AN INVESTIGATION ON THE EFFECTIVENESS OF
ACCOUNTING SOFTWARE TO SMALL AND MEDIUM ENTERPRISES
Introduction
VisiCalc is acknowledged as the first-ever electronic spreadsheet. VisiCalc has the ability to change a value, instant calculation, real-time navigation, formatting and minimal key-stroke formula entry. With affordable and successful marketing, VisiCalc served as the catalyst of the personal computer industry due to the demands of the business segment. The credit of being the pioneer of modern AIRS hailed from the turnaround VisiCalc did in setting an ultimate programming platform that minimizes the weaknesses and maximizes the strengths of earlier models such as Javelin and Lotus Improve. Two concepts that highlighted the advantages of VisiCalc are the construction as iterative calculations regularly without requiring repetitive structure, also called replicate command, and the overlapping references followed by relative or absolute rules can be copied, also called range concept.
Accounting software such as VisiCalc is the new generation accounting information system (AIRS) which traditionally is a paper-based and manually-supported engagement. It is a computer software that can record and process accounting transactions in a more efficient manner. Due to this advantage, the issue of accounting software became important and crucial to the success of businesses that began in the 1990s. For example, many suppliers of such software were being acquired or the market for the software undergone consolidation. As a result, several concerns about accounting software became an integral part of strategic plan of companies. These includes the issue whether to acquire an software from a third party or create it internally or combination of both and the issue of how complex or functional the software will be and how much budget will the company dedicate to it.
Although there are several studies that proved the usefulness of accounting software to big companies, deriving the same occurrence to small and medium enterprises (Somes) can be misleading. The transactions in Somes are relatively small, complexities are relatively solvable and the amount involved in the whole accounting system is relatively minimal. The risk is bearable rather than to pay the cost of acquiring accounting software or subsequent problems that may occur in its implementation. These points can be argued by Somes who are within an industry that demands reliable accounting software due inherent advantages. This will be the starting point in introducing this study where Somes need for accounting software and the crucial features of effective software will be explored and investigated.
This study aims to research about the nature of demand of Somes in selected city areas in Hong Kong where the use of accounting software are prominent. It will focus on the advantages these Somes derive from certain accounting software they are using and what its key features are that highly contributes to an effective AIRS within the organization. This study will research the financial and non-financial aspects of each accounting software, its background, development and improvements that can be applied into them. With this knowledge, we will be able to create a model that future Somes wanting to acquire accounting software can use to maximize the benefits of the endeavor. It can also serve as reference for further studies related to AIRS, accounting software and Somes such as comparison of key features of accounting software of Somes and global companies. Granting this, it can rationalize the level of complexity or budget that companies must dedicate according to their size.
Literature Review
Background on Accounting Software
There are many categories of accounting software. Personal accounting software functions to address the demands of home users particularly in accounts payable transactions, budget management and reconciling of accounts. Dedicated software for the same industry or also called as the vertical market defines software that is designed for specific needs of an industry. Vertical market is prominent in industries like banking, construction, medical services and retail. Further, industry-dedicated software is preferred over custom-built applications because of leaner and less costly requirements such as smaller development team, lesser risk of failure of vendor delivery and employee resistance from complex design.
When it comes to cost and complexity of software, there are three kinds of market. The low end market usually carries cheaper products which only needs single-entry system of accounting. Such software can address general business accounting functions but does not comply with GAP or FSB provisions with limited security and audit capabilities. The software for middle market has greater abilities than the preceding type and can comply with several accounting standards and can function for different currencies. As a result, it can serve multiple geographical markets with add-on management systems and other industry-specific features. Lastly, the most complex and expensive software for high end businesses can enjoy the advantages of having an enterprise resource planning software (ERP) software. This software is characterized by having a long period of execution, requires significant effort to integrate accounting systems and highly customized to address unique needs of the business.
With automation of financial accounts, however, non-accountants are able to prepare them without caution. With the lack of expertise and training, the integrity of accounting records, reporting and interpretation is undermined. To minimize this, systems accountants are called to oversee the software use and management. Another issue is the high reliance of accountants in the internet to research and select accounting software that can address their specific problems. This trend is said to continue for a long-time as software options and offering are in great number and regularly updated with the needs of the business. However, technological advancements and affluence of software use is becoming increasingly insufficient (Mack) and the mere effort of searching for compatible software is described as time-consuming and tedious task (Collins). In effect, the basic understanding of the whole AIRS concept becomes more appropriate.
Background on AIRS
Accounting transactions that can be process by AIRS are also referred to as functional modules which includes core modules such as accounts receivables, accounts payable, general ledger, billing, stock inventory, purchase orders and sales orders. There are also non-core modules like debt collection, expense, inquiries, payroll, reports and timesheet. According to (), AIRS is a system of collection and process of data from transactions and the dissemination of the financial information to specific users. Selection of appropriate AIRS such as the level of complexity of software depends of several corporate factors like nature of business, size, volume of data, and the vitality of the information.
Since AIRS are regularly applied with audit, they must be free of typing errors to assure they will produce relevant and reliable information. The introduction of computers aids accountants to this feat but there are other requirements that are emphasized. AIRS should have business focus which converge them to Accounting and Management Information Systems or A/MIS. A/MIS put accounting information to the context of decision relevance to the organization. They support the economics, strategies and development information systems of the business. Their central role is to manage the data flow between business processes with the use of databases on the operational level. In the long-run, this information can tackle more strategic issue with broader scope and time horizon (Brecht and Martin, 21).
As suggested, when the business in well-aware with concepts circling AIRS functions, it would be easy to select an accounting software from a vast selection of computer programs. Also, certain concerns must be answered to support AIRS knowledge like why the need to change the current system, why add software, what are the benefits and when these benefits be realized (Tate, 41)? Vital stages of developing AIRS includes the initial system design such as coding structures, report formats and level of security; the involvement of the top management in the implementation; installing several oversee groups in each project milestone; and robust documentation.
One example of decision-making applied to software is the extent of its user-friendly features. An organization with high emphasis to experienced and faster users would design a text-only menu which is not only compatible with high expertise but also provides traditional environment. On the other hand, graphical menu is useful for an organization that has novice bookkeepers which need proper guidance in inputting data into the system (Collins, 70). Coinciding with human resource focus, the amount of training required to integrate and run new AIRS are often underestimated by firms because of cost and time bottlenecks. A solution to be considered is the recruitment of temporary staff to alleviate the task of running the old system while permanent staffs are implementing the new system. Advice can also be outsourced from consultants especially in the aspect of training employees.
Roles and Benefits
The role of AIRS adapts to the need of the business but there are two primary duties; namely, production of business forms and recording of important assets. The former emphasizes on design while the latter is on functionality. Special types of AIRS such as industry-specific software packages can give additional value for the firm not only because it is more expensive but also only few Somes can afford or need them. With this type of software, the business can take advantage of having wider and deeper profitability information. This benefit derives from the software’s capability to accurately figure where the areas in the corporate activities the business is making money. Getting consultancy services for the installation of the software also depended on the needs of the business and are not mandatory.
Due to continuous development of wide selection of AIRS and software applications, simple programs can be purchased for less than 0 especially for the one-person services companies. As a rule of thumb, general-purpose programs like QuickBooks, Peachtree and MOB are cheaper versions than extra-functional software that can cost thousands of dollars. Sophisticated software can also cost millions of dollars if bought. Once installed, accounting software can bring strings of benefits. One is the identification of profitable customers which can trigger the need of loyalty marketing to prevent shifting to competitors. Second, it avoids the possibility of corporate theft particularly from employees. Software has audit trails, classification of responsibilities and encryption which can deter and detect theft. Lastly, it can improve cash flows such greater tax deductions, better collection, prevention of bad debts, higher inventory turnover and robust cash assets.
There are software service companies such as The Accounting Library that promises cheap AIRS without the need to undergo the critical process of determining and planning appropriate software. The company assures the software that will be purchased by its clients is within the latter requirements with proven-to-be-effective methodologies that can minimize cost of training, integrate real-time industry features ready to be exploited, avoidance of substantial loss from acquiring the wrong AIRS, improved analysis and efficient second opinion for the exiting consultant. For the consultants themselves, they can use the Library to increase the efficiency of each project, provides ability to demonstrate the program in the client’s site and update their knowledge about the current risks in accounting software.
Development of Conceptual Theory
Methodology
Research Design
Personal experiences and readings of the researcher will form the qualitative aspects of studying the AIRS of Somes in Hong Kong. Qualitative information is used to speculate that problems are eminent in the current system guided by grounded theory. This approach emphasizes the generation of theory from qualitative information (2003). However, the problem will be dealt more thoroughly in the latter part by ensuring that established theories will also be included to justify the problem. This process will assure that measurable solutions can be implemented for ease of identifying of its strengths and weaknesses after implementation.
The research will be carried as a case study. According to (2003), case studies observe, record and analyze stages and patterns of the background, development, current conditions and interactions of individuals and groups relative to internal and external influences (p. 127). In this sense, qualitative data will be derived from secondary data while some quantitative data can be used and will be sourced from the responses in the questionnaires that will reflect the responses of the respondents through percentages. Analysis of qualitative and qualitative data will be derived from journal and textbook articles while presentation will be rationalized by knowledge, direct observation and experience of the researcher. These procedures can help detect false statements from the personal biases which can be affected by self-vested interest. The goal of the study is to justify a problem and post solutions to mitigate the issue and this should not be compromised by personal manipulation.
Research can deduce information solely from secondary data for decision-making purposes to minimize the conduct of primary data (1995). As secondary data are not intended to address research questions under study, this research would largely offer decision-makers to gain familiarity and establish appropriate context in which primary data can be implicated. Secondary data can be gathered in scholarly journals, magazines, books, newspapers and corporate records. With these materials, the marketing research process such as problem definition, research design and report representation are attended. Such is crucial in finding pertinent information, sufficing exploratory research for the purpose of primary research and finding the right tools and techniques in analyzing and solving research questions.
This research will use interpretative approaches that can study the topic in an in-depth and sophisticated manner without the rigorous statistical process (1995). However, this adoption prevents the research to generalize findings but it can provide rich and insightful description of a particular subject which can give the opportunity to contextualize important issues. This is compatible because the current problem is to identify the effectiveness of AIRS and software application for Somes in Hong Kong. Initial contextualization of important issues regarding the business industry should be dealt first to be followed by pinpointing what is the particular sector within the industry is most apparently fulfilling such issues. Primary data can be gathered in the questionnaire wherein the understanding of the topic by he researcher is reflected.
Since Somes have already ample experiences in the business sector, the focus of the study are those sectors that are yet to be tapped. This will include analysis of how to be profitable operator and constraints that can lead to failure. Quantitative phase in the research is declined due to lack of adequate statistical competence and lack of time/ resources while qualitative phase is entirely applied because of the personal knowledge in the area of management and to be able to investigate on under-researched AIRS of Somes (1995). Also, when analyzing qualitative and secondary information, the researcher intends to apply personal knowledge, experience and world-view to interpret and understand them.
Interpretation will be an output of commonsense at experiential level where the researcher invokes that his analysis will be the same as the reader ( 1995). To prevent validity problems, this study will extract accounting-related issues from specific transportation textbooks (e.g. relationship of vehicle speed to customer satisfaction) with the aid of theories and concepts especially in the advent of recommendation and conclusion. Further, the validity of the analysis can be justified by practicing manager’s approach to theory as merely academics against the reality happening within organizational settings.
Participants
Respondents will be determined through investigation about their net assets that can include them to the definition of Somes within Hong Kong boundaries. They have operation and transaction in other countries but their headquarters is located in Hong Kong. In this engagement, the researcher will go to Hong Kong authorities to determine the validity of their classification. Their sectors can vary and the basis will only be the SAME category to prevent the tedious task of segregation wherein companies that are selected do not have accounting software. Two hundred (200) respondents will be surveyed using the questionnaire and no bias will be given for successful and non-successful companies at the time of research.
Data Processing and Analysis
Naturalistic inquiries, developmental research, descriptive research and correlation research will be used in this study to research population behaviors, relate them to success factors and determine the relevance of existing explanatory theories/ empirical studies (___________). One underpinning hypothesis would be employees/ managers are interested to know, participate and act in the intended M&A. Another hypothesis is that most of them confront IT-related issue in their jobs and tasks. With this, they can address the questionnaire. The questionnaire is divided into three parts. The first part contains the assessment questions to check if the two hypotheses are eminent. The second part are a set of questions that are subdivided into four parts (i.e. categories proposed by ) where Scale is applied to determine the level of importance the respondent place on each sub-categories (i.e. the major categories will be applied by the researcher with sub-categories to specify the factors relevant to the respondents).
The third part will evaluate the profiles of the respondents and probably linking them to the part-two answers through specialized grouping (e.g. length of service, age, salary, gender, IT-relevance to work). The data will undergo SPAS/ spreadsheet application and determine their variance, averages, significance. Reliability and validity will be checked through the use of additional statistical treatment under SPAS/ spreadsheet such as factor analysis. As observed, questionnaire method will extensively used. However, interviews with managers and financial executive would be possible that may comprise the qualitative data that can support the explanation behind the behavior of the respondents.
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