In the current fast-growing world, ethics has emerged as a significant part of every system. With the increase in the number of organizations and competition, every organization is striving to have a huge share of the pie. Several organizations are utilizing business accounting in the provision of relevant and up to date information about organization financial performance which assists most of them in making decisions and establishing sustainable strategies for the operation of the company. Business accounting is essentially the art of arranging, maintaining, recording and assessing financial activities and further translating this accounting information into meaningful terms that can be utilized by interested parties. On the other hand, management involves activities such as planning, measuring, controlling as well as evaluating performance and developing business decisions that relate to business entity operation.
From the perspective of enterprise resource planning, financial accounting and managerial accounting have numerous differences. To start with, financial accounting information is utilized by external as well as internal stakeholders to provide previous operations of the company based on the company's past transaction (Hoch & Dulebohn, 2013). Managers of organizations use this kind of information in making decisions for investors to know the financial status and prospects of the company. Additionally, bankers, suppliers, and creditors utilize this information to leverage the financial soundness of the organization, particularly when granting credit or loan. The information provided by financial accounting is useful to individuals with a vested interest in the company's financial well being.
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On the other hand, managerial accounting provides information on the company's financial well being to the management of the company which assists the company in making decisions that affect the daily operation and future planning of the company. This kind of information is necessary for decisions that pertain to increasing prices, cutting down costs, salary increment and organization expansion in terms of branches and other business decisions. As financial accounting concentrates on past operations of the company, managerial accounting is more current and provides future estimates that assist managers to make informed projections.
Additionally, the information provided in financial accounting ought to be verifiable and objective. This means that the information provided should have supporting documents that are utilized in report compilation. The supporting documents include cheques received and issued as well as receipts. In some cases, managerial accounting utilizes data that is not verified because it depends on estimates that are not verifiable but important in decision making. To add on, financial accounting is carried out as a whole for the company as much as it requires costs and revenue breakdown of different sectors of the business while managerial accounting is more focused on business parts such as sales, departments, and products. This is very critical as it assists the management to develop decisions of the various departments and parts of the business. The management may use this information to know the department that has the highest overhead which helps them in cutting costs or increase the supply of certain products in the market.
In financial accounting, laws and rules are strictly followed in preparing, compiling and presenting the information. The generated financial reports are prepared in line with the Generally Accepted Accounting Principles (GAAP) which promotes a standardized way of reporting, decreasing misrepresentation and fraud. In managerial accounting, there is no stipulated law or a particular format that is followed. The management is responsible for the way the report is prepared or what is included in the report. Managerial accounting mostly comprises of sales forecast, budget analysis and feasibility studies that compare the actual and the projected report. As much as these two types of accounting play different roles in business, financial and managerial accounting play a significant role in the success of the business.
Adopting sound financial as well as managerial accounting practices has many benefits to the organization. One of the benefits of financial and managerial accounting is customizing the numbers which help the organization in tracking and use of information that can be quantified. The information gathered can be used to make decisions about business operations based on accurate numbers (Williams et al 2015). Secondly, financial and managerial accounting presents a clear financial picture to the stakeholders. If the information is clear, the ability to use the capital for development and paying back loans will be shown. Apart from presenting a clear financial picture to the stakeholders, financial and managerial accounting also indicate time purchases and investments of the business by showing the amount that has been reinvested in the company, the amount borrowed to make ends meet as well as the amount saved for working capital.
There are many ways that the Enterprise Resource Planning (ERP) system will help in solving accounting and financial reporting problems for the unintegrated system of an organization. To start with, ERP will help in solving accounting and financial reporting problems of an unintegrated system by integrating the financial system of the organization reducing the time that can be wasted on reconciling numbers. In addition to integrating the financial system, the system will also integrate orders during manufacturing, order taking, accounting, inventory, and distribution (Gupta, 2012). Likewise, ERP will standardize and speed up manufacturing processes which will ultimately save time; decrease headcount and optimize productivity. The ERP will further standardize HR information in an organization that has an unintegrated system. In this case, it will enable employees to maintain their information while at the same time facilitating expense tracking, scheduling, training as well as time reporting. Finally, ERP will help in standardizing procurement in an organization that lacks an integrated procurement system. It will execute this by purchasing teams for vendor negotiations.
References
Gupta, A. (2012). Enterprise resource planning: the emerging organizational value systems. Industrial Management & Data Systems , 100 (3), 114-118.
Hoch, J. E., & Dulebohn, J. H. (2013). Shared leadership in enterprise resource planning and human resource management system implementation. Human Resource Management Review , 23 (1), 114-125.
Williams, J. R., Haka, S. F., Bettner, M. S., & Carcello, J. V. (2005). Financial and managerial accounting . China Machine Press.
