Problems, challenges, prospects and success (a case of malawian companies)
Overall, probably the greatest benefit comes from the fact that a computerized accounting system can do the same thing as a manual system, but does them better1. Many software or accounting packages have been developed which can be used in various businesses, whether small or large. This project paper discusses the computerization of accounting functions and looks at the problems, challenges, prospects and success in selected two Malawian business organisations. 2. 0 INTRODUCTION Manufacturing and trading entities are important organs of the world’s economic dimension.
Companies and other entities need to communicate to the employees and public and statutory administrative bodies about the transactions they perform which have financial implications. This need is precisely addressed by a language called accounting. Accounting is hence the language of business2. Until about one hundred years ago all accounting data was kept by being recorded manually in books. Nowadays although manual accounting system may be used (particularly by smaller organisations) most accounting data is recorded electronically and stored electronically using computers. Most businesses now use modern computerized accounting systems.
It is worth noting that the benefits of using computerized accounting system vary from business to business with each one deriving different benefits. The decision by an organization to have computerized accounting system depends on the company’s need to have accurate , consistent and timely data in a variety of reporting formats3. This project paper will discuss the computerization of accounting functions in two selected organisations. The paper will discuss the theoretical aspects of computerization, the benefits and disadvantages of computerization, the determinant factors for computerization in the two organisations.
The paper will also discuss critical issues on computerization of accounting functions relating to policy, legal framework, financing, hardware and staffing. Challenges and prospects of computerization will be discussed and recommendations will be made on computerization in general and the two companies in particular. The methodology used in the study is that questionnaires were administered to key staff in accounts and information technology departments in the two organisations. The responses to the questionnaires have formed the basis of this project paper.
The organization also employs temporary staff and labourers especially during the period it is conducting the Government subsidy programme. The organization has a head office in Blantyre and it has three main depots which have warehouses in Blantyre Lilongwe and Mzuzu. SFFRFM has satellite depots through which it sells fertilizer through the country. The organization has computerized almost 70% of its accounting functions and uses Proteus SCO-Unix software. Some of its accounting functions like stocks, debtors and fixed assets are not yet computerized. Alliance One Tobacco (Malawi) Limited (Alliance One) was formed on 13th May 2005.
Alliance One is one of the only two global independent publicly held leaf tobacco merchants. Alliance One primary business revolves around the selection, purchase, processing, storage, packing, shipping and sale of leaf tobacco. The tobaccos are used internationally in branded cigerettes. Alliance One is a multinational company. Alliance One consolidated entities employ approximately 4,400 persons excluding seasonal employees. Alliance One use SAP accounting software which is supported by ToPS and IFAS as subsidiary packages. All accounting functions of Alliance One are computerized. 3.
Computerized accounting system uses computer software to process accounting data and information. The computerized accounting system follows the same process as the manual accounting system. This means that in the computerized accounting system there are same stages of input, processing and output as in the manual accounting system4. Manual accounting implies that employees perform the whole accounting cycle manually on a periodic basis: they calculate trial balances, journalize transactions, prepare financial statement reports and other routines.
Of course it takes much time, resources and effort in large organisations. Computerized accounting implies that the only thing that employees do is recording transactions into the computer which processes other steps of accounting cycle automatically or by request5. Accounting is purely human invention, having no independent existence in nature. Hence, it cannot in any true sense have been discovered, but it must have been constructed by human minds to serve human needs.
Meigs et al 19996 specified the basic functions of accounting systems, in developing information about the financial position of a business and the results of its operations; every accounting system performs the following basic transactions: 1. Interpret and record the effects of business transactions, 2. Classify the effects of similar transactions in a manner that permits determination of the various totals and subtotals useful to management and used in accounting reports, and 3. Summarize and communicate the information in the system to decision makers.
Computers can be used in all aspects of the accounting system. When computers are used for some or all of accounting activities they can do everything that can be done with a manual system, but computers often do them faster, more accurately and more efficiently. The benefits which accrue to SFFRFM and Alliance One when using computerized accounting system are numerous. Some of the benefits are as follows: saving costs and money, the software in SFFRFM and Alliance One costed the organizations a lot of money and the organizations pay a licence annually.
However despite these costs the overall effect of using Proteus and SAP accounting software has resulted in the saving of costs and money. As indicated the functions of SFFRFM are spread across the country, information is hence supposed to be sent daily by pony to head office for collating. These functions are however done online greatly reducing costs. This also leads to the benefit of saving time. This is unlike in manual system where the information is supposed to be sent to head to be recorded manually.
This could take a lot of time, however this is done right at the depots saving time. Another aspect of time management is that the information in the two organisations is processed on time and targets are met. The two organisations are huge in size and transactions so processing the information using computerized accounting system saves time and man power unlike if it could have been done manually. In Alliance One the linkages SAP accounting system has with the other subsidiary packages means there is less manual intervention saving the users a lot of time.
The other benefit is minimization of mathematical errors, the functions which are done manually in SFFRFM have a lot of mathematical errors which is unlike the case for functions done in Proteus. The other notable thing is that mistakes can easily be corrected in Proteus unlike in manual accounting system which is a tedious task. Generation of reports is automatic and instant, this becomes handy when preparing Board meetings which needs various reports at a short notice. Speed of data entry is another advantage, this can be carried out more quickly than in manual processing.
The data to be entered in the software in SFFRFM relates to data from the whole country which is entered directly at depots. If the whole data would be gathered and entered manually at head office it would lead to a lot of time wastage. The other thing is that information is up to date as the accounting records are automatically updated. When Management request for information the information is instantly available, the information can be made available to other users like the Board, internal auditors, external auditors or Malawi Revenue Authority instantly.
The other benefit which stood out from the two organisations for using computerized accounting software rather than manual accounting system is increased job satisfaction. Computerized accounting system is efficient as better use is made of resources and time, further the onscreen and printed data is legible and hence avoidance of errors which are caused by poor figures. Staff motivation is another benefit. Staffs in SFFRFM and Alliance One have been trained in Proteus and SAP accounting software on several occasions. The staffs are also constantly trained when the packages are being upgraded.
The training makes the staff feel more motivated. Integrity of data is another advantage in Proteus and SAP accounting software, the data produced is accurate this is because there is less room for errors as only one accounting entry is needed for each transaction rather than two or three for a manual system. The use of Proteus and SAP accounting software has also lead to reduced staff frustration, especially Management who usually are now on top of the accounting systems leading to reduced stress levels.
There are also several disadvantages as well of using computerized accounting software. When the Proteus package was first introduced in SFFRFM it came with several technical problems. The technical problems had to be rectified using the local technical support, Burco Electronics. Some of these problems which arose due to bad programming and inappropriate software subsist to date. SAP accounting software is also poorly programmed in that it does not have all the features needed. The other disadvantage is power blackouts, when there is a power blackout some entries could hang.
Fortunately the computers are connected to Uninterrupted Power Supply (UPS) which allow any entries which have hang to be saved for later correction. The computerized accounting system for the two organization are also prone to hackers and viruses, this can arise in case of poor controls. The hackers can access the accounting system without permission and enter data or delete accounting files. This is however safeguarded by having an anti-virus installed which is upgraded by the technical support team of Burco Electronics in case of SFFRFM from time to time.
Proteus and SAP accounting package are dynamic, they keep on changing, the systems are hence costly as they require constant upgrading. Staff need to be constantly trained as well so as to effectively manage and use the systems. Some of the benefits of computerization bring problems of their own. The extraction of too many various reports that could not be achieved under a manual system can also lead to information overload as decision makers suddenly find they have too much information for them to fully understand and apply.
The reports and information extracted from a computer can only be as good as the data placed into it – the well-known “garbage in, garbage out” situation. If the full benefits of computerization are to be enjoyed, regular checks need to be made to ensure that the data input is accurate and timely7. The other disadvantage is that of computer fraud if proper levels of control are not properly instituted. The good thing about Proteus and SAP is that both packages have different levels of control depending on seniority in the organization hierarchy.
The need to computerize accounting functions in SFFRFM and Alliance One was due to several factors. In order to stay on top the two organisations have to analyse the performance of all organizational cells and discover all the deviations from the plan, their causes and finally the organisations’ management has to take corresponding measures to avoid such deviations in the future. To that end management needs financial and accurate information for making decisions. The information need to be availed to management with speed.
Using that information management is able to identify and solve problems in the two organisations. The information to be availed to management need to be easily available and the reports need to take various forms which will enable management to make good, right and timely decisions for the organisations. The two organisations are required to reveal certain financial and management reports to the government and public users, in that regard management need to fulfill such difficult reporting requirements and provide financial information in formats required by their governing bodies such as Malawi Revenue Authority and the Board.
As already alluded to, the use of computerized accounting system in the two organisations save money and costs. Management of the two organisations need to be more cost effective and this requires them to do more with less in terms of time and resources. 6. 0 DETERMINANT FACTORS FOR COMPUTERIZATION The main aim of computerized accounting system is to perform the processing stage electronically, much more quickly, consistently and accurately than if it were done manually8. The factors which were considered by the two organisations when buying Proteus and SAP accounting software respectively were several.
The needs of the two organization were the main consideration to buy the software. Proteus software is used mostly in warehousing and distribution and suitable for operations which are spread over a large area i. e. the whole country. SAP accounting software was chosen by Alliance One Head Office in the United States of America. SAP is a global package hence all users have access to global support. The other consideration was scalability especially for Proteus. Proteus has the ability to meet future financial accounting needs of the organization as the organization grows.
Proteus package has been upgraded by the organization on several occasions to meet emerging business needs. The other factor which was considered was the technical support for the software. Proteus has the support from local software suppliers Burco Electronics. SAP accounting system is supported in many countries as well as it is a global package. The support has also taken the form of training in that each and every time Proteus package changes or is upgraded, the technical support team conducts training in the organization. Proteus and SAP accounting software are user friendly.
Further Proteus is able to interact with other packages like Excel. SAP accounting software is able to interact with Excel and other subsidiary packages namely ToPS and IFAS. The software used by the two organisations has features which the organisations need. Some features will be needed to be added to Proteus software like stocks, fixed assets and debtors modules. These modules will have to be added because they are now needed by the organization. The SAP accounting package does not have all the required features, there will hence need to upgrade the package with the needed features in the future.
The other factor which was considered in determining the software to use in the organizations was accountants interface. The accountants were consulted when buying the software like Proteus. Several dealers came to the premises at SFFRFM to do demonstrations of the accounting packages and the accountants were present during the demonstrations. The subsidiary packages for Alliance One, ToPS and IFAS were bought after consulting the accountants so as to supplement the main accounting package SAP.
The availability of qualified staff to operate the accounting software in the two organisations was also considered before buying the software. A special Data Entry Clerk was recruited in SFFRFM to handle Proteus. The duties of the Data Entry Clerk also include training other staff in the use of the package and offering first hand technical support if there is a problem. A review of the hardware requirements for the software was conducted in the two organisations. Enough hardware with special features to handle the accounting software were bought.
As already stated Proteus requires to be upgraded, this will need additional hardware to be used by staff who will be dealing with the added modules. Apart from the factors considered mentioned above, there were also several numerous factors which were considered before buying the software like the actual cost of the software, the size, language and consideration to buy major brands. The two organisations also shopped around to look for a supplier who can offer the best value of money for the chosen software.
The two organisations have written ICT policy documents which regulate the usage of the accounting software. The policies restrict among other things downloading of software from the internet which can corrupt the accounting package. The policies also deal with levels of approval and access to the accounting package. The use of the accounting software to perpetrate fraud is prohibited. The policies also restrict unauthorized access to accounting information and modifying of its contents. Legal Framework Certain functions that are illegal are prohibited to be carried using the software or organisation’s computers.
Deliberate and serious breach of the policy statement will lead to disciplinary measures which may include the offender being denied to computing facilities, termination of service or legal action. Financing Proteus and SAP accounting software requires that a licence fee be paid annually to enable users access the systems. If the licence has expired it may be difficult to run the software. Both accounting packages are dynamic and changes frequently requiring upgrades. The upgrading of the accounting software requires the payment of extra money. When the package needs extra
features, such additional modules are bought using money and this can be quite costly. Hardware Hardware to be used for the software is bought from reliable sources to ensure compatibility and uniformity with the package. Installing of software on organisation’s hardware is also restricted as such software may corrupt the accounting software. Use of hardware for leisure or personal purposes like accessing internet, sending and receiving personal mail, playing games etc is monitored and controlled to avoid abuse. The staff are also required to care for hardware equipment assigned to them for their day to day work.
The care include not to take food or drink whilst using hardware, not to re-arrange how equipment is plugged, switching off computers when not in use etc. Staffing Computerization of accounting functions results in efficiency and less manual intervention; it enables certain functions to be done by fewer people. When Proteus was introduced in SFFRFM it led to reduction of staff in accounts, the excess staff were assigned other duties leading to more efficiency. An extra person was recruited in accounts, a Data Entry Clerk, to operate the Proteus accounting package. 8. 0 CHALLENGES AND PROSPECT
The introduction of Proteus and SAP accounting software in SFFRFM and Alliance One was a positive move with lots of benefits and advantages as already discussed. However the introduction of the accounting packages has its own challenges and limitations. Some of the challenges include that the flexibility of the staff in using accounting software poses a big problem. Most of the staff especially in SFFRFM are not well versed with computers, the staff were employed a long time ago when the organization was starting and do not have an indepth knowledge of information technology.
There was also great resistance to change when the system was being introduced in SFFRFM due to the caliber of staff. The other challenge is the frequent power blackouts experienced especially in Malawi. The two organizations have Uninterrupted Power Supply (UPS) which enable staff to continue working for a limited time when there is a power blackout. Proteus and SAP accounting package are advanced and are not easily corrupted when there is a blackout. The packages are also able to save the entries before the computer switches off.
The other challenge experienced especially with SAP accounting software is that it does not have all the required features. The system does not meet all the needs of the organization. All Alliance One entities use the same package which is interlinked, this means that there is strict control especially on access to certain information for fear of hackers or unauthorized usage. The packages are also very costly since they need constant upgrade which requires money. The users need to frequently go for training as well which is costly. The most notable prospect of Proteus computerized accounting software is the scalability.
The software can be upgraded based on the requirements of the business, there is currently a need to upgrade the software to include stocks, fixed assets and debtors module. 9. 0 ACTUAL FINDINGS IN SFFRFM AND ALLIANCE ONE SFFRFM accounting system is partially computerized. The accounting package used in SFFRFM is Proteus SCO-Unix. The other accounting functions like stocks, debtors and fixed assets are not yet computerized. All in all about 70% of the accounting functions in SFFRFM are computerized. Proteus accounting software was chosen because of its flexibility in terms of warehousing and distribution.
SFFRFM has got warehouses which are used to keep fertilizer. The operations of SFFRFM are spread across the whole country, the system can also be run on a wide area network online. The most direct benefit of Proteus to SFFRFM is that it is easy to follow transactions. Adjustments can also be done easily in Proteus, this is unlike in the manual system where to do adjustments is pretty tedious. The computerized accounting system also reduces costs of running business in the organization. In a manual system documents are supposed to be sent from the whole country to head office to be keyed in.
This does not happen in Proteus as data entries are made right at the depots. The big disadvantage of Proteus is the cost of running the software, the software needs regular upgrading. The upgrading is costly and it also comes with staff training costs. SFFRFM intends to upgrade the software. This poses a challenge as at the moment the software is not being fully utilized, only 50% of the functions of the software are in use. The first step before upgrading is to make sure that the modules available are being fully utilized to avoid creating confusion.
In conclusion there is big difference in terms of accuracy, speed and efficiency between the functions that are manual in SFFRFM and those that are computerized. Manual accounting system is tedious and time consuming due to the magnitude of the organization and the sheer volume of transactions. Alliance One accounting system is fully computerized. All accounting functions in Alliance one are computerized. The accounting package used is SAP accounting software, there are also subsidiary packages which are used locally namely ToPS and IFAS.
SAP accounting software was chosen by Alliance One Head Office in the United States and is being used by all its entities throughout the world. The main benefits of using the package is that the users have access to global support. SAP accounting also easily interacts with other software like Excel and its two subsidiary packages and there is virtually minimal manual intervention. The main disadvantage of using SAP accounting software is that all Alliance One entities throughout the world are linked and because of this the system can be slow.
As some functions are controlled from head office, other people do not have access to certain functionalities. The package does not have all the required features. Alliance One accounting functions have never been manual. It is not possible to have a manual accounting system in Alliance One due to the sheer volume of transactions and also the fact that it is a multinational company spread across the world. Just like Proteus, SAP accounting system is dynamic and changes with time and hence it requires constant upgrading. The system requires extensive staff training because it is complex and is frequently upgraded.
All this can be costly. 10. 0 CONCLUSION Accounting is an important part of every business. Accounting is the language of business which is accepted in all developed and developing countries. All features in a manual accounting system such as profit and loss accounts, balance sheets, cash flow statements and management information can be replicated in a computerized accounting system which not only does them quicker, more accurately and 100 percent consistently, but can also do them more frequently and do other things as well.
The main aim of computerized accounting system is to perform the processing stage electronically, much more quickly, consistently and accurately than if it were done manually. Both managers and accountants need to appreciate that the use of manual accounting systems is inadequate when it comes to production of timely reports, accurate and reliable accounting information. 11. 0 RECOMMENDATIONS There are various recommendations which can be made following our discussion in the project paper relating to accounting software in general and the two organisations in particular.
It is recommended that SFFRFM fully computerizes its accounting functions so that it is 100% computerized. The organization need to buy the modules for stocks, debtors and fixed assets. That way the organization can fully benefit from computerization of all of its accounting software. Most of the staff in SFFRFM are not well versed in computers. Staff should be sent on an extensive training so that it becomes easier for them to use computers and be conversant with accounting software. It is recommended that SFFRFM buys a power generator at its head office so that computing functions should not be disrupted when there is power failure.
Several recommendations can also be made pertaining to Alliance One. It is being recommended that Alliance One upgrades its SAP accounting software so that it should have all the features needed. The upgrade should also look at the speed of the package as it is slow due to the fact that all Alliance One entities are interlinked. Control of the SAP accounting package from head office in United States should be minimized to enable other people have easy access to certain functionalities. Both organisations need also ensure that there are adequate controls on usage and access to computers to avoid hackers and computer fraud.
The levels of control in access to the packages need to be strictly adhered to. REFERENCES 1. Wood, F and Sangster, A (2005) Business Accounting 1, Prentice Hall, 10th Edition 2. Horngren, C et al (2008), Introduction to Financial Accounting, 9th Edition 3. Breen, John, Sciulli, Nick & Calvert (2003), “The Use of Computerized Accounting System in Small Business” A paper for the Small Enterprise Association of Australia and New Zealand 16th Annual Conference Ballarat, 28th September – 1st October 2003