Academic journal article Business and Economics Research Journal

The Role of ERP in Advanced Managerial Accounting Techniques: A Conceptual Framework 1

Academic journal article Business and Economics Research Journal

The Role of ERP in Advanced Managerial Accounting Techniques: A Conceptual Framework 1

Article excerpt


Today's business environment has made inevitable for firms to have comprehensive, daily and detailed information of both market and their own operational processes. In other words, to be obtained by using emerging technologies holistic comprehensive, flexible and real-time financial and operational information is indispensable for firms high performance. ERP is precisely one of the information technologies for this purpose.

As an enterprise information technology, ERP demonstrated the rapid spread and development across the World from the 1990s to now. In this process, the system that meets the specific needs of different users (in particular to increase the effectiveness and profitability of resources) and has become a complex set of computer application which integrates all processes and functions in the company and offers a holistic and integrated view by using a common database sharing.

Because ERP makes data sharing in to an accurate and real-time form, operational processes are also automated in whole business. In this context, the nature of the accounting practices in this context has changed radically. With the change, the operational coordination between departments has got easier, and thus efficiency has obtained in areas such as strategic planning and management control. Efficiency is observed as increased flexibility in providing information, increased integration in accounting practices, and increased quality of financial status report and also seen as quick decision-making process, the harmonization of conflicting objectives and to standardize business processes (Colmenares, 2009: 5-6); and finally seen in areas such as an increased efficiency in commercial enterprises, facilitating the access to information, increased quality of information and supporting temporary reporting (Booth, 2000: 2).

With these features the ERP can offer important contributions to Managerial Accounting Systems (MAS). Thanks to ERP, MAS facilitate budgeting applications and tracking responsibility on prepared reports. So, in our opinion, MAS effectiveness has increased dramatically by ensuring interdepartmental integration. This article examines how management accounting applications become effective and productive with the support of an ERP system and how this interaction increases firm performance.

2.Literature Review

The problem of determining cost and cross-functional data reliably and quickly, particularly in manufacturing enterprises (Lea and Min, 2003: 2880), hampers the effectiveness and credibility of both traditional and modern managerial accounting (MA) applications. To eliminate this obstacle, enterprises increasingly adopt ERP systems. The integrated, flexible and real-time financial and operational data offered by ERP systems, which could be defined 'a change agent', extend the usefulness of managerial accounting techniques (Granlund and Malmi, 2002: 305). In this article, we show that how ERP and advanced managerial accounting methods are highly complementary systems based on literature review. In this regard we will explain how ERP system interact with total quality/quality cost, just in time production, activity based costing, balanced scorecard, business process reengineering, benchmarking, product life cycle costing, value engineering and costing.

2.1.ERP System

ERP was developed to establish control over complicated operations, increase efficiency and productivity within enterprises, decrease production and transaction costs (Davenport, 1998: 123-124) and build full and flexible information systems for all of these processes. ERP becomes a milestone of the use of effective, fast and comprehensive information by integrating enterprises' inside and outside operational processes.

ERP is a software system aimed at corporate resource planning. This system is based on establishing effective control and coordination of resources in different geographic regions in parallel with companies' strategic goals, purposes and customer needs. …

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