Management Accounting in ERP Systems
I Introduction
In this competitive global economic environment, corporations all over the world have a desperate need to increase profits and decrease cost every year. They have tried many ways to improve their business, such as improving the quality of the products, gaining more market share, as well as improving customer satisfaction sentiment. These decisions though simple have several thousands of financial data points which have to be analyzed before any new decision can be made.
Inside a corporation, management accountants are responsible for these decisions with their responsibilities including “management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy”.(Institute of Management Accountants, 2008) . With all these responsibilities many management accounts have encountered various problems, particularly in collecting the data, classifying it, and then processing it. However, new accounting information’s systems have made it possible for large scale corporations and management accountants to easily classify, collect, and standardize financial information. One of those powerful tools which has greatly helped management’s accountants fully process and gather is Enterprises Resource Planning (ERP) system.
Since 1990 ERP systems have revolutionized how companies make decisions, ERP has become an integral part in management accounting as it has efficiently helped managers to use and analyze data and apply the analysis to accomplish the company’s goal of cost reductions and increased revenue.
ERP systems have the capabilities...
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...e consumes the most resources, while conduct the least profits. Therefore, management who only have the comprehensive information is hard to make precisely and accurate decision that which product should cut the redundant cost and how to reduce the cost.
However, activity-based costing (ABC) could help to make the function of Enterprise Resource Planning (ERP) systems more integrity. Activity- based costing (ABC) not only allocate several cost drivers, but also it can track the costs incurred during the whole cycle of Enterprise Resource Planning (ERP) systems to individual product and service. Combination of Enterprise Resource Planning (ERP) systems and activity-based costing (ABC), corporations can have a comprehensive view of the entire company, also have an clearly sight of the details.
USPS is in need of developing the ABC, while Elkay Plumbing benefit a lot
Rocket-Blast, LLC, a beverage maker, has seen its profit margins reduced which presents a real problem for the company going forward (Precord & Macdonald, nd). Management has decided that operating costs must be reduced in order to increase profit margins to
An organization costing system is a system that helps the management with the strategy planning while the system plays an important role in providing accurate cost information about the products and customers (Curtin, 2006). UPS utilizes the Activity-Based Costing (ABC) system. ABC assumes that activities cause costs and that cost objects create the demand for activities (Marx, 2009). The key to cost allocation under ABC is to identify the activities that are performed to provide a particular service and then aggregate the costs of the activities (Gapenski, 2012). This is a marked departure from the practice of sharing overheads costs equally or overheads becoming part of the overall profit-loss estimate instead of component product pricing (Nayab, 2011).
ERP stands for Enterprise Resources Planning. ERP is a term used for software that controls whole organizations different departments. SAP is the world leader in ERP systems followed by Oracle.
ERP is a huge resource managing tool used by companies today. Some systems preform general ledger, accounting and order management for the company. ERP systems are a great asset and greatly improve a company, so a company should defiantly look into implementing ERP systems! However, Gartner estimates that 75% of all ERP projects fail. Why is there so much of a high failure rate? This paper will take an in depth look at reasons to why ERP systems fail.
Management accounting in organisation is very important for decision-making and to make the business more efficient and therefore increasing its profits. Is the process of preparing accounts that can help managers to make day-to-day and short-term decisions, by providing them with accurate and timely key financial and statistical information...
The new president believes that the key to the new strategy is to be able to understand the true nature (i.e. costs of customers and orders. He feels that if the company is able to tie costs to customers in an accurate manner, it will enable the company to better focus on higher profitability. Major Issues: What is the ' Understand the cost structure of the company. Allocate costs on a per customer and per order basis. Implement a new cost system that will support the new cost allocation methodology.
ERP is a business system that joins all the aspects in the business world such as planning, manufacturing, sales and marketing, projects. The ERP has become more popular in the software which used to help the business actives including order tracking, customer service, finance, inventory control and human resources. The ERP databases contain all the data about the business whi...
Activity-based costing (ABC) is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore “fixed” as well as variable costs. Activity-based costing is mostly used for internal decision making and managing activities while traditional costing method is used to provide data for external financial reports. Most organization uses activity-based costing as an addition system for using traditional absorption costing as sometimes the traditional cost system misleads the product’s profitability. In a company, there are many products on sale, if one product is sold at a high price with low product margin and a product with high product margin at a low price, it may result in a loss. In addition, due to the reason that cost drivers and enterprises business may change, activity-based costing analysis also needs to be revised periodically. This amendment should be prompted to change pricing, product, customer focus and market share strategy to improve corporate profitability.
Every company has some kind of Revenue and they all have costs that are associated with running the company. It is also true that if a company wants to increase their Revenue, their costs will increase too. It is every company’s goal to maximize revenue and either through Production or Services, and minimize cost. These things are easy to figure out, but actually identifying the production and figuring out how it will increase or decrease with change is very difficult.
First we will talk about activity based costing and we will start by giving the definition of it ; Activity based costing means refining the costing system by concentrating on individual activities as essential or primary cost object or tool . ABC system has a lot of benefits and we will discuss them now, ABC helps in understanding overhead much better and the percentage of prim cost and overhead is the same in both ABC and traditional system; but what gives advantage of ABC over traditional is by using ABC system it helps to know the detail of overhead so that it can identifies how is the activity to avoid.
ERP systems are meant to make companies and businesses operate more efficiently when they are not. The main goal for a company is to choose a vender that will give them the safest and easiest way to operate efficiently and achieve their business goals.
...pplied. Cost estimation and analysis could ultimately determine major decisions in both the business and political worlds today, and play a crucial role even in our day to day lives. Through activity based costing one is able to see what areas need improvement and also whether or not a business will be successful after considering all the factors. These tools are very powerful in drawing wise conclusions from cost analysis and can be a priceless tool to have even in the field of engineering.
Business organizations usually make many regular decisions during their activity, but when an organization wants to make a specific operational decision, it requires distinguishing the appropriate cost elements to a particular management decision. One of the practical tools in the decision-making process is to compare the costs of a particular alternative with that of other alternatives, which is known as the differential analysis.
In its current practice, the roles and functions of cost accounting includes additional functions. More specifically, it can be described as more than an inventory tracking system. This is because cost accounting entails defining the charges of activities and goods (Horngren & Srikant, 2000). Because of its many roles and functions, this accounting method has been of great help to growth and expansion of business planning and management. Again, the reports offer assistance in the planning and growth projections for different business functions and units within the organization. The information cost accountants offer different uses, some of which aid in the controllership function, as well as the industrial
Nowadays with the implementation of new emerging technologies, the way businesses keep this financial information has become computerised. At the moment businesses use computers with a computerised accounting system in order to perform many other new activities than what they were able to do in the past. Businesses can access financial information from different department in the organisation, access to the information through computers and find financial data very fast, being more efficient. (Beliss, 2013)