Essay Example on Computerised Accounting: Maximising Efficiency for Businesses of All Sizes

Introduction

Information and communication technology (ICT)today have greatly influenced the way bossiness work regardless of the size or the nature of an organization (Darmansyah & Fitrijanti, 2015). ICT has given rise to the development of Computerised accounting, which in many cases, this move is meant to simplify the accounting operations and increase the efficiency and accuracy of data. Many business organisations have adopted Computerised accounting, including small and middle-sized enterprises (Ismail & Rashid 2017). The move has, therefore, influenced the financial performance of these enterprises in different ways.

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One of the most significant influences of Computerised accounting is on financial reports. The users of Computerised accounting systems (CAS) experiences easy and simplified financial reporting (Udegbunam et al. 2017). The adoption of CAS, however, varies in different countries, developed countries have significantly improved in the adoption of CAS as compared to developing countries (Al-Hanini,2015).

Despite the disparity, CAS has a prevalent influence on the financial performance of small and middle-sized businesses in all countries across the globe. In any organization, accounting is one of the most stable department, and it requires critical attention as well as standard management skills to ensure excellent handling of financial services. In spite of the continuity and its stability, it has dramatically been received significant changes in terms of operational activities and to be specific, CAS is one of the significant developments that considerably influence financial performance (Shiraj, 2015). This research, therefore, intended to analyses the impacts of CAS on the financial performance of small and medium-sized enterprises.

Background

ICT adoption has increased over time regardless of the nature of organizations, whether private or public, profit, or none profit. The development of CAS is linked to the improvement of ICT systems in business enterprises. In the UK, small and medium-sized enterprises (SMEs) are considered as back born of the county's economy; they play a significant role in creating jobs and helps to ensure economic stability in the country (Giaoutzi, Nijkamp & Storey, 2016). SMEs are seen as an essential factor in modern industrial development and prosperity in society. As a result of globalization, SMEs find themselves in a new environment that influenced by technological advancement, improvement, and adoption of ICT by different organizations and governments has led to the computerization of accounting operations (Afrifa, 2016). The approach includes the development of accounting software such as QuickBooks, Sage, and pestle; this software has dramatically influenced the way SMEs work, and more importantly, it has positively influenced financial performance.

SMEs have been forced to adopt a computerised accounting system to suit the globalized societies. In contrast to large-scale businesses, SMEs are seen to have limited access to ICT, which is the most critical tool to increase stability and financial performance. However, the diffusion of CAS has dramatically improved across the country.

Due to an advanced technology system, SMEs prefer using computerised systems to track, analyse, and report on their monetary transactions using c computer software. CAS, therefore, offers a great deal in making accounting operations easy and accurate, and this translates to positive outcomes from a financial perspective in the business. Computerized systems offer assistance to human resources and reduce the chances of errors in collecting, analyzing, and reporting financial operations a business. Tracking monitory transactions through computerised systems are the safest way as compared to a traditional approach where paperwork was used to carry accounting operations. The adoption of a Computerised accounting system across the UK has increasingly received attention from SMEs. One of the most excellent benefits that have influenced the financial performance of SMEs as a result of CAS is accuracy and reduced loss of financial data. Other benefits that translate to increased financial performance includes fast transaction, timelines, quick reporting, and analyses of financial data. Major accounting software's used by SMEs in the UK included Microsoft excel, quick books, and Pastel. Accounting basing an essential component in any business, SMEs have made a considerate move by adopting computerized accounting systems.

Many research studies have been conducted to determine the impacts of computerized accounting systems, large scale businesses, and the results identify this strategy as the most significant facilitator to financial performance in any business (Daru, 2015). However, little has been done to determine the compacts of CAS on the financial performance of SMEs. For this reason, it appears that there is a gap that needs to be addressed, therefore this research is aimed at exploring this issue and addressing the gap. Furthermore, research on the impacts of CAS on accounting efficiency, job opportunities, and technology but less have been addressed on CAS influence on financial performance, and this study, therefore, focus on the financial impacts of SMEs.

Statement of Problem

In the past two decades, most of the business used manual accounting operations; however, as a result of the development of information technology across the globe (Shiraj, 2015),.The government of the UK has dramatically encouraged the adoption of computerized systems in business operations, which includes the use of CAS by SMEs (Santoro et al. 2018). Currently, most of the enterprises have introduced computerized accounting to promote their operations and cut the cost of labor. The results of this move are seen from the financial performance of SMEs, which the research intends to address.

Information technology is progressively changing the way the commercials operate, and it has dramatically changed the way SMEs carry out financial services (Afrifa & Tauringana, 2015). The impacts on financial performance on SMEs is considerably noticed by the stakeholders. It is, therefore, essential to understanding the impacts of CAS on the financial operations of SMEs to determine their effectiveness and need to make necessary modifications in the accounting departments. The issue is significant to SMEs and business operations because the results hold an essential clue that will assist SMEs in forming different marketing strategies and operational approaches to promoting CAS in the future.

There have been various cases of escalations in issues associated with financial performance reporting in SMEs; the research, however, will address the problem through a vivid comparison of the manual process of accounting with comprised accounting systems to determine the actual benefits that accrue to SMEs based on financial performance (Slater & Deschamps, 2015). Manual accounting operation was associated with lots of financial challenges as a result of inaccuracy of data, slow operations, and time-consuming; these problems greatly affected the financial performance of SMEs in the UK.

Objectives of The Research

The primary purpose of the research is to carry out analyses of the impacts of computerised accounting systems on the financial performance of SMEs. The specific objectives include:

• To determine the effects of CAS on the monetary operations of SMEs, such as financial reporting.
• To ascertain the impacts of CAS on growth and development of SMEs
• To identify the level of usage of SMEs in the UK
• To assess the problems associated with the usage of CAS and their impacts on financial performance

Hypotheses of the Study

To meet the objectives of the research, the following list of hypotheses was drowned and examined to analyses their significance in the study.

• CAS has positive effects on the financial performance of SMEs in the UK
• SMEs are increasingly adopting CAS
• CAS reduces errors and risks of financial loss
• CAS has encouraged growth and development of SMEs
• SMEs experience financial drawbacks as a result of CAS adoption

Literature Review

Promoting SMEs Growth and Development Through CAS

Computerized accounting means the utilization of accounting software to carry out accounting operations in an organisation. In the UK, SMEs have substantially adopted to CAS primarily to improve work experience, save time, and reduce the chances of errors in financial (Daru, 2015). The implications of this strategy on financial performance are evidenced both negatively and positively; however, most of the research studies have identified this intervention as the most effective form of an accounting system and has more financial benefits.

Accounting software has improved financial performance as it saves money and ensures security on financial data. Commercially, CAS makes it simple for SMEs to identify financial errors better than traditional means of paperwork. SMEs that are involved in large amounts of financial transactions reduces labor force and financial loss.

Murungi & Kayigamba, 2015 affirm that computerized accounting is one of the most profitable accounting systems an organisation can adopt. The authors focus on the effects of CAS on financial reporting. Murungi & Kayigamba affirms that 98% of the finding shows that computerized accounting helps to provide easy and quick financial transactions through the application of accounting software packages. They identify the importance of using computer software to run accounting operations. One of the most significant benefits that the authors confirm is accountability; it provides a smooth process of financial reporting and ensures optimal time management, which directly translates to positive financial performance SMEs.

The use of computerized systems to promote small-scale business in the world in increasing, Murungi & Kayigamba, 2015 concedes that despite the challenges associated with the computerized systems, it has dramatically impacted financial performance by providing precise information about financial data and progress of an organization which in turn helps to determine financial progress of the business. In conclusion, Murungi & Kayigamba 2015 affirms that CAS is essential for SMEs to avoid financial loss, time consumption, and complexities of paperwork. Through CAS, staff may receive job unbiassed job appraisal because, through CAS, workers can be tracked to determine their job performance and competence.

Financial performance is one of the most crucial factors in any organization, whether small-scale or large-scale. Therefore, improving the financial system as an essential strategy for improving financial performance in SMEs is beneficial; Ogundana et al. 2017 confirms the contribution of ICT to the development of computerized accounting systems.

The impacts of using CAS plays a significant role in improving the process of financial reporting. Ogundana et al. 2017 focus on the influence of this move on SMEs in Sri Lanka, which positively reflects what is evident in most research studies across the globe. The implementation of SMEs to simplify financial reporting and stabilise management in a business. They acknowledge that today's business, most of the business organisations that have adopted CAS, have benefited from different perspectives, including reduced cost of labour, increases in financial performance, and do business. They identify CAS as a tool that if SMEs incorporate into their accounting system, financial operations and outcomes are likely to impact the businesses positively. The entrepreneurs who focus on promoting financial gains in the busin...