In the wake of increasing financial complexity, contemporary organizations have opted to use accounting information systems to record business transactions. As a result, there is a need to implement state-of-the-art technology in organizations that need to remain competitive. The Statutory Account Principles provide a suitable framework for an apt financial management system that is becoming popular among modern organizations. The SAP system is used to record and analyze financial data to help in the determination of risks among other factors that influence the accomplishment of business goals. It can be used to manage financial information in small, medium-sized, and large companies that conduct international trade. Due to this kind of development, many of these companies prefer to use the SAP financial system with a view of integrating different business activities such as sales, distribution, asset management, and other resource needs into the set organizational objectives. Many companies have nowadays adopted the SAP as a way of resolving their accounting challenges. However, not all of them have achieved this objective. For example, large companies in the United States such as the Global Crossing, World-Com, and Enron collapsed when the Sarbanes-Oxley Act was passed. The Act came with huge conditions regarding the disclosure of reports, accountability, and independence of auditors. Its implementation also affected the way that the SAP system was implemented in the companies.
General Information on Research Philosophy
According to research conducted by Agarwal (2015) to assess the impacts of the SAP system on organizations, it was shown that they had little significance on the improvement of their financial statuses. An isolated survey conducted by Krishnamoorthy, Murray, & Reynolds (2011) in an Indian production company revealed that the SAP projects led to minimal changes in financial management and control techniques. The study focused on investigating the effects of integrated enterprise-wide information system on financial management. Myers and Vallo (2014) supported the same sentiments by theorizing that the SAP system had a positive impact only on the transactional management accounting, but not on the management of the accounting practices. Elsewhere, Zensar Technologies (2015) found that under the SAP systems, there were no fundamental changes in financial management. However, there existed change in the role of accounting in relation to the traditional methods of financial management. The researchers found that the SAP systems reduced the routing work that was accomplished by the accountants. This situation led to the systematization of accounting using an evolutionary change. In addition, management accountants found new ways of working with the SAP system enabling them to perform tasks that were significantly different. The researchers also found that the operating managers accessed such kind of information using the SAP systems rather the traditional accounting practices (Franz, 2015). A study that was conducted by Scapens and Jazayeri (2003) to explore the impacts of the SAP system on financial management revealed that most organizational leaders perceived its implementation as a technological rather than a decision support resolution.
However, Myers and Vallo (2014) posit that the implementation of the SAP systems calls for further research to provide a deeper understanding of the use of such technology in financial decision-making. Another reason for conducting further research is also discussed by Franz (2015) who claims that majority of modern companies continue to use inflexible tools in enterprise management. The integration of the SAP system in such financial accounting techniques is paramount to the improvement of the fiscal position of the organization. The research reveals that the SAP system is the framework for a successful, balanced scorecard approach. In a different study, Scapens and Jazayeri (2003) examined the changes in financial management and the role of the SAP system in improving financial management for seven companies in the United Kingdom. It was realized that the implementation of the system had failed for some time. The results of the study also showed that the role of accountants was affected in all the examined cases. There were also changes in the role of financial management in the company.
Research Approach
This thesis adopted an interpretive case study approach. Interpretive research approaches assumes that human agents usually construct the reality. According to Saunders, Thornhill, and Lewis (2009), case studies are usually the most preferred strategies where the ‘when’ and ‘how’ questions are asked. In this case, the investigator has little or no control over the events since the focus is on a contemporary phenomenon within some real-life context. Since this thesis examined the impact of the SAP system on financial management in companies, the case study research was the most appropriate method. The research is based on studies of four business situations on how companies integrated the SAP system into their financial management practices.
The research philosophy here is that of Suanders et al. (2009) who held that research is compared to an onion where he describes the outer layer as the research philosophy. When one goes beyond the research philosophy, the research approach lays that leads the researcher to the third layer that is the research strategy. In the onion, we look at the inductive and deductive research approaches wherein the deductive approach is aimed at testifying a theory however in the inductive approach we look at a theory emerging from new data. For a deductive approach, the research will be concerned with the hypothesis and an inductive approach uses questions as part of the study. From the definition of research strategy, the researcher is able to develop data collection where he determines the time horizons for the research. The model is described in the figure below:
SAP Implementation for and Engineering Customer
The first case study looked at ways that SAP system was used to support and engineering customer. Case study approach was inductive in nature is it investigated SAP system in calculating filing machines produced capsules, fluid bed processors, blister packing machines, special attachment and special purpose machines. It was discovered that the SAP system enabled each machine to have basic attachments while other parts were mainly selected to a specific customer. With this regard, most customers faced a challenge where requirements would repeatedly change to the time that the machine would be dispatched (Zensar Technologies, 2015).
There was a need to ensure the availability of minutes of the costing details due to the heavy sub-contracting, complex chemical process, and expensive in-house manufacturing facilities. In addition, a component was also subjected to several scenarios during planning to satisfy the domestic, the internal and the export customer and the different stock levels were to be maintained constantly (Agarwal, 2015). The other challenge that the business faced was in capturing all the minutes’ details that were derived from the customers during inquiry and their ability to assess the probability to place an order. During the study, different platforms were identified and assigned a unique status through the marketing team with a focus on the potential customer.
As part of the SAP system solution, the client implemented mySAP ECC 5.0 with the CO, FI, SD, MM, CS, QM, WM, VC, DMS, ECM and other central functions that contained a bar coding interface (Agarwal, 2015). In addition, the requirement outlined by the customer with regard to an end user entering minimal data was also achieved using barcode processes. There was also an integrating of customer service, marketing, quality, and design and production department for a better product (Franz, 2015). In the end, the SAP system solution provided an opportunity to capture details of leads origin, allied information during and maturity marketing during the creation of inquiry. As a result, it became a big asset to the company with regard to information about the potential of customers and authorization limit alerts for discounts.
Another case study investigated the impact of SAP system in healthcare management at the health care business unit of Waldorf. According to the study, the SAP for healthcare is a system that is presented as a whole unit IT support that encompasses all the functions in the health organizations accompanied by a portfolio for each application. In this regard, the mySAP is the main module for SAP health care and is responsible for all the basic functions of an organization. The functions would include human capital management, logistics exclusion, procurement, financials, analytics, sales and services, product manufacturing and development and other corporate services for the organization (Krishnamoorthy et al., 2011). According to the study, each application is responsible for specific functions. For example, the SAP NetWeaver is the one that integrates the SAP and the non-SAP legacy systems. It is also responsible for providing components used for electronic data transfer, portal capabilities, business intelligence and master data management.
The researcher concluded that the SAP system is vital in supporting the clinical processes that are directly affecting patient treatment as well as care. These include areas such as ordering medication, medical documentation, and administration. With regard to the healthcare industry, the SAP system can provide a standard patient management module. Previous industry solutions may be used at some point especially in the technical patient management areas (Agarwal, 2015).
However, as found out in the case study, the SAP system for the management of patients is the most recommended application that can best serve the health care needs. The solution supports all aspects of patient care including billing of the patient, administration during discharge and transfer, coding of patients and information about their insurance companies. The system provides a set of parameters and forms that the organization that deploys should select with regard to its mission and vision. The process may seem complex and would require proper knowledge of the SAP system process and those of the organization as well.
It is also important to note that each country has its rules for billing the patients, meaning that the SAP system will be configured with regard to a specific country before it is put into use. The NetWeaver integration platform in the mySAP application will be responsible for integrating different portfolio with regard to a standard interface. The system thus provides an organization with the impression of flexibility in management that can be integrated into any IT structure in the hospital (Agarwal, 2015). It is thus important that hospital administrators choose ways in which they can instantiate the concept to different hospital services. It has to determine the type of modules necessary for the hospital and the third party solutions that they should acquire in the IT system (Krishnamoorthy et al., 2011). With regard to the case study, it is discovered that over 90% of organizations already implement SAP system in their healthcare system and are also using the SAP patient management where reports are also generated (Myers & Vallo, 2014).
The third case investigated the impact of the SAP systems in Small Medium Enterprises because they are usually recognized as belonging to different environment from the large organizations. With regard to the integration of the SAP system, the size of an organization will matter. The following case shows that there is little attention given to the impacts of SAP systems in SMEs because most studies are conducted in bigger and well-established companies (Myers & Vallo, 2014). In a study that was conducted in India, it revealed that competition, business requirements, customer retention and fight for market survival have forced SMEs also to integrate SAP as part of their system. In fact, Agarwal (2015), proposes that there should be a pre-adoption framework for evaluating the SAP system. The aim should entail determining the degree of the business and kind of change that the SME needs the system to implement. Agarwal (2015) came up with a decision support systematic methodology that should help decision makers with regard to adopting decisions which in the end provides a solution to the adoption of SAP system. Other studies have also argued that the characteristics of SME proprietors should correlate with the SAP characteristics. The SAP implementation cost is not only the main factor for the decision to adopt.
However, other researchers look into the influence of organization characteristics on the adoption of SAP systems. The result always indicates that the complexity of the business will always predict the willingness and readiness of an SME to adopt the SAP system. According to the study referred above, it is also discovered that most of the SAP would apply to the SMEs with exceptions, unlike the much larger companies. It should be noted that SAF systems work for SMEs as well as they do for big organizations (Zensar Technologies, 2015).
According to another article that analyzes the implementation of the SAP in China, SMEs reveal that. While the top management supports the SAP system quality and sharing of knowledge during the implementation of the SAP the key remains with the proprietor that makes it a key factor to the success of the SAP systems. In this case, authors developed a framework that would be used in the implementation of SAP systems and integration assessment in small firms. In addition, Myers and Vallo (2014), used the procedure theory to be able to identify the implementation that was critical with reference to the same case studies in the United Kingdom. At the end of the study, it was concluded that the main success factors, uncertainties, and people contributed to either the success or failure of the SAP system in the SMEs (Myers & Vallo, 2014).
The fourth case looks at how the SAP system can be used in maintaining a competitive edge. The study was conducted at the Grasim Industries Limited that is amongst the largest textile sectors in India with net revenue of up to 3 billion dollars. The research approach here was deductive where researchers came up with a system to raise performance, control cost of production and ensure that every product was completed and delivered on time to enhance the business efficiency (Myers & Vallo, 2014). The major challenge included better planning for equipment and utilization, control of inventory and real-time information, picking and tracking of customer orders, database consistency, and procurement.
As part of the solution, the company introduced the SAP ECC 6.0 modules and SAP BW. This involved implementation and customization, application development, coding system and material coding system. It also needed a system that would monitor the cross-functional team that would along Grasim business model coming to a seamless transition that added knowledge with the key processes of the group (Krishnamoorthy et al., 2011). At the end of the day, benefits included the availability of online data in making decisions and control. There was a smooth online flow of information, improved online system information and the flow of data and lastly the system provided for controlling of the budget with regard to planning and purchasing (Franz, 2015).
Benefits of the Studies
With regard to the four case studies, it was realized that the most vital area about integrating the SAP in financial organizations is the ability to come up with an implementation process that offers little or minimum assistance. The research was important as it supported the implementation of the SAP system to change the work of financial management accountants in relation to the quality of many operational factors of the organization such as the inventory system. This situation improved the function of the company despite the success or failure of the implementation of the SAP systems.
Reference List
Agarwal, C. (2015). SAP CRM: Comprehensive guide to SAP CRM processes, functions, and configuration. New York, NY: SAP Press.
Franz, M. (2015). Project Management with SAP Project System.New York, NY: SAP Press.
Krishnamoorthy, V., Murray, M., & Reynolds, N. (2011). SAP Transaction Codes: Your Quick Reference to Transactions in SAP ERP. New York, NY: SAP Press.
Myers, G., & Vallo, E. (2014). SAP BusinessObjects BI System Administration: BOBJ Admin, BOBJ. New York, NY: SAP Press.
Saunders, M., Thornhill, A., & Lewis, P. (2009). Research Methods for Business Students. Upper Saddle River: Prentice Hall.
Scapens, R., & Jazayeri, M. (2003). ERP Systems and Management Accounting Change: Opportunities or Impacts? A Research Note. European Accounting Review, 12(1), 201-233.
Zensar Technologies. (2015). SAP Integration of Business Processes across the Value Chain to maintain Competitive Advantage. Web.