The adoption of Information and Communications Technology has tremendously increased over the last few decades in an attempt to bring efficiency in business accounting in the United States (US). The US economy is one of the highest in the world in terms of trade and GDP. This paper researches the use and impact of Information and Communication Technology in management accounting in the United States. This paper discusses the drawbacks of using ICT in accounting. Both small and large organizations are currently utilizing ICT to provide accounting efficiency. Accounting bodies have encouraged the changes in accounting training to ensure focus is directed towards the adoption of information systems in the industry. This study finds out that ICT has great impact on business accounting in multiple ways. According to the department of accounting efficiency, the impact is very much evident that produces accurate information and in time for management to make decisions. Auditing software and the ability to freely share information also lead to higher productivity of businesses in the United States.
Information and Communications Technology (ICT) plays a major role in the improvement of life in the United States (Sangster, Xiao & Dodgson, 1997, p.6). With the adoption of information systems to conduct business, the world has witnessed tremendous growth of business firms. ICT impact is evident in the usage of the internet. Internet has globally revolutionized the way communication, communication, and information occurs (Lefley, 2013, p.509). The use of technology has also changed the other areas of the economy like entertainment and trade. It is evident that with the help of the internet, ICT aided many organizations to present their products in any part of the world. Many studies attempted to find out the impact of ICT on business performance. Such general studies only mention the impact of adopting technology in other production areas of the firms. This study narrows down to the adoption of ICT in accounting. It finds out the impact of blending ICT in accounting activities that also include audit (Wessels, 2005).
The continued emergence of new Information Technology (IT) innovations in the United State—research studies are available in many accounting journals—encouraging businesses to adopt technology in their accounting operations. Most of these articles advocate for the investment in IT applications by the management of firms. Managers could only invest in IT depending on the impact it has on the productivity of the firm. In many of the research studies on the impact of ICT on businesses, it is very difficult to pinpoint the impact that results from adopting the same in accounting operations. Certain areas like public accounting rely on information to make decisions. For this reason, this study also focuses on management accounting as well as financial accounting. Management accounting is important in making important decisions concerning business operations like planning.
In an attempt to blend ICT with accounting, a change in the curriculum has led to the incorporation of Information Systems as part of the syllabus. This has been done to help inculcate the IT culture to the students early enough in order to be effective in future. Historically, accounting started thousands of years ago while IT came later but has been quickly evolving (Chewning, Lai & Doerfel, 2013, p.258). The continued changes in IT have made the current business world very competitive, making it inevitable for adoption. For this reason, professional management accounting bodies like Chartered Institute of Management Accountants (CIMA) and The Association of Certified Chartered Accountants (ACCA) (Sangster, Xiao & Dodgson, 1997, p.8) continue to encourage firms and businesses to embrace IT as it has the potential to ensure better decision making and growth.
Companies blend ICT with management accounting to help management take important decisions. This is information should be free of errors and more accurate. Shareholders and the management rely on the accounting information to help decide on budget issues as well as investments on short and long-term basis (Hollestein, 2004, p.34). On the same, the vision of an organization would determine the kind of technology adopted. For this reason, the outcome of adopting a certain IT application on accounting depends on whether the vision of the organization is in line with the chosen technology (Techatassanasoontorn et al., 2011, p.75). This leads to research problems as summarized below:
- Adopting influences of IT a firm depending on knowledge of the available technology that corresponds to the accounting objective.
- Indirect technological costs may affect the impact performance of the organization.
- A certain IT technology may not affect an organization’s performance within a shorter time.
This study aimed:
- To present the differences and similarities that exist between traditional and the technological applications of management accounting in the United States
- To find out potentials of blending ICT in accounting
- To find out the benefits of blending ICT in accounting to a firm
- To assess the impact of adopting ICT in management accounting
Banker, Hsihui, and Yi-ching (2002, p.213) find out that in order to find the impact of Information Technology in a given firm, we must be able to understand the details of the IT in place and the task to be performed. This is important because accounting tasks involve intensive gathering, processing, and presenting data. Productivity is likely to improve when all details are available. In their work, they indicate that the adoption of IT in an organization helps in the efficiency since professionals of different ranks can easily do work. According to them, accounting tasks require teamwork in order to produce accurate results (Žnidaršič, 2012, p.11). For this reason, the adoption of an Information System helps in integrating the whole process in a single interface for efficiency.
The use or non-use of IT can determine the performance of an organization. According to Banker, Hsihui, and Yi-ching (2002, p.209), companies that adopt technology in their financial operations register improved results as compared to those without. In their study, they point out that banks that adopt the use of ATM services incur less non-personal operating expenses. In another example, they show that the use of computerized point of sale machines contributes to better sales for stores as compared to non-usage. This proves that the use of technology has the ability to improve accounting process in an organization while at the same time improving productivity.
Business accounting entails collecting and analyzing data in order to help in decisions -making, something that requires the aid of certain tools to be successful. Allahyari and Ramazani (2012, p.12) note that the use of technology has greatly changed since the last decade, during which, the use of personal computers and the internet have increased. On the same, they find out that the application of digital technology has shifted from the organizations towards individual homes (Znidarsic & Werber, 2012, p.45). The major milestone of technology has come from its ability to utilize in collecting, filtering, compiling, analyzing and presenting information that can be used for other important purposes. To Allahyari and Ramazani (2012, p.12), digital technology provides a platform for businesses to achieve strategic growth as less time is spent on processing useful information for decision-making.
Adoption of any technology requires that internal controls in an organization be identified (Qian, Ward & Blaskovich, 2012, p.3). This can never be underestimated, especially in accounting matters that require the utmost accuracy of the final product. In order to achieve the best result, Qian, Ward, and Blaskovich (2012, p.14) quip that both parties must understand computer-based information systems because this is the best foundation needed for the development of efficient financial reports. For this reason, they find out that coming up with reliable accounting information depends on the kind of system in place, the experience of the accountants who use it. This means that an internal control entails a clear understanding of the king of the system that is in place in the organization (Tang & Trevino, 2010, p. 51). Lack of knowledge of the system is likely to affect the outcome and decision-making capabilities of the management and shareholders. On the same note, auditors must understand the kind of Information System in place at the organization in order to understand and interpret the financial reports (Moorthy et al., 2012, p.3).
According to (Moorthy et al., 2012, p.3), Information Technology is necessary because it helps in producing information that is used to make important decisions. He notes that investment towards establishing Information System in an organization is important as it guarantees return on investment. His findings indicate that the use of IT is important as it produces information that shows the performance, pointing out areas that require work to improve the situation (Gani, 2006, p. 655). However, his study does not indicate the level of the need to invest in IT as compared to the Return on Investment (ROI). Banker, Hsihui, and Yi-ching (2002, p.211) find out that businesses can only become successful in terms of investment when utilizing past information or data in decision-making. They note that the adoption of Information and Communications Technology helps in the production of accurate accounting information used to enhance performance in business.
Information technology also helps organizations have a platform to interact with customers (Sangster, Xiao & Dodgson, 1997). For instance, websites provide an interactive interface where an organization’s information can readily be acquired. By this, companies can gain competitive advantage over others through its usage. Sangster, Xiao & Dodgson1, 997, p.2) point out that websites help establish personal relationships between current as well as potential customers. However, their study does not point out the negative impact that websites have, like development and maintenance costs. In addition, not all organizations would prefer it as their quest to gain a competitive advantage (Moorthy et al., 2012, p.8).
The first assignment was to identify the target publication to give direction on the study (Kauffman, 2008, p. 12). This process entailed the use of keywords to search for appropriate accounting journals that could help provide prior studies on the subject of study. Cabell’s Directory of Publishing opportunities in accounting, available via Gee library, was also utilized for this research assignment. This study only utilized accounting journals and articles that touched on the adoption of Information Technology in the accounting operations in any institution (Sutton & Arnold, 2013, p.81). As mentioned above, all source materials were from the university library. The keywords used to undertake the research were accounting, Information and Communications Technology (ICT), business decisions, management accounting, and the United States. Below (figure 1) is the research framework used to accomplish the task.
This study involved qualitative and quantitative analysis in a bid to find out how many organizations adopted IT in an attempt to improve accounting operations (Sutton & Arnold, 2013, p.81).
Differences and Similarities between Traditional and Technological Management Accounting in United States
Presently, management accounting has been an important tool for making decisions in organizations. To put things into perspective concerning the impact that technology has made on this subject, it is important to discuss the differences that exist between the traditional methods used. In the past, concerned authorities used to conduct accounts with a view of requirements related to tax and legal areas. This was the only an organization could ensure that it was relevant in the market (Basu, 2007, p.11). In order to be successful in this endeavor, the collection of information was tedious as it was manually done, making the process slow and full of errors. Strategies were put in place depending on the kind of competition in the industry; therefore, organizations had to gather information concerning other competitors with a view of formulating strategies with a competitive edge (Sutton & Arnold, 2013, p.86). Management accounting demands that information be collected and compiled in a way to help in internal operations of an organization. Many organizations did not consider this process because of the complexity involved. As time changed, many organizations adopted the use of accounting software that only allowed for bookkeeping operations. Other important information like capital investment, breakeven point, and standard costing had to be done through tedious processes that spent many hours of the accountants (Moorthy et al., 2012, p.11).
Most organizations dwelt much on financial accounting and management accounting as it involved a complex process. This means that organizations’ accounting operations involved profit and loss statements and nothing else. Traditionally, in order to make management decisions, all departments had to sit in a meeting to get results from each of them. These departments would present their figures of the sales, inventories and other operations to their leaders (ZYSMAN, 2012, p.33). The managers present in the meeting would therefore make management decisions depending on the presented reports. However, this method was challenging to large corporations that had their operations in many parts of the country or the globe, in terms of gathering in a single meeting to present their reports. Moreover, the data presented had to be validated before producing the final report for decision-making. Inaccuracies and errors were common in such data (Qian, Ward & Blaskovich, 2012, p.15).
Traditionally, accountants were required to have great analytical as well as statistical skills in order to produce authentic reports to the managers. This was needed because accountants were charged with the responsibility of producing budgeting and investment reports to be used for decision-making. Accounting departments were only specialized in accounting operations, something that limited accountants’ abilities to produce more for organizations. They spent all the time working on statistical data, analyzing it, and correctly presenting them as required for management purposes (Allahyari & Ramazani, 2012, p.12).
Presently, the adoption of ICT in accounting operations has brought a major difference in terms of perceptions of management accounting. Industries have been able to utilize IT in all areas of operations because of the difference that it offers to the organizations. Most importantly, IT has elevated accounting to perform greater role in management and decision-making. Many organizations have installed IT systems that integrate financial and management accounting. Such systems have the ability to help in budgeting, cost control, investment control, and other planning operations (Allahyari & Ramazani, 2012, p.12). This has evidently changed how accountants conduct their activities as compared to the traditional accounting. A single integrated system has made work easier as it avoids tedious manual methods of working the statistical data. However, the capability to accept a certain data depends on the type of system that is in place. This means that organizations can adopt a given system depends on the kind of output required for decision-making (Banker, Hsihui & Yi-ching, 2002, p. 216).
Management reporting has become important tool for investors and shareholders for deciding on the best way to direct their investments. Importantly, the revolution brought about by the internet can never be underestimated as it has opened many companies to present themselves to the global audience. In this way, they are able to avail their accounting information on their websites for their customers to see. On the same note, this is a strategy to expand the customer base because the reports available online easily attract potential customers. Internet has also helped smaller businesses compete with bigger ones on a global scale. Management accounting information posted on the website adds confidence to the customers and pushes for growth through an expanded customer base. Most importantly, IT has enabled attainment of accurate and efficient information used for business decisions in organizations (Banker, Hsihui & Yi-ching, 2002, p.118).
Adopting IT in accounting operations has necessitated a change of roles of the accounting departments, as all accountants are required to acquire certain skills to be efficient. The following are some of the skills required:
- Ability to work with computers
- Ability to model data
- Ability to forecast and make projections
- Ability to make formulations according to the data presented
- Technologically savvy
Information Technology has definitely changed how accounting is done, requiring that accountants adapt to the present and emerging technologies in order to produce expected results. This is also an indication that IT has made management accounting an important aspect of any organization in the current method of doing business. On the same note, management accountants seem to have an important part to play in the present and future organizations (Moorthy et al., 2012, p.12). The best they can do is to disregard the old traditional methods of accomplishing accounting tasks and to adopt the modern technologically aided methods that are more accurate and error-free.
Potential of Blending IT in Accounting
Many organizations attest to the fact that the adoption of IT has brought more potential for them in terms of opening more avenues for growth. In effect, this brings us to the potential for adopting IT in an organization. This means that any organization must have a reason for adopting a certain technology in its operations. For accounting purposes, an organization should identify the need for adopting IT in working out and presenting information to the shareholders and investors. At present, organizations have computerized many operations in a bid to create efficiency (Allahyari & Ramazani, 2012, p.12).
In order to ease information sharing, the departments are connected. In effect, the use of Information Technology in management accounting has been made in an attempt to go in line with other technological improvements in other departments and operations. With time, organizations have been found it necessary to put in place technologies that can mine data, store, and retrieve the same when needed (Sangodoyin, 2011, p.76) To achieve this, many organizations have automated accounting operations in order to form a system that collects and allows for the retrieval of information whenever needed (Banker, Hsihui & Yi-ching, 2002, p. 119).
Competition between companies is an important drive towards adoption of IT. The fact Because the use of IT is in the public domain, many people are able to access information on the internet. The important fact is all companies can utilize that IT infrastructure without incurring much cost on maintenance. Accounting information can be availed on the internet for people to see and decide on whether to join or not. The fact that business decisions require that accounting information must first be available; IT has made it easier for the shareholders to get the accurate information in time. The need to retrieve information from regional departments by large companies to be analyzed and utilized in decision-making has necessitated the adoption of IT.
Companies will realize IT potential more in the future because of the integration of IT in the current education system. Accounting bodies like CIMA and ACCA continue to encourage the adoption of IT in the accounting syllabus. Presently, IT is an examinable subject for those taking accounting courses. This means that the younger generation has become more technologically practical understanding, something that will boost the industry in the future. This is an attempt to improve the industry in terms of proper utilization of technology in the United States (Sangster, Xiao & Dodgson, 1997, p.8).
Advantages of Using Technology in Accounting
Clearly adopting technology leads to better results in accounting operations as compared to traditional methods. Traditional accounting methods had numerous weaknesses that have been solved by technology. Many businesses can easily invest smartly because of the information produced through integrating IT in accounting operations. Information and Communications Systems are able to produce accurate data essential for decision-making (Sutton & Arnold, 2013, p.87). The application of data mining has made it possible for system of management accounting to gather information from all offices and departments. This application has enabled the formation of a single accounting system that has real-time data necessary for analysis. This helps in enhancing accuracy and reducing human error in analyzing and presenting information for management purposes (Qian, Ward & Blaskovich, 2012, p.3).
In the past, the traditional accounting method took many weeks before information could be availed to the relevant authorities. As mentioned above, this was a result of the tedious statistical, analytical and presentation work that was involved. Things have changed in due course of time with IT, an accountant does not need to perform an analysis, the system does everything in real-time. Accounting systems are able to multi-task and produce what is required immediately. Manipulation of The system can produce the outcome needed. Designs of the reports produced can also be manipulated within a short time with a view to simplifying presentation of the same. Most importantly, most of these systems do not require much-complicated usage, as they are simple to understand (Allahyari & Ramazani, 2012, p.12).
Decision-making is important part of an organization and must be done out of informed reports and information. Business decisions get a lot of help from various outcomes offered by Accounting IT. Reports dictate and design the next course of action. This action certainly saves time. Note that every investor commits money where there is a potential for growth and recovery of the investment. A business venture with no capability of making profit chases away investors. The only way of knowing the potential of an investment is through the reports from the accounting analysis. For this reason, IT systems help in predicting the time needed for the Return on Investment (ROI), payback period and breakeven within the shortest time possible (Allahyari & Ramazani, 2012, p.12). To ensure that things run well, these reports are accompanied by recommendations and positive results are registered in the venture. These systems are important in informing investors on the conditions that may dictate a long-term or short-term investment. It is important to note that management accounting systems store historical data used to decide on the best measures that can produce positive results for an organization (Banker, Hsihui & Yi-ching, 2002, p. 117).
Adopting technology in the accounting has eased accountants’ work and can now concentrate on doing other assignments like designing business models for the organizations and helping in decision-making. The traditional methods accounting methods entailed monotonous statistical and analysis activities. IT has made it possible for all the tasks to be performed automatically by the system without having to involve many accountants. This has also led to an increased production because accountants are engaged in other profitable tasks within the organization (Banker, Hsihui & Yi-ching, 2002, p.118).
Benefits of adopting technology on accounting operations are enormous, one of them is enabling organizations to have competitive edge over the others. Internet and website made all this possible. Accounting utilizes IT systems in enabling the real-time accounting updates on the websites to show to customers the progress made by the organization. This is one of the ways of wooing customers in an attempt to increase production. On the same note, investors and shareholders are also able to see the direction takes in terms of the goals, strategies, and aspirations (Qian, Ward & Blaskovich, 2012, p.3). This explains the rise in adoption of IT in many organizations within the United States.
Results of using IT in Accounting
The use of IT has a great impact on accounting operations in organizations. However, it would not be accurate to make a conclusion that application of technology automatically leads to the improvement in an organization’s performance. It is important to put into question the kind of technology on adoption by the organization (Moorthy et al., 2012, p.13). Adopting an expensive technological system may result in the reduction of profits. In some cases, positive results may only be realized after a long time after implementing a given technology in performing accounting operations. Furthermore, when inappropriate technology has not been chosen, an organization may run into unnecessary costs and subsequent losses. This calls for a thorough feasibility study by the concerned parties to ensure that appropriate technology is chosen for financial and management accounting. Such studies help in avoiding the risk mentioned above (Qian, Ward & Blaskovich, 2012, p. 2).
The impact of IT in accounting can only be realized when all accountants have the skills and training to work with it. Inability of the accountants to work with a certain technology may lead to the unprecedented inefficiencies in the organization. This means that accountants need to be trained in order to be effective in using the system; otherwise, its benefit may never be exploited when accountants fail to utilize it. On the same note, the chosen system must be user-friendly to allow for ease in mastering usage by the personnel (Allahyari & Ramazani, 2012, p.12). This also ensures that fewer accountants are able to perform activities with it. However, there are many easy-to-use systems available in the market, something that has helped improve accounting operations in many organizations (Basu, 2007, p. 70).
Just as mentioned in the introduction of this study, accounting remains the same while technology continues to change with each passing day (Qian, Ward & Blaskovich, 2012, p.2). Therefore, an organization needs to put this into consideration when adopting a certain technology in its accounting system. The technology must be able to adapt to the changes that continue emerging in ICT, otherwise, it may turn obsolete within a short time (Sutton & Arnold, 2013, p.88). Upgradability is of essence when choosing technology to be used for accounting operations because an organization may be forced to discard it for the latest sophisticated one, an expensive venture. The same way, accountants must be aware of the technological innovations that keep emerging in the market. It involves continuous training on the emerging technologies.
The impact of adopting technology by organizations is evident in a number of ways. Technology has become part of the United States lifestyle, necessitating the adoption of the same in many areas of operations. Financial and management accounting is important in ensuring that organizations make appropriate decisions in operations. Therefore, the accuracy of such information greatly influences strategies put in place by the management and investors. This study finds out that the traditional means of conducting accounting operations was tedious and time-consuming to the accountants given the responsibility of collecting, analyzing, and presenting the information within a certain duration. The outcome was always prone to error and inefficiency (Qian, Ward & Blaskovich, 2012, p.15).
Adoption of IT in accounting has drastically changed the situation because the new systems can easily collect data from all offices and departments, analyze and present the report within seconds. This is a positive impact on the organizations as accounting information is readily available to everyone. In most cases, these systems perform and produce results in real-time, meaning no delays at any moment. What has made this possible is the application of data collection, storage and retrieval method within the system. Accountants no longer need to spend more time collecting and working on statistical data in an effort to present reports to the management, as is the case with organizations without such a system. Improvement in the productivity of an organization is also possible because accountants can commit their time to perform other beneficial tasks.
Investors can make informed decisions because adopting accounting technology can produce results with recommendations on the way forward. The ability for such systems to forecast the returns on investment makes it possible for the investors to commit their finances to long-term projects. This explains the continued growth of investments with the United States (Sutton & Arnold, 2013, p.88). Another attribute is the ability to give recommendations that can help achieve the strategic objectives of the organization. It is no doubt that adopting IT in accounting operations has improved business decisions in the United States for both the investors and the internal management.
Adopting IT in accounting has brought a level playing ground where competition is higher. Technology has enabled organizations to utilize their websites to publicize themselves in terms of their goals, strategies and achievements. Furthermore, the accounting system is connected to the website to enable investors, customers, and potential customers to follow the real-time progress of an organization, which helps attract more customers to the business. The fact Because internet is in the public domain, small and big multinationals have a level playing ground where decision is left to the customer to choose where to go.
Organizations and companies in the United States agree that technology has an impact when adopted in accounting operations. It is inevitable that all organizations will have to implement IT in their operations to create efficiency and improve production and service delivery. The need for a paperless environment is another motivation for organizations to adopt new technologies to avoid costs associated with paperwork. Many organizations have already implemented IT into their accounting systems, however, others are still in the process of doing so. What comes out clearly in this study is the need to find out the correct technology that will appropriately serve an organization. Lack of a feasibility study can easily lead to loss of resources.
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