy to use and learn. Our results have proved this to be true as can be seen from the tables above. Besides above mentioned factors, it has also been seen that having a proper financial management is an important motivating factor for adopting computerized accounting software (McMahon and Holmes 1991; Gorton 1999). In fact, previous research has shown a definite relationship between the adoption of computerized software for accounting and better and improved financial performance in the business (Gorton 1999, Smith 1999, Reid and Smith 2002). The answers and responses given by the staff of our company seems to show the same positive link. As per the various responses we received, the new computerized accounting system provides real time data, is able to reduce accounting posting errors and provides tremendous relief from the tedious and repetitive work. The new system helps to avoid double work as the invoices can be checked instantaneously against previous data as the invoicing module linked to AR module. Moreover, various customized invoices can be produced as per the requirements. The new accounting software is able to check the customer's credit limit instantly when producing invoices. The Bank Reconciliation Statement or the Debtors Aging Report or the Creditors Aging Report -- all can be handled quite easily. Similarly many other time consuming processes such as Stock quantities and the various stock reports can be generated easily and within less time as compared to the manual system and the accuracy is also much better. The system also options to save the stock images. Moreover, the respondents also mentioned that the computation of Pension Scheme & Commissions etc plus the payroll preparation time has been reduced by half after the implementation of the new computerized accounting system. Some staff concerned with inventory transactions also reported better results as they were now able to handle inventory transactions with ease. They also said that the new computerized accounting system was helping them to prepare the tax reports faster and was thus a great help in making accurate decision on when to order or to identify the tax obligations. The new system can also track job-specific expenses for the whole organization. Thus, the users are able to immediately find out regarding quotes, orders and invoices, the net profit (or loss) for a job and get an immediate breakdown of the income and expense incurred. And hence an accurate and timely decision can be made whether to proceed or stop the respective jobs. As per Burgess (1997), there are many benefits of implementing a computerized accounting system and it helps to improve the overall efficiency of a business and facilitates accurate and timely information. The managing staff was extremely happy as they reported having more time to focus on making informed decisions rather than pouring over the long tedious and sometimes inaccurate reports generated through previous manual system. They were able to track receivables and payables easily, the balance sheets were available online and up-to-date. Since the financial data was now always readily available, and more accurate and detailed, they were able to quickly know regarding the difficult areas and take suitable action to avoid problems snowballing into major issues. Thus quick and in time actions could be taken which was saving lot of time and resources later. Thus Quick and accurate decisions were being made lots of time was being saved. Appendix 1 QUESTIONNAIRE On the scale of 1 to 5, rate the features of new automated system and old manual book keeping system. 1 – very poor, 2 – poor, 3 – satisfactory, 4 – good, 5 -- excellent Before starting the questions below, please provide some information regarding yourself. NAME (Not essential) AGE (ESSENTIAL) QUALIFICATIONS (Essential) EXPERIENCE IN THIS COMPANY (Essential) TOTAL WORKING EXPERIENCE (ESSENTIAL) 1. Does the new automated system provide accurate results? Score : 2. Does the new automated system provide Reliable results? Score : 3. Does the new automated system increase productivity? Score : 4. Is the new automated system easy to use? Score : 5. Do you get help in case of system problems? Yes No 6 Were you provided training on this system? Yes No 7 Does the old manual system provide accurate results? Score : 8 Does the old manual system provide Reliable results? Score : 9 Is the old manual system easy to use? Score: 10 Which one of the systems provide more integrated results AUTOMATED MANUAL 11 Which one of the systems provide more real time data and control? AUTOMATED MANUAL 12 Which one of the systems provide greater transparency AUTOMATED MANUAL 13 Have you studied or used computers before? Yes No 14 Which one of the systems do you prefer to use ? AUTOMATED MANUAL 15. What according to you are the major benefits of the computerized accounting system? Ans. 16. What according to you are the major drawbacks of the new computerized accounting system? And. 17. What according to you should be done to further improve the new accounting system? Ans. 18. Are you management or non management ? Ans. If your answer to Q 18 is yes, Please answer the following: 19. Does the new automated accounting system helps you to make better decisions. Yes No 20 If yes, How? Ans. INTERVIEW QUESTIONS 1. How long have you been using the new computerized accounting system? 2. How long before this did you work on the manual systems? 3. Have you ever worked on computers before? 4. Have you ever used computerized accounting system before in some other company? 5. How long have you been working here? 6. What do you think is the extent of computer familiarity in your accounting workforce? 7. Do you think, it will have an effect on the acceptance and rejection of the new computerized accounting system? 8. Are you providing training to your people before they start work on the new computerized system? 9. What are the main benefits you have experienced since the implementation of the computerized accounting system? 10. Are there any problems or drawbacks associated with the new system? 11. If yes, what are they? 12. How do you plan to overcome these problems? 13. Are they severe enough to shelve the plan of total implementation of the new computerized accounting system? 14. How has the new computerized accounting system effected you decision taking ability? 15. Do you think you are able to take more effective and better informed decisions now as compared to earlier times? 16. Has the new computerized accounting system helped to increase or better the performance of the company? 17. If so, how? 18. Any suggestions for improvement of the current system? REFERENCES Attewell, P., 1992, “Technology Diffusion and Organizational Learning: The Case of Business Computing” Organization Science, 3(1), 1-19. Burgess, S., 1997, “A Categorized Study of the Use of IT in Small Business” Detailed Survey Report, Small Business Victoria, Melbourne, Australia. Burgess, S., 1998, Information Technology in Small Business in Australia: A Summary of Recent Studies, Paper presented to the USASBE Conference, Florida, January 15–18. Delone, W.H., 1988, “Determinants of Success for Computer Usage in Small Business,” MIS Quarterly, 12(1), 51-61. 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