Impact of Enterprise Resource Planning 

(ERP)
on Roles of Management Accountant in
Organizations

Researchers
Roll # 01 Zainab Mehmood
Roll # 03 Aakfa Nudrat
 Presentation Overview
1. What is ERP?
2. Introduction
i/ Why Use It?
4. ERP system implementation
5. The main role for management accounting in the organization
6. Attributes of a good management-accounting system
7. The impact of ERP implantation on management accounting system
8. The impact of ERP systems on the role of management accountants
9. Benefits and Issues
10. Change in the Role of the Management Accountant
11. Recommendations for management accountants in an ERP environment
12. Findings and Conclusion
13. Limitations
14. References
 ERP system and ERP software
 All components required to establish the
system, such as ERP software, IT
Infrastructure, business process and so on.
Thus, ERP software is part of the ERP system. 
 What is ERP?
 Enterprise resource planning (ERP) is an integrated
computer based system used to manage internal and
external resources including tangible assets, financial
resources, materials, and human resources.

 Its purpose is to facilitate the flow of information

between all business functions inside the boundaries
of the organization

 ERP systems consolidate all business operations into

a uniform and enterprise wide system environment.
 Introduction
 Enterprise Resource Planning is the latest high
end solution, information technology has lent
to business application.
 The ERP solutions seek to streamline and
integrate operation processes and information
flows in the company.
 Synergize the resources of an organization
namely men, material, money and machine
through information.
 Continue….
 Today many companies in India have gone in for
implementation of ERP
 It is expected in the near future that 60% of the
companies will be implementing ERP since this will
become a must for gaining competitive advantage.
 The aim of this paper is to demonstrate the impact of
ERP implementation as a new system on management
accounting practices.
 Why Use It?
 “Our sales guys can never make up their minds. They keep changing their
product requirements on a daily basis. How can I ever manage my production
under such a situation?”

 "Our manufacturing people are in a world of their own. They are more
interested in reporting high capacity utilization, rather than meeting the
delivery schedules committed to customers. We end up facing the flak with our
customers”

 “I never seem to get the right information. Each department presents me their
own picture. Which never matches another department's information. Am I
supposed to spend all my time reconciling data, or take decisions!”
ERP = Extended Enterprise Management System

EXTENDED ENTERPRISE MANAGEMENT SYSTEM

Supplier Customer
Front End Back End Front End
Supplier E-Procurement Finance and Customer Relationship Customer
Reverse Auction Accounting Management
Supplier Exchange Human Resources E-Store Customer
Supplier Selection Manufacturing E-Auction
Supplier Supplier Purchasing E-marketing
Customer
Relationships Distribution Service Management
Supplier E-Sourcing Marketing
Customer

E R P A P P L I C A T I O N S
 ERP system implementation

 Four major phases are:

1. Detailed Discussion Phase
2. Design and customization Phase
3. Implementation Phase
4. Production Phase
Logical Framework

Implementation Phases
of ERP

Detailed Discussion
Phase

Design and
customization Phase

Implementation Phase

Production Phase
The main role for management accounting in the
organization

 “Management accounting is a system of

measuring and providing operational and
financial information that guides managerial
action, motivates behaviors, and supports and
creates the cultural values necessary to achieve
an organization’s strategic objectives”[ Jan,
Shahid, Homas and Arol 1999].
 Continue…..
 Management accounting is often defined as a
system that provides useful information for
managers in terms of decision making,
planning, control and performance evaluation
(Drury, 2004, p. 20 )
Attributes of a good management-accounting
system
The impact of ERP implantation on management
accounting system
 The involvement of management accountants
is seen as another important success factor for
ERP implementations.
 The more active the role played by the
management accountants, the higher the level
of perceived success for the ERP
implementation.
 . The impact of ERP systems on the role of
management accountants
 The Institute of Certified Management
Accountants (ICMA, Australia) describes the
management accountant as someone who
applies his or her professional knowledge and
skill in the preparation and presentation of
financial and other decision oriented
information in such a way as to assist
management in the formulation of policies and
in the planning and control of the operation.
 Continue….
 The changes which are affecting the core role
of the management accountant are in large part
due to the popularity of ERP
 Benefits of ERP
 Reduction in stock levels due to improved planning

 Monthly accounts closing in fewer days

 Improved financial accuracy and financial efficiency

 Meaningful reports

 One version of the truth

 Improved visibility and access to information

 Continue……
 Improved financial control

 Reduction in staff due to automation of tasks

 Cost saving through shared services

 Reduction in cost of maintaining multiple systems

 More time for managing the business

Change in the Role of the Management
Accountant
 Reduction in time spent on data collection

 Increase in time spent on data analysis

 Increased involvement in decision making

 Improved focus on internal reporting

 Improved focus on external environment

 Continue…..
 Shift in focus from historical to forward looking analysis

 Shift from domain specific to cross-functional analysis

 Changes required in communication skills

 Improved long term job satisfaction

Recommendations for management accountants
in an ERP environment
 Should have appropriate and adequate accounting training vis-
à-vis the skills needed by management accountants in ERP
environments.

 A formal accounting qualification is very desirable.

 The need for good communication and interpersonal skills.

 Analytical skills and the ability to focus on objectives and

prioritize work (work management) were also deemed
important.
 Continue….
 The increased importance in understanding the
business was also emphasized.

 That is, the management accountants need to

be able to communicate with the management
team and synthesize and explain the results
(the impact of the financial data) in a way that
can be easily understood.
 Findings and Conclusion
 ERP system has had a positive effect on the role of the
management accountant.
 ERP systems has not changed the ultimate responsibility of
accountants which is the end of month figures.
 ERP effortlessly communicates information across various
departments and improves efficiency, performance and
productivity levels.
 When management accountants are involved in the
implementation of an ERP system there is an increased
likelihood of success.
 The management accountants become more closely involved
in business decision-making
 Limitations
 The scope of customization is limited in several
circumstances
 The present business processes have to be rethought
to make them synchronize with the ERP
 ERP systems can be extremely expensive to
implement
 There could be lack of continuous technical support
 ERP systems may be too rigid for specific
organizations that are either new or want to move in a
new direction in the near future
 References
 A. A. Atkinson, R. D. Banker, R. S. Kaplan and S. M. Young (2001):
Management
 Accounting, 3rd edition, Prentice- Hall Inc, Upper Saddle River, New Jersey
07458
 A. Caglio (2003): Enterprise Resource Planning systems and accountants:
towards
 hybridization? European Accounting Review, Vol. 12, Issue 1, pp. 123–153.
 A. A. Atkinson, R. Balakrishnan, P. Booth, J. M. Cote, T. Groot, T. Malmi,
H. Roberts,
 E. Uliana and A. Wu (1997): New Directions in Management Accounting
Research,
 Journal of Management Accounting Research, Vol. 9, pp. 79-108.
 Abdinnour-Helm, S., Lengnick-Hall, M.L., and Lengnick-Hall, C.A., "Pre-
implementation attitudes and organizational readiness for implementing an
Enterprise Resource Planning system", European Journal of Operational
Research, Vol 146 (2), 2003, 258-273.
 Abdinnour-Helm, S., Lengnick-Hall, M.L., and Lengnick-Hall, C.A., "Pre-
implementation attitudes and organizational readiness for implementing an
Enterprise Resource Planning system", European Journal of Operational
Research, Vol 146 (2), 2003, 258-273.
 B. Light, C. P. Holland, K. Wills (2001): ERP and best of breed: a comparative
analysis,
 Business Process Management Journal, Vol. 7, No. 3, pp. 216-224.
 B. Pierce and T. O’Dea (2003): Management accounting information and the
needs of
 managers Perceptions of managers and accountants compared, The British
Accounting
 Review, Vol. 35, pp. 257-290.
 Booth, P., Matolcsy, Z., and. Wieder, B. (2000). Integrated Information
Systems (ERP-systems) and Accounting Practise – the Australian Experience.
Paper presented at the Third European Conference on Accounting Information
Systems, Munich, Germany, pp. 27-28.


 Brazel, J. F. and Dang, Li (2005). The Effect of ERP System Implementations

on the Usefulness of Accounting Information. Managerial Auditing Journal,
Vol. 20, No. 6. pp. 619 – 631.
 Burns , J., Ezzamel M. and Scapens R. (1999). Management Accounting
Change in the UK. Management Accounting, London, Vol.77 No.3, pp. 28-
30.