Evidence to Critically Discuss the Potential Consequences of Implementing ERP Systems - Essay Example

? Management: Evidence to Critically Discuss the Potential Consequences of Implementing ERP Systems Number Total Number of Words 261 Advantages and Disadvantages of Implementing ERPs The advantages of implementing ERP is not limited to the improvements in asset management (i.e. reducing the long-term cost of labour and inventory)1 but also reduce the time needed to monitor the actual financial status of the company2, overcome Y2K problems3, increase customer satisfaction4, improve the integration of business process in different departments like HR, warehouse, purchasing, shipping, production, and marketing, etc. into a single information system5, ensure that financial data is consistent with other departments on a real-time basis6, improve resource planning, enhance the integration of global and supply chain system, and requires less computer applications7. Most of the routine accounting tasks will no longer be necessary8. Therefore, it is expected that there will be lesser cost on hiring accounting staff. Furthermore, the use of ERP can help reduce the risk of data redundancy. Therefore, problems related to financial integrity is possible. Due to the fact that real-time financial data will be available anytime of the day, managers can easily make important business decisions9. Despite the advantages of implementing ERPs, the use of this technology can be very costly because of the need to maintain and upgrade the system, hire additional consultants and technical experts who can convert existing data and customize the system based on the nature of business10. Aside from the need to re-train people on how to maximize the use of ERP system, the company also need to consider the need to change their normal business process11. Implementing the use of ERP could result to lesser accounting personnel by eliminating routine jobs12. Because of fear of losing their job security, implementing ERP increases the risk of creating resistance-to-change among its people13. As a result, there is a risk wherein internal problem such as work-related attitude and behaviour would arise. How the Role of Management Accountants Change when ERPs were Introduced Ever since the ERP has been introduced in the market, the role of management accountants has been subject to a lot of changes. Instead of focusing on pure book-keeping practices, management accountants who are obliged to use the ERP system are expected to play the role of an “internal consultant” to the business14. It means that management accountants should one way or the other serve as the financial adviser of the company. Through the use of ERP system, the future book-keeping would definitely become automated in terms of data collection15. Even though management accountants are expected to retain their knowledge in book-keeping, the future role of management accountants is not limited to having a vast knowledge and understanding about the basic business management theories and practices but also strive hard to improve their communication skills, interpersonal skills, consulting skills, IT skills, and ability to work in team16. Associated with the implementation of ERP system, the line managers are somehow expected to play a significant role in the management of allocated financial budget17. To ensure that the management accountants will be able to allocate sufficient budget to line managers, the management accountants should be able to forecast necessary budget based on historical data18. One of the main reasons why management accountants should acquire sufficient knowledge and skills in business management is because of their need to constantly communicate and interact with a group of business managers with regards to several business issues19. By doing so, management accountants will be able to gain better understanding on how different business indicators can be used in gauging the overall business performance. In the process of learning more about how the daily business operations work, management accountants will be able to make use of financial statement in identifying areas that needs further improvement. With this in mind, management accountants can fulfil their role as an effective internal consultant who can effectively guide and assist the business managers in the development of useful business strategies needed to enhance the company’s business profitability20. This further explains why the future management accountants are being challenged to develop and enhance their consulting skills, communication skills, and interpersonal skills21. In response to the full automation of corporate book-keeping and other financial transactions, the future management accountants are expected to master the use of the ERP system technology22. In line with this, management accountants are expected to develop a strong control over the designing and implementation of the new system23. It simply means that management accountants should exert more effort to learn more than how to use the basic ERP system. Instead of simply using the system on a daily basis, management accountants should be able to have some IT skills which can empower them in simple trouble-shooting in case something goes wrong with it. By doing so, the management accountants can play a significant role in minimizing or reducing the company’s future expenses particularly when it comes to the need to maintain and upgrade the ERP system. Reasons why the Implementation of ERP May Fail There are quite a lot of reasons why the implementation of ERPs could fail. Earlier, it was mentioned that the implementation of ERPs could somehow trigger the fear of job loss among the corporate employees24. For this reason, it is clear that the inability of the corporate leaders to effectively control and manage the presence of political and organisational conflict can strongly lead to a failed ERP implementation. In the process of not being able to win the trust and loyalty of the corporate employees, the workers in different organisational level would end up not supporting or staying committed to the implementation of ERPs25. Another possible reason behind a failed implementation of ERP lies behind the communication gap between the corporate employees and those individuals who are mainly responsible in the implementation of ERP system26. Without proper communication, unnecessary misunderstanding between the corporate employees and those individuals who are mainly responsible in the implementation of ERP system could arise in the process. This partly explains why there are some people who are implementing ERP who failed in meeting their project goal and objectives. Aside from shortage of skilled workers, technical issues could also arise out of implementing the ERP system. In the past, most of financial data are available are encoded in excel spreadsheets. For this reason, individuals who are responsible in the implementation of ERP system may find it complicated to transfer data in excel spreadsheets into a single IT platform27. Should Management Accountants See these Systems in a Positive Light? The management accountants should definitely consider the use of the ERP system in a positive light. First of all, the long-term advantages of implementing the ERP system outweigh the short-term consequences of the said project. Through the use of ERP system, management accountants will have a better chance of controlling the financial status of the company. Even though the implementation of the ERP system has its own disadvantages, most of these challenges are controllable. With regards to the risk of not winning employees’ support, the corporate leaders should make use of their communication, interpersonal, and leadership skills to identify specific reasons why each employee would choose not to support the implementation of the said project. By knowing their individual concerns, the corporate leaders can develop and find new ways on how they can effectively convince the corporate employees to support the new project. By doing so, the corporate leaders can have a better chance of being able to maximize the full economic benefit of using the ERP system. References Howcroft, D. (2006). Spreadsheets and the financial planning process: a case study of resistance to change. Journal of Accounting and Organizational Change, 2(3), pp. 248-280. Newman, M. and Westrup, C. (2005). Making ERPs work: accountants and the introduction of ERP systems. European Journal of Information Systems, 14, pp. 258-272. Newman, M. and Westrup, C. (2003, February). Perpetrators. More and More Businesses Are Introducing Enterprise Resource Planning Systems, but What Are the Implications for the Future Roles of the Management Accountant? Mike Newman and Chris Westrup Discuss the Latest Research. (Finance ERP Systems). Financial Management. pp. 32-33 . Scapens, R. and Jazayeri, M. (2003). ERP systems and management accounting change: opportunities or impacts? A research note. European Accounting Review, 12:1, pp. 201-233. 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