Perpetrators: More and More Businesses Are Introducing Enterprise Resource Planning Systems, but What Are the Implications for the Future Roles of the Management Accountant? Mike Newman and Chris Westrup Discuss the Latest Research. (Finance ERP Systems)
Newman, Mike, Westrup, Chris, Financial Management (UK)
Enterprise resource planning (ERP) systems are software modules for different business functions linked by a common database to produce an integrated enterprise-wide system. In line with international trends, most large British companies have introduced ERP in the past decade. So what effects are these systems having on firms and on the role of their finance professionals?
We surveyed a sample of CIMA members and then interviewed people ranging from finance directors and management accountants to IT staff in nine large organisations. We found that the impact of ERP systems on management accountants has been inconsistent. Whereas one food producer used its system simply as an accounting package, a building products subsidiary implemented its system as part of the process of re-engineering its whole business. Most companies use ERP systems to link parts of their organisation, while still retaining different functional areas, but there is no determining logic in the purchased ERP system that leads to a predetermined outcome for management accountants or anyone else.
On the other hand, in most companies, management consultants and the vendors (usually SAP) were actively involved in setting out the role and scope of the ERP system. The scope of the system depends first on an early design definition and then on subsequent reworkings. These reworkings are in part initiated by the individuals and groups who learn to use the new system and find different ways to achieve their tasks. But they are also triggered when senior managers question the benefits of the system or start a new round of business restructuring.
For example, in one company the sales force triggered changes because they, rather than the management accountants, were responsible for checking and reacting to the margins on individual products. In another, senior managers set up a project to try to extract more value from the company's large ERP investment and this led to a re-evaluation of how the system was used. One consequence was an attempt to standardise and reduce the use of spreadsheets as inefficient adjuncts to the ERP system.
One interesting finding was that the installed systems were not stable. All companies had to change their versions of their system from time to time if only to ensure that they were maintained. Each change to a new version required considerable work, mainly because all prior non-standard alterations to the system and interfaces to other non-ERP systems had to be revised. So, even a successful upgrade to version 4.6 of SAP in an aerospace company took seven months. With hindsight, customising software for ERP systems was seen as a mistake that later incurred extra work.
Similarly, vendors have changed the scope of ERP systems radically in the past couple of years. There have been initiatives to move them away from being internal company systems towards becoming internet and inter-organisational systems. Interestingly, no respondents discussed the internet or its implications for their work.
Companies preferred to go for a big-bang approach so that they could move directly from legacy systems to ERP. The result was a period of considerable difficulty for users, who found it hard to perform their tasks efficiently. Nobody considered that they had had enough training, but many senior managers discussed the problem of training large numbers of people in a short time.
For several months after implementation, companies go through a period of change in which data entry becomes critical. All respondents said they were shocked to realise that data entered on the system immediately affected everything else. For example, one management accountant in a large chemical company mentioned how users elsewhere had been confused and were putting weights in tonnes instead of kilogrammes. This quickly meant that stock and the financial accounts became completely mixed up. Respondents found that everyone needed to understand the process they worked within, rather than simply their own specific task, and that this required a cultural shift. …