Assignment

Literature Review

Strategic Information System

  Introduction

In recent years, modern enterprises are seen to increase in their reliance on accounting reports to support information systems for strategic business decisions. The companies are analysing information from accounting reports to integrate accounting information systems as a communication tool and knowledge tool in developing business strategies and design solutions to fulfil business requirements from accounting practice (Peppard and Ward, 2016).

The accounting practices are now supporting the design of accounting information to obtain benefits from accounting computerised software and cloud-based software that process large financial data saves time and effort to track, record and store transactions for customers, suppliers and other business partners (Soudani, 2012). The different elements of accounting software are account receivable, accounts payable, payroll, invoicing, trail balance and basic accounting reports such as balance sheets and profit and loss accounts.

The different accounting packages are used by Australian SMEs and large companies to assist in judgement, making strategic decisions and business strategy to gain a competitive position in the marketplace. The technological advancements in Australia have provided momentum for accounting software packages companies like MYOB (a dominant cloud accounting software provider), Xero, Intuit, Quickbooks to dominate the Australian accounting market.

The purpose of this report is to analyze the literature of an Australian organisation using an accounting software package. The chosen organisation is Coles, a supermarket chain operating in the retail industry. This report discusses the organizational structure and related operational problems, accounting software acquisition methods and possible control or frauds in the system.

The report also provides details of development and adoption, existing market size and leaders, market competitiveness in relation to accounting software packages. Finally, the report draws the gaps by the accounting software users to provide recommendations for improvements in the case organisation.

Part 1

Organizational structure

The organisational structure of Coles is a functional structure. The supermarket chain has many departments which are managed and supervised by general managers are having their own functions and objectives (Keith, 2012). The department falls broadly into retail operations and store support centre (SSC).

These support centres include functional areas such as Coles online, Coles IT, Coles HR and renewal. The supermarket business includes food, meat, groceries, dairy products and liquor products. The company is making effort to move to a more flat organizational structure to help its staff to be more adaptive and encourage employee engagement and participation in decision making.

Operational problems

The functional organization structure is associated with operational issues in the retail operations as the resource allocation, policies and goals are set under a functional aspect. It is a centralized structure so the decision making in the hierarchical system is affected with bureaucratic blocks where the decision from routine matters are delayed from the different functional heads where no value is added to the overall process.

According to Lunenburg (2012), the functional areas involves different specialist who bears no responsibility for critical decisions making the process of accountability difficult in functional structures. María Martínez-León and Martínez-García, (2011) studied functional structures that leads to poor communication across the various functional units and conflicts in working with different functional areas.

Lunenburg (2012) elaborates the function structures owing communication breakdown decreases staff flexibility and weaken innovation in the workplace. It can be said that improper resource allocation among function units can cause conflict, poor communication structure and the delayed decisions can impact the operational efficiency of the departments of a retail organization. This structure can also hamper the organizational capabilities to change its operations with changing in the external competitive market.

Thus, the functional structure in Coles can limits the development of its general managers and managers can lose focus to achieve organisational goals by focusing on functional goals.

System acquisition method for accounting software package

The supermarket chain with its growing business has different informational requirements which can be useful to take strategic decisions for different functional departments. This fulfilment of accurate information is essential for the retail organization to deal with operational issues faced due to functional organizational structure and provide support to accounting system design for management of a continuous flow of information across its different functional business units. Thus, the most feasible system acquisition method is Enterprise Resource Planning (ERP).

In the study of Teittinen et al. (2013), the author found that the organizational structure and accounting software are linked together for enhancing operational efficiency within the organization. In support of this, Ruivo et al. (2012) state that the design of an accounting system has transformed organisational structures from a centralized to a decentralized structure in the process of decision making and other business operations.

It can be understood that the acquisition of an ERP software package for Coles can be useful to the retail operations in terms of efficiency improvements, re-structuring organization, effective decision-making process, coordination between different departments and better operational control.

The ERP will provide easy access to information, directs in technological changes and offer the advantage of business process reengineering. Ram et al. (2014) suggest the use of ERP software to get a better accounting function by providing control on the organizational assets.

On the other hand, Altamony et al. (2016) assessed the integration of ERP software in organizational structure. The author found that the implementation of ERP in a large organizations involves complex processes thereby, increases the execution cost, training costs and time are the issues in its implementation.

 System chart of the sales procedures for Coles

The course of ERP implementation is associated with fraud risks and control problems. The primary control problem is the lack of alignment of the ERP system with the organizational structure, business process and business goals. In support of this, Teittinen et al. (2013), viewed implementation of ERP system involves wide-ranging activities ranging for changes in organizational processes and structure and technological changes.

The author found that massive changes in structure, process and technology within an organization are often loaded with risk. Altamony et al. (2016) point that ERP implementation demands careful monitoring from organizations to align the system with business process re-engineering to obtain the system effectiveness. This points that the system if not planned carefully can lead to process, data integrity and cost concerns due to reconfiguration of existing controls.

The specific requirements of the ERP system and skills, knowledge and abilities of the internal IT staff are another control problem in achieving its full potential for business as recognized by Teittinen et al. (2013). Purohit et al. (2012) elaborates that decentralization in decisions making indicate lack of control of ERP system for business operations can impact its performance.

Lack of internal IT capabilities and technical infrastructure, improper system testing before actual implementation can lead to business risks, frauds and compliance issues with are some additional problems in ERP system implementation.  It can be noted that the ERP system to a certain extent is exposed to fraud due to control problems.

Control problems in the system and fraud possible in ERP system

Figure 1 Fraud Risks

According to Purohit et al. (2012), the risk of fraud arises in supplier-vendor issues when addition to new suppliers or vendors or new data for invoice or payments is being done, fraud purchases, thefts, fake orders and intentional change in system configuration.

The frauds are likely to take place through the staff in areas of account payable, purchase and procurement for material misrepresentation. Ruivo et al. (2012) suggest the development of new internal controls and risk management methodology and internal audits to deal with control problems and fraud in the system.

Part 2

Development and adoption of the accounting software packages

The software providers companies have always been active in the Australian accounting industry to discover ways for control in business transactions through the development of the accounting software packages to record and process voluminous data, data management to provide accurate accounting information for strategic decisions.

Small and middle businesses have gained momentum in the adoption of cloud-based accounting software in Australia due to ease of use and scalability features. Ram et al. (2014) specify adoption of accounting software packages is associates with decision making, enhancing accounting performance, mitigate business risks and frauds and obtaining strategic accounting information to gain a competitive edge.

Lim and Perrin, (2014) viewed acceptance of accounting software packages of Xero, MYOB and Intuit Quickbooks as extensive in Australian SMEs. The author points the need for fast, accurate and error-free information, improved productivity of accounting staff, the efficiency of this software are the reason for its implementation. Soudani (2012) found factors influencing the adoption of accounting software packages in SMEs are cost, time, managers support and staff coordination.

Altamony et al. (2016) argue that the time factor in the adoption of accounting software is most crucial in large organisations as fine-tuning of past entries of huge transactions and inventory balances in sales, purchase and cash ledgers and cash books with the new system takes considerable time of accounting staff.

It can be said that the development and adoption of accounting software packages for retail operations in Coles require specifications to manage material procurement, account payable, stocks, cost of goods sold, accounts receivable, supplier contacts, tax reporting, payroll management and customer transactions to get strategic information to enhance business capabilities.

Peppard and Ward (2016) state ERP adoption in business requires linking the banking feature with accounting software for secure transactions with different stakeholders. The adoption in Coles requires the alignment of the ERP software requirements with the cloud-based information system, IT architect, and business processes to generate strategic accounting information from financial reports.

The current market size

The dominant players in the Australian accounting market are MYOB followed by Xero. In 2015, MYOB online users were 170,000 owing to its investment in online accounting software according to CRN Austarlia (2016). According to Business Insider (2015), the market share of MYOB for its initial public offering (IPO) in the Australian market has grown from $AU831.7 to $AU833.8 million.

According to Financial Review (2016), Xero has a global market share of 15 percent catering to 262,000 users in Australia and 600,000 globally. The emerging competitors are Reckon and Intuit Quickbooks which has increased its customer base from 7,000 to more than 30,000 in Australia since the year 2013 (The Australian, 2015).

Market leaders and the competitive advantage

In the Australian market, the MYOB and Xero are the two market leaders as the providers of accounting software packages and cloud computing. The functionality features and innovation provide support to large organisations to SMEs in business operations and error-free performance and the product differentiation strategy is keeping the market leaders ahead of the rivals.

Innovation and investment in cloud computing functions, accessibility without the internet, enable switching in online/offline modes and bank feeds feature in cloud computing are some main factors that are responsible for the market competitiveness of MYOB.  Similarly, Xero unique features such as customisation for software integration with third-party products, accessibility in smartphones, tablets and other technological platforms is maintaining the competitive position in the accounting market.

Current gaps/challenges

The current challenges encountered by users and customers of accounting software packages are data security and the need for technical training and knowledge. Teittinen et al. (2013) identified data security as the key issue for the users of the accounting packages in SMEs. Jadhav and Sonar, (2011), elaborates the existence of financial data and information is an attraction for hackers and makes the information susceptible to fraud and business risk.

It is, therefore, essential for the technology manufacturers to test their security architect and design features for secured user access controls. Teittinen et al. (2013) argue most software manufacturers are unable to meet the high data security needs and secure controls owing to the high cost in development. In addition to this, Altamony et al. (2016) describe the less user-friendly interface of accounting software increases the user difficulty.

This indicates that the accounting users require to dedicate considerable time to technical training which is an ongoing challenge to get maximum business performance by the customers of these accounting software packages.

Conclusion and Recommendations

It can be summarised that the three is growing demands of accounting software packages in Australia SMEs for the need for error-free, quick and accurate strategic information from financial reports for business decisions and performance.

This has led to fierce competition among the market leaders MYOB, Xero and others to take advantage of business adopting accounting software packages and to fulfil growing demands of cloud computing accounting services. However, the concern for data security and less user-friendly is an ongoing challenge for accounting software users.

It is, therefore, suggested that the manufacturers need to invest in the development of security architectss with security features, secure user access control, approval controls to increase its acceptance in a large organisation. It is also suggested that accounting service providers can make arrangements for webinars, online basic training for beginner users and conduct few sessions to train IT, staff, through professionals for different accounting reports.

References

Altamony, H., Tarhini, A., Al-Salti, Z., Gharaibeh, A. and Elyas, T. (2016) The relationship between change management strategy and successful enterprise resource planning (ERP) implementations: A theoretical perspective. International Journal of Business Management and Economic Research, 7(4), pp. 690-703.

Business Insider. (2015) The cloud accounting supremacy war in Australia [Online] Available at: https://www.businessinsider.com.au/charts-the-battle-for-supremacy-in-australias-cloud-accounting-market-2015-4  (Accessed 9th September 2017).

CRN Austarlia. (2016) MYOB chases Xero with surge in online users. [Online] Available at: https://www.crn.com.au/news/myob-chases-xero-with-surge-in-online-users-414739 (Accessed 11th September 2017).

Financial Review. (2016) Xero primed to keep gaining market share in Australia, new managing director Trent Innes says. [Online] Available at: http://www.afr.com/technology/xero-primed-to-keep-gaining-market-share-in-australia-new-managing-director-trent-innes-says-20160106-gm0b08 (Accessed 9th September 2017).

Jadhav, A. S. and Sonar, R. M. (2011) Framework for evaluation and selection of the software packages: A hybrid knowledge-based system approach. Journal of Systems and Software, 84(8), pp. 1394-1407.

Keith, S. (2012) Coles, Woolworths and the local. Locale: The Australasian-Pacific Journal of Regional Food Studies, 2, pp. 47-81.

Lim, N. and Perrin, B. (2014) Standard Business Reporting in Australia: Past, Present, and Future. Australasian Journal of Information Systems, 18(3).

Lunenburg, F. C. (2012) Organizational structure: Mintzberg’s framework. International journal of scholarly, academic, intellectual diversity, 14(1), pp. 1-8.

María Martínez-León, I. and Martínez-García, J. A. (2011) The influence of organizational structure on organizational learning. International Journal of Manpower, 32(5/6), pp. 537-566.

Peppard, J. and Ward, J. (2016) The strategic management of information systems: Building a digital strategy. United States: John Wiley & Sons.

Purohit, G. N., Jaiswal, M. P., and Pandey, M. (2012) Challenges involved in the implementation of ERP on-demand solution: Cloud computing. International Journal of Computer Science Issues, 9(4), pp. 481-489.

Ram, J., Wu, M. L. and Tagg, R. (2014) Competitive advantage from ERP projects: Examining the role of key implementation drivers. International Journal of Project Management, 32(4), pp. 663-675.

Ruivo, P., Oliveira, T. and Neto, M. (2012) ERP use and value: Portuguese and Spanish SMEs. Industrial Management & Data Systems, 112(7), pp. 1008-1025.

Soudani, S. N. (2012) The usefulness of an accounting information system for effective organizational performance. International Journal of Economics and Finance, 4(5), pp. 136.

Teittinen, H., Pellinen, J. and Järvenpää, M. (2013) ERP in action—Challenges and benefits for management control in SME context.International Journal of Accounting Information Systems, 14(4), pp. 278-296.

The Australian. (2015) Intuit’s Australian customer base starts to takes off. [Online] Available at: http://www.theaustralian.com.au/business/business-spectator/intuits-australian-customer-base-starts-to-takes-off/news-story/1c51e80fdc06cba6af1d54141f76a5f8 (Accessed 11th September 2017).