The solution on Accounting Software Package Use in Australia

Question: Discuss about theUsage of Accounting Software/Packages in Australia. Answer: Introduction The report provides a review of literature related to usage of Accounting Systems application/software usage in Australia. The review covers development, usage, adaptability and problems faced in general by business companies while using Accounting packages and software in computers. Accounting applications and software are normally used almost all types of organizations, and while exploring literature related to accounting software or packages, the secondary sources indicated many software are available in the market with a variety of features and functionalities to suit different types of organizations and their operations. Accounting software is also used in educational institutions, non-profit organizations, however in this report an attempt is made to discuss the use of accounting software packages in Australian business environment in general with no focus on any one particular company or software solution provider. The literature reviews provided in the report are obtained fro m secondary sources (journals, conference papers, reports and online information) related to this topic. While reviewing literature it was found that SMEs in Australia comprise of around 99.7% of 2.1 million firms in the country (DIISR, 2011). This interesting statistic influenced the review to be made for accounting software usage in business firms in Australia. The review is made in accordance with the development and usage of accounting software in Australia. The resources reviewed include history, adoption and development, and competitive advantage realized by business firms. The gaps and challenges faced by users in the accounting software are also highlighted. The suggestions to overcome some common challenges that were identified by business firms are also explained. Literature Review The review of literature is made in the context of business research. As mentioned earlier, the usage of accounting software/package in a business environment is reviewed. While reviewing implementation of accounting software in business companies, it was found that business companies can be classified as small and medium businesses (SMB), small and medium enterprises (SME) and large enterprise business companies and other organizations such as governmental organizations, non-profits, banking and insurance, etc. The methodology followed in writing this literature review report is illustrated in figure below: Figure 1: Steps followed in literature review Background of Accounting Software According to Scott (2015), the background of accounting software/packages dates back to 1955, over 60 years now and have evolved a long way along with developments in digital computer technology. From the days of the mainframe computers introduced by IBM, accounting packages and computers seems to naturally fit well in the area of financial management. The developments in digital technologies make significant contributions in improving accounting systems which can be found in computerized software such as ERP (Enterprise Resource Planning), Accounting Information Systems (AIS) and so on. Brief on Accounting Software Usage Fink (2007) provided a study on the success of information systems in the context of large organizations to evaluate two main variables namely, user practices and design features in accounting software that which are designed and developed in-house. This evaluation was done by public accountants who deal with business companies to provide accounting expertise, controls, and computerized accounting package evaluations. Evaluation for these two variables was done for SMEs because SMEs have increasingly adopted accounting packages within their companies. SMEs make use of information systems for reporting, accounting and outsource their IS operations. The results of the evaluation showed satisfactory ratings for user practices and design but with exceptions in some cases. For instance, the installation process in the software was not well managed, but the functionalities and reporting features were good. This study was made to identify accounting package deficiencies and improve the soft ware to overcome deficiencies. In this study, Fink highlighted the importance of IS success, the usage of accounting packages by SMEs and the involvement of public accountants to improve accounting software. Sori (2009) explained that the involvement of consultants in accounting software implementation and usage will help in identifying incongruence within the accounting IS and the implementation team. A Brief on Accounting Practices The general case of SMEs in Australia explained by financial researchers and experts state that there exists a positive relationship between efficient cash flow management and working capital and the companys profitability. Therefore it must be noted that if an SME will manage its working capital well it can increase profitability and achieve business success (Yazdanfar and Ohman, 2014). At the same time in the case of owner-manager run companies, poor financial controls, and management practices are some of the reasons for the decline in business performance. Vos and Roulston (2008) suggest that in owner-manager run firms must actively engage themselves in monitoring cash flow cycle, break-even and profitability. In addition to these situations, SMEs find their accounting and reporting systems are adequate for accounting and compliance purposes. At the same time, their accounting systems used by SMEs may be inadequate for monitoring company performance on the daily, weekly or monthl y basis. This poor performance in accounting and financial management can be overcome through developing more skills on financial controls and knowledge of computer based accounting software. According to Breen et al. (2003), the motivation for adoption of computerized accounting systems (CAS) by businesses in Australia is mainly driven by IT systems adoption in their companies. Their research project was made to examine the small business usage of CAS and to identify obstacles that prevent business companies from adopting CAS. The overall objective is to encourage adoption of accounting software in SME record keeping. Since accounting packages need an IT system, IT adoption of is influenced by many factors such as making decisions in the organization for IT, using technology for innovation, the overall organizational style, and the business environment. It is found that in large organizations, IT is used extensively, as business operations are computerized. On the contrary, smaller business firms depend on the owner-manager who makes decisions on IT (Liberman-Yaconi et al. 2010). Halabi et al. (2010) suggested that the IT knowledge levels, proficiency and characteristics of owner-manager play a major role in determining CAS in the company. In addition to these constraints it was found that small business companies have resource limitations and in many instances, the owner himself performs the accounting function. For companies initiating the use of accounting packages, public accountants offer support in implementing the accounting package and improving it further (Breen et al. 2003). Hunter (2015) stated that the availability of more powerful computers along with user-friendly accounting software has influenced SMEs to implement IT and accounting software along with other packages in the recent years. There is also considerable research to demonstrate the link between improved business performance and use of accounting package/software. SMEs are found to be using accounting software for obtaining information related to business operations more efficiently (Reid and Smith, 2002). Looking into these circumstances, it can be understood that for having a more systematic and comprehensive performance monitoring of financial data, the owner-manager must be proficient and skilled in accounting software. More financial literacy is also highlighted for SMEs to help them have more control of their finances and sustain themselves in the competition. Mazzarol (2015) suggests the need for a national system such as Australian Small Business Commissioners to provide assistance to SMEs on regulatory changes, information control, advocacy services and in dispute resolution. Many researchers have also highlighted that accounting department maintains books of accounts for all the departments, the input data from other departments came in different formats. This has often resulted in duplication of data and posed challenges while reconciling accounts at the end of the year. This problem is often faced by companies running an accounting package on a standalone computer. The solution to this problem led to the development of centralized database and accounting systems which were used by SMEs and large enterprises. In the centralized database, the problem of data duplication and issues in multiple formats of data is easily handled (Svejvig, 2011). Large business companies implement network-based software systems such as ERP and to maintain the centralized database and establish uniformity and consistency of data from different sources. ERP systems integrate different individual applications in business functions and ensure data centralization and avoid the ne ed for an independent accounting package. ERP software is a business enabler and provides competitive advantage but the implementation is quite challenging and must be done correctly (Xu, 2011). A number of accounting packages are available for use immediately off the shelf and can be customized. Some examples are XERO, MYOB, Oracle, SAP, etc. Conclusion In summary, the report provides a detailed review of the use of accounting software by business companies in Australia with a focus on SMEs. The review summaries are made by using journals, conference proceedings and research reports which are the sources of information. It can be found that SMEs and small companies due to their limited resources face many problems and challenges in effectively managing their finances which can be overcome by the use of centralized databases and software applications. The role and involvement of public accountants in Australia in improving accounting packages used by SMEs are briefly mentioned for its importance to enhance the features of in-house developed software. The use of computerized accounting systems is highlighted to overcome the problems faced by SMEs in managing their cash flow, capital and company performance. The need for a centralized software system such as ERP is highlighted to ensure data consistency and uniformity in business funct ions. References Breen, J., Dr. Sciulli, N. and Calvert, C. (2003) The Use of Computerized Accounting Systems in Small Business, 16th Annual Conference of Small Enterprise Association of Australia and New Zealand, Sept 28 - Oct 1, 2003. pp. 3-8. DIISR (2011) Key Statistics: Australian Small Business, AGPS Canberra, Department of Innovation, Industry, Science and Research. Fink, D. (2007) Information Systems success in small and medium enterprises: An evaluation by Australian Public Accountants, Australian Journal of Information Systems. 4 (1), pp. 32-34. Halabi, K.A., Barrett, R. and Dyt, R. (2010) Understanding financial information used to assess small firm performance, An Australian quantitative study. Qualitative Research in Accounting and Management. 7 (2), pp.163-170 Hunter, M.G. (2015) Strategic Utilization of Informatio Systems in Small Business. PA: Business Science Reference (An imprint of IGI Global). Mazzarol, T., Reboud, S. and Clark, D. (2015) The financial management practices in small and medium enterprises, Small Enterprise Association of Australia and New Zealand, 28th Annual SEAANZ Conference Proceedings, 1-3 July, Melbourne 2015. pp. 1-20 Reid, G. and Smith, J. (2002) The Bigger Picture, Financial Management, Chartered Institute of Management Accountants, pp. 24 26. Scott, B. (2015) The Accounting Journal: 60 years of Accounting Software, The Pulse Australia. [Online] Available at: https://myob.com.au/blog/60-years-of-accounting-software-introduction/. [Last Accessed 17-Aug-2016]. Sori, M. Z. (2009) Accounting Information Systems (AIS) and Knowledge Management: A Case Study, American Journal of Scientific Research. (4), pp.36-44 Svejvig (2011) A successful enterprise system re-implementation against all odds - a multi-sourcing case study, Journal of Information Technology Case and Application Research. 13(4). Liberman-Yaconi, L., Hooper, T. and Hutchings, K. (2010) Toward a model of understanding Strategic decision-making in micro-firms: Exploring the Australian information technology sector, Journal of Small Business Management. 48 (1), pp.70-78 Xu, L. (2011) Enterprise Systems: State-of-the-Art and Future Trends, IEEE Transactions On Industrial Informatics. 7(4), pp. 630-640.