Management Accountant's Role and Functions in the Enterprise Resource Planning Environment - Author's Own Research into Enterprises in Poland

Zarzycka, Ewelina Article Management Accountant's Role and Functions in the Enterprise Resource Planning Environment - Author's Own Research into Enterprises in Poland Comparative Economic Research. Central and Eastern Europe Provided in Cooperation with: Institute of Economics, University of Łódź Suggested Citation: Zarzycka, Ewelina (2012) : Management Accountant's Role and Functions in the Enterprise Resource Planning Environment - Author's Own Research into Enterprises in Poland, Comparative Economic Research. Central and Eastern Europe, ISSN 2082-6737, Łodz University Press, Łodz, Vol. 15, Iss. 2, pp. 47-64, https://doi.org/10.2478/v10103-012-0009-7 This Version is available at: https://hdl.handle.net/10419/259101 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/4.0 10.2478/v10103-012-0009-7 EWELINA ZARZYCKA* Management Accountant’s Role and Functions in the Enterprise Resource Planning Environment – Author’s Own Research into Enterprises in Poland Abstract ERP systems have revolutionized practically all aspects of business processes in enterprises. They help improve the processes by ensuring their integration. Ensuring integration between financial and non-financial data, an ERP package gives new quality to the management of enterprise value. All these features make ERPs particularly important for specialists responsible for providing management information and measuring performance of the company. This article seeks to answer whether the implementation of an ERP system has an effect on the management accountant’s tasks and functions, especially in the field of performance measurement and internal reporting. The ERP impacts on the controller’s role in the organization will be evaluated using field studies on six enterprises owned by multinational corporations. The question that should be asked here is whether controller’s functions and tasks will also be unaffected. 1. Introduction The new economic reality characterised by hypercompetition calls for the development of competitive business strategies addressing customers’ needs, quality, time and product prices. Management accounting which provides information necessary to make decisions and manage an organization grows *Ph.D., Dept. of Accounting, Faculty of Management, University of Łódź 48 Ewelina Zarzycka increasingly important in this demanding business environment. Financial controllers and management accounting specialists become one of the more important employees, without whom effective management is not possible. The role and functions of the controller have been evolving, driven by factors such as changing business environment and business management methods and the introduction of new management accounting practices, but also due to the availability of new information technologies, particularly of integrated solutions called Enterprise Resource Planning systems (ERP). ERP systems have revolutionized practically all aspects of business processes in enterprises. They help improve the processes by ensuring their integration. Data are entered into an ERP system only once and can be accessed through any of its modules immediately afterwards, thus becoming a valuable source of information about the enterprise. Ensuring integration between financial and non-financial data, an ERP package gives new quality to the management of enterprise value. All these features make ERPs particularly important for specialists responsible for providing management information. This article seeks to answer whether the implementation of an ERP system has an effect on the management accountant’s tasks and functions, mianly in the field of internal reporting and performance measurment. The ERP impacts on the controller’s role in the organization will be evaluated using field studies on six enterprises owned by multinational corporations. The study is consistent with the research into ERP effects on management accounting and confirms the existing findings. This field is interesting to explore, because the studies carried out so far indicate that the implementation of an ERP package does not induce major changes (mainly Scapens, Jazayer, 2003 and Granlund, Malmi, 2002). The question that should be asked here is whether controller’s functions and tasks will also be unaffected. Because of its subject, this study contributes to the volume of research into ERP effects on management accounting and complements author’s earlier investigations into ERP systems. It also indirectly addresses changes in the perception and definition of the controller’s role and functions in an enterprise, which have been broadly discussed in the recent years. 2. Controller’s role and functions in an enterprise Over the last three decades management accounting has been growing increasingly important for business management processes. This trend makes enterprises lay stronger emphasis on the functions of controllers and Management Accountant’s Role… 49 management accountants. The requirements that these specialists are expected to fulfil, their job descriptions, roles and functions have been the subject of numerous studies. Researchers are increasingly interested in issues arising from the evolution in the roles and functions of management accounting specialists, seeking also to establish where the changes come from (in Poland Sobańska, 2003; Sobańska, Wnuk 2000; Szychta 2002, etc.; and abroad Burns, Scapens, 2000; Scapens et al. 2003). The position and functions of a controller are determined by many factors, such as the degree of sophistication of enterprise’s management accounting system, the methods and tools used in this area, as well as national, cultural and economic determinants (Szychta 2005). According to the IFAC experts (International Federation of Accountants), a management accountant is expected today to provide enterprise managers with decision-making information and to actively support business management processes in the organization. A. Szychta stresses that instead of being an analyst working in isolation from the enterprise management, a management accountant should be ,,a pivot point of [the enterprise’s] information transmission system”, thus making it easier for the enterprise to achieve its objectives and to improve its performance on a regular basis (Szychta, 2005). The role that R.S. Kaplan (1995) gives to controllers is even broader, as he suggests that they should belong to the enterprise’s value-adding team. He also underlines that management accounting specialists may be instrumental in developing and implementing business strategies and in streamlining business processes. A very interesting approach from the ERP perspective was presented by R. Cooper (1996). Cooper’s vision of the future was that the management accounting functions would be decentralised and that, for instance, one of them – the delivery of information – would be taken over by other staff in the organization. This means that the main function of the controllers would consist in designing and implementing information systems supporting management accounting, rather than delivering data and generating reports. The management accounting literature owes the term “hybrid accountant” to J. Burns and R. Scapens (2000). According to the authors, today’s management accountants are not only “suppliers” of information, but also, to a great extent, advisors on the financial and non-financial impacts of enterprise’s activities and processes. In addition to having financial and accounting knowledge, ,,hybrid accountants” possess an unusually good understanding of the processes run in the enterprise and its special character. These specialists are most common in the process-oriented organizations, where they cooperate with process managers while being also managers, advisors and consultants on 50 Ewelina Zarzycka a given process. They are members of the accounting team, but they primarily belong to the process management team. J. Burns and R. Scapens as well as other authors continued their research on the role and tasks of management accountants. Financed by the Chartered Institute of Management Accountants (CIMA), the research involved three decades of interviews with these specialists, as well as analyses of CIMA periodicals published in the same period and of management accounting job ads (Balvinsdottir et al., 2009 and Balvinsdottir et al., 2009a). The conclusions the authors reached were rather surprising. They found that notwithstanding all the changes in how management accountants and their tasks were perceived (a perceptive shift from a “bean counter” to a modern business partner) over the three decades, the accountants’ primary function in the organization remained the same. According to the authors, a controller should perform the traditional role of an analyst of board’s decisions and of a supplier of vital information for managers to make decisions on long-term growth. This double role is particularly welcome in a time of crisis – a management accounting specialist should be “a pessimist expert” limiting the symptoms of ungrounded corporate optimism. CIMA is not the only organization to trace controllers’ evolving responsibilities. In 2007 Ernst&Young interviewed 44 financial controllers, financial directors and external consultants in order to determine the role of financial controllers vis-à-vis managers’ needs and the Sarbanes-Oxley and IFRS standards, and to formulate guidelines for these specialists to further their careers. The main tasks of controllers as arising from the survey are, among other things, adding value to the organization, improving the reporting solutions, and making the organization more effective (Ernst & Young research report, 2008). In recent years controllers’ functions have been decentralised. It is currently believed that some of the management accountants’ tasks should be assigned to managers or operational staff (e.g. the preparation of some reports, variance analyses), while the controlling staff should concentrate on designing, implementing and improving management accounting systems. Very interesting studies are those trying to explain why the functions and the role of controllers change. The changes are mainly attributed to the economic situation in the 1990s, particularly to the strong competition in the global markets. In a difficult business environment management accounting and management accountants become very important for their organizations. Management Accountant’s Role… 51 J. Burns and R. Scapens (2000) found that controlling processes in enterprises faced by strong competition are customer oriented and lay emphasis on the customers and the market. Controllers’ responsibilities are also affected by technological progress, particularly the availability of modern IT solutions. Today’s advanced computer technologies offer very efficient hardware platforms; at the same time, hardware prices are going down, so even the small and medium-sized companies can afford to use sophisticated computer systems. Some authors indicate that management accountants’ functions change following major modifications in the organization of modern enterprises. In the 1970s and 1980s enterprises merged to form conglomerates, but in the 1990s a reverse trend could be seen: enterprises concentrated on their core activities, while other services were outsourced. These trends affected the scope of controllers’ responsibilities too (Burns, Scapens 2000). A. Szychta (2005) characterised management accountants in the context of the standards and guidelines developed by their professional organizations, as well as presented their functions and tasks in relation to the changing scope and methods of management accounting. 3. The nature of ERP systems As a result of the enormous progress in computer science that has taken place in recent years, financial controllers have received new tools that improve their performance in various ways. An IT solution that started to develop in the 1960s and has revolutionized processes in controlling departments is integrated information systems known as Enterprise Resource Planning systems (ERP). The systems use the available, minimal set of data to generate all information one needs to make decisions and prepare the required reports. This feature allows shutting down all independently running and overlapping systems for data collection and processing that can be found in many enterprises. The ERP systems give managers access to each unit’s data as soon as they are entered into the system, as well as enabling all employees in the organization to exchange and distribute information – this functionality has become characteristic of the turn-of-the-century information technologies (Granlund, Malmi 2002). In addition to being multi-modular structures, the ERPs are also special in that all data are entered only once and immediately afterwards they become accessible through all system modules. Their other features include functional 52 Ewelina Zarzycka comprehensiveness, the ability to integrate data and process, customization, ease of configuration and compliance with local laws ( Shang, Seddon 2002). The main purpose of an ERP package is to ensure that all management levels in an enterprise are integrated as much as possible. The package covers all production and distribution processes in the enterprise, integrates various business areas, streamlines flows of critical information and enables instant responses to changes in the market. The ERP data are updated in real-time and can be accessed whenever needed (Spathis, Constantinides 2004, p. 235). Integrated information systems known as ERPs have revolutionised the way enterprises do their business. They are readily implementable sets of integrated modules that can handle all business functions (Kavanagh 2001). They are also dynamically customizable, which means that they can be adapted to address the needs of any industry. ERPs can build comprehensive models of business processes, which places them among all-embracing solutions containing large numbers of modules characterised by different complexity (Scapens, Jazayer 2003, p. 202). A particularly valuable feature from the management accounting perspective is that not only can the ERP data be used multiple times, but they can also be accessed by the system’s different modules, which saves additional and frequently unnecessary data processing. Moreover, the main advantage of an ERP system – the accessibility of a wide range of newly entered data from any place or geographical location – gives a new value to the work of a financial controller or a management accountant. This feature brings controllers closer to their area of responsibility. It is particularly important for multinationals, whose management accounting staff is frequently required to service remote branches (Quattrone, Hopper 2001). 4. A review of the literature about ERP impacts on management accounting systems The influence exerted by ERPs on management accounting and management accountants has become the subject of research relatively recently, because the first studies from this field started to be published in early 21 st c. Booth at al. (2000) reviewed the experiences of Australian enterprises implementing ERP systems to determine their benefits for broadly understood accounting. According to the enterprises, the ERPs proved useful in processing transactional data and as a source of information necessary to make short-term decisions. At the same time, though, their capability of supporting more Management Accountant’s Role… 53 advanced strategic decisions was very limited. In general, the systems did not have effect on accounting practices. One of the most interesting studies discussing ERPs’ impacts on management accounting and management accountants was conducted by M. Granlund and T. Malmi (2002). They showed that the examined ERPs only moderately affected control and management accounting systems. The sampled companies did not implement new management accounting solutions, preferring to improve the methods and tools they already used. Moreover, their more advanced management accounting tools functioned outside the ERPs. The authors noted, however, that the implemented ERP systems had a considerable and positive influence on the management accountant’s role in the enterprise. The representatives of the controlling departments stated that owing to the systems their work added more value to management control and managers’ decisions. Analysing the SAP implementation in BM (Europe), a branch of the global BM Corporation, R.W. Scapens and M. Jazayer (2003) also found that although the system did not contribute to changes taking place in the corporate management accounting system, it made their introduction much easier. They additionally established that following the introduction of the ERP system the role of the management accounting specialists was broadened in the enterprise and that the traditional functions of the controlling department were decentralised at the same time. C. Spathis and S. Constantinides (2004) surveyed Greek enterprises to find out why they chose to implement ERP systems and what accounting practices were used in the new environment. Their findings showed that more than half of the enterprises used ERPs to calculate financial and non-financial indicators of performance, to carry out multidimensional analyses of profitability, to plan and control budgets, and to manage cash. Only few added operational management, activity-based costing, target costing or marginal costing to this list. In 2005 P. Quattrone and T. Hopper compared SAP R/3 implementations in two multinational corporations. The authors’ main goal was to establish how the systems affected the exchange of information between the branches and the headquarters, as well as the solutions applied within management accounting and internal control. The implemented ERPs did not bring about the expected changes in the internal control system in any of the corporations, although the authors pointed to different causes of the situation. An extensive study analysing ERP impacts on the accountant’s role and functions was carried out by A. Caglio (2003). The author maintains that the 54 Ewelina Zarzycka introduction of an ERP system contributes to the creation of new hybrid jobs in the enterprise, including the position of a “hybrid accountant”. She also found hybridisation between particular groups of professions. The implementation of an ERP system leads to redefinition of accountants’ tasks. Some of them are taken over by employees in other departments, which opens the door to their professional development and is likely to increase their importance in relation to other stakeholders in the enterprise. Having interviewed the representatives of the management accounting department and financial department in the enterprise they chose, O`Mahony and J.Doran (2008) concluded that while the interviewed employees benefitted from ERP implementation, the department’s responsibilities changed little. The Griffin and Dempsey study (2010) had a slightly different character and aims, as the authors concentrated their efforts on establishing accountants’ influence on an ERP implementation in a public sector enterprise. Their research is very interesting, because it underlines the importance of the contribution made by the financial accounting and management accounting departments to ERP design and implementation. When an ERP implementation team does not have these specialists among its members, then a consistent system meeting legal requirements and able to handle the organization’ business model is not likely to be created. 5. Presentation of the field studies This study sets out to determine how an ERP implementation affects the management accountant’s role in the enterprise. An attempt is also made to find out about the ERP-induced changes in controller’s responsibilities and tasks. The exploration of this subject area was inspired by earlier, similar studies conducted by M. Granlund and T. Malmi (2002), R.W. Scapens and M. Jazayeri (2003), A. Caglio (2003). R.W. Scapens and M. Jazayeri (2003) suggested that further interviews and in-depth field studies were necessary to confirm their findings. It is interesting to note that all studies mentioned in this article show that an ERP system has only limited effect on the enterprise’s management accounting system and that controllers’ tools and methods remain virtually the same following its implementation. On the other hand, though, the studies by M. Granlund and T. Malmi (2002), R.W. Scapens and M. Jazayeri (2003), and A. Caglio (2003) indicate that an ERP system significantly affects the practices of management accountants. Management Accountant’s Role… 61 Other changes The representatives of the surveyed enterprises were of the opinion that the data integration in the ERP systems contributed to more effective flows of information and communication between the controlling department and other departments. One of the controllers formulated an interesting comment, stating that the ERP system made everyone in the organization "speak the same language”. Another interesting finding is that all respondents believed that the ERP technology stimulated their professional development and allowed them to learn many new things. On the other hand, though, all of them were aware that their knowledge of it was insufficient and that they did not utilise their systems’ capabilities to the full extent. Although the parameterisation, implementation and operation of an ERP system are a real challenge, each controller perceived their involvement in the processes as a very valuable professional experience that was likely to help them achieve professional successes in the future. 6. Conclusion Most studies indicate that ERP packages have limited effect on enterprises’ management accounting systems and that their role in the introduction of new management accounting tools and methods and in the evolution of this business area is small. However, the interviews with the representatives of the management accounting departments indisputably showed that integrated information systems such as SAP or BAAN affected the practices of this group of specialists. The implementation of an ERP system allowed the controllers to learn much more about their in-house processes and the linkages between them, as well as about the logic of integrated information systems. Moreover, the system enabled them to take a more active part in business management and to become partners to managers, offering valuable support for decision-making processes. These findings show that the role of management accountants has evolved in the last decade, from suppliers of information to highly specialised advisors and competent consultants. Although the implementation of an ERP system did not significantly change the general job descriptions of the management accountants, some of their tasks were either assigned to the managers of particular centres or 62 Ewelina Zarzycka automated to a high degree. Having more time, the controllers could undertake more in-depth analyses or actively participate in business management in the enterprise. According to the surveyed management accounting staff, the ERPs improved the quality and timeliness of their reports and analyses. Each of the controllers indicated that in their particular case the main burden of ERP implementation and operation rested on the controlling department. In other words, the controlling staff had to spend a large portion of their time on implementing the system or on solving the arising technical problems. Although the implementations were very demanding on the surveyed specialists, they also offered them many professional benefits and broadened their horizons. The specialists expected that their knowledge of the ERP environment would further their development. The conclusions that the survey offers coincide with those reached by other authors, although the sample contained only six enterprises. For the validity of the findings to be verified, the sample should be extended to other enterprises and the surveyed enterprises should be monitored for changes. In this way, ERPs’ long-term impacts on the practices of management accountants will be able to be reliably identified. References Balvinsdottir G., Burns J., Norreklit H., Scapens R.W. (2009), The management accountant`s role, ‘Financial Management’, September, pp.33-34 Balvinsdottir G., Burns J., Norreklit H., Scapens R.W. (2009), The image of accountants: from bean counters to extreme accountants, ‘Accounting, Auditing & Accountability Journal’, Vol. 22, Issue 6, pp.858-882 Booth P., Matolcsy Z., Wieder B. (2000), The impact of enterprise resources planning on accounting practice – Australian experience, ‘Australian Accounting Review’, Vol. 10, No. 3, pp.4-18 Burns J., Scapens R.W. (2000), The changing nature of management accountants and the emergence of ,,Hybrid” accountants, IFAC in the News & Video Library, www.ifac.org/Library/Novemebr., status as on 15 Sept. 2011 Caglio A (2003), Enterprise Resource Planning systems and accountants: towards hybridization?, ‘European Accounting Review’, Vol. 12(1), pp.123-153 Cooper R. (1996), Look out, management accountants, ‘Management Accounting’, June, pp.35-41 Management Accountant’s Role… 63 Ernst & Young, The changing role of the financial comptroller, Research report, www.ey.com, 2008, status as on 15 Sept. 2011 Granlund M, Malmi T. (2002), Moderate impact of ERPS on management accounting: a lag or permanent outcome?, ‘Management Accounting Research’, Vol. 13, pp. 299-321 Griffin J., Dempsey S. 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(2005), A ’time-space odyssey’: management control systems in two multinational organisations, ‘Accounting, Organization and Society’, Vol. 30, pp.735-764 Scapens R.W., Ezzamel M., Burns J., Baldvinsdottir G. (2003), The future direction of UK management accounting practice, CIMA Publishing, Elsevier, Amsterdam, Boston, London Scapens R.W., Jazayeri M. (2003), ERP systems and management accounting change: opportunities or impacts? , ‘European Accounting Review’, Vol. 12, No. 1, pp. 201-233 Shang S., Seddon P. (2002), Assessing ad managing the benefits of enterprise systems: the business manager`s perspective, ‘Information Systems Journal’, Vol. 12, No. 2, pp. 271-299 Sobańska I. (2003), Rachunkowość zarządcza, [in:] Irena Sobańska (ed.), Rachunek kosztów i rachunkowość zarządcza, Wydawnictwo C.H. Beck, Warszawa, pp.32-57 Sobańska I., Wnuk T. (2003), Zmiany w praktyce rachunkowości na przełomie XX i XXI wieku, ‘Zeszyty Teoretyczne Rady Naukowej’, SKwP, 56, Warszawa, pp.215-221 Spathis C., Constantinides S. (2004), Enterprise resource planning systems` impact on accounting processes, ‘Business Process Management Journal’, Vol. 10, No. 2, pp.234-247 Szychta A. (2002), The scope of application of management accounting methods in Polish enterprises, ‘Management Accounting Research’, Vol. 13, No. 4, pp.401-418 Szychta A. (2005), Rola współczesnych specjalistów do spraw rachunkowości zarządczej w świetle ewolucji jej zakresu i metod, ‘Zeszyty Teoretyczne Rachunkowości’, 25(81), pp.80-107 64 Ewelina Zarzycka Streszczenie ROLA I FUNKCJE SPECJALISTY DO SPRAW RACHUNKOWOŚCI ZARZĄDCZEJ W WARUNKACH ZINTEGROWANYCH SYSTEMÓW INFORMATYCZNYCH– BADANIA WŁASNE PRZEDSIĘBIORSTW W POLSCE Zintegrowane systemy informatyczne rewolucjonizują praktycznie wszystkie obszary działalności przedsiębiorstwa. Przyczyniają się one do ulepszenia procesów biznesowych poprzez integrację wszystkich obszarów działalności przedsiębiorstwa. Co więcej dzięki tej technologii następuje zintegrowanie danych finansowych i niefinansowych przedsiębiorstwa, pozwalając na jeszcze lepsze zarządzanie wartością przedsiębiorstwa. Toteż systemy ERP szczególne znaczenie odgrywają dla specjalistów zajmujących się dostarczaniem informacji niezbędnych dla zarządzania przedsiębiorstwem. Celem badania jest próba odpowiedzi na pytanie czy zastosowanie zintegrowanego systemu informatycznego w przedsiębiorstwie zmienia zadania i funkcje specjalisty do spraw rachunkowości zarządczej. Na podstawie studium przypadku sześciu przedsiębiorstw będących częścią koncernów międzynarodowych zostaje dokonana ocena wpływu zastosowania ERP na rolę kontrolera w organizacji. Autor odpowiada również na pytanie czy w funkcjach i zadaniach kontrolera nie zaobserwowane zostaną zmiany w związku z implementacją ERP. .