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Woolworths Strategic Information System: Effective use of accounting software packages in Australia

Question

Each student will write a literature review of NOT more than 2500 words. The review should demonstrate that the student has thoroughly researched their topic. Students should use examples of business practice from the scholarly journals papers, conferences, books and professional magazines to support their arguments

The literature review would be on an organisation (company) that is using accounting software packages in Australia. The research would cover:

PART 1:

  1. The current organizational structure
  2. What operational problems (e.g., inefficiency, errors) do you think the organisation could experience because of this structure?
  3. What is the most likely system acquisition method— commercial software, custom software, or ERP?
  4. Describes and prepare a system flowchart of the sales procedures for the chosen organisation (company)
  5. Identify any control problems in the system and what sorts of fraud are possible in this system?

PART 2

  1. Development and adoption of the accounting software packages,
  2. The current market size,
  3. Identify the leaders in the market and what gives them the competitive advantage,
  4. Identify the current gaps or challenges encountered by users or customers of accounting software/packages and make relevant suggestions or recommendations.

Answer

Introduction: In the write-up it is being discussed about an organization that is using accounting software package in Australia. Here Woolworths has been taken as research organization. The accounting software it is using is Xero/MYOB. We are going to discuss about its organizational structure, the operational problems it may or may not face because of this structure, what is the most likely system of acquisition, sales procedure of the organization, how can the problems can be identified and controlled for the fraud that is possible in the system. Then discussion will be done about development and adoption of the accounting software packages, the current market size, Identify the leaders in the market and what gives them the competitive advantage, Identify the current gaps or challenges encountered by users or customers of accounting software/packages and make relevant suggestions or recommendations.

Organization structure: The current organizational structure of Woolworths is given below; in the structure we can see the hierarchy where a Managing Director controls all the directors of other departments. The system seems more like a bureaucratic system where rules and regulations are followed strictly.

Woolworth’s organization structure

Figure 1: Woolworth’s organization structure
(Source: Woolworthsgroup.com, 2018)

Operational Problems: The operational inefficiency could be hierarchy of authority and centralized decision making system, strict rules and regulations make decision making process slow and stagnant. It affects the innovation within the organization. Rigidity affects the creativity within the organization. Although this system claims to be perfect but due to strict rules and regulations customer dissatisfaction and complaint takes a lot of time in resolution which makes the system slow and dull, which is normally disliked by the customers.

System acquisition method: The accounting software used by Woolworth is Xero/Myob; Woolworths use both commercially available and custom software. Woolworth uses both Xero and Myob for different purposes both software offer different advantages cost wise Xero is better because it offers straightforward pricing strategy but options provided by Myob are more than Xero in any sense. Number of accounts usage by Myob is more than Xero as Myob offers two company accounts per subscription in premium account subscription. While Xero offers only one company account (Yigitbasioglu, 2015). Xero needs a new subscription for adding new account in the system. Xero is fast, intuitive and responsive app while working on a mobile interface while whereas Myob is slow, Invoicing is easy on Xero than in Myob, Xero offers customized invoicing while with Myob this facility is not available. Payroll support by Myob is better than Xero as in one price range Myob offers unlimited payroll while Xero needs different plans for different payrolls, Xero offers multiple reports running system while in Myob one report runs at a time, Inventory management is easy with Xero than with Myob as with Myob inventory tracking is done only on the system on which the software is installed. Multicurrency support is present only with Xero and it is not available with Myob. Online support provided by both the software companies is good but Xero offers simple tier structure and the information is easily understandable. Employee login is easy on Xero than in Myob (Yigitbasioglu, 2015).

Here Woolworth uses both the accounting software for the purposes they are best suited for.

Woolworth wants to become a lean retailer and for this it had made a lot of changes in IT system (Cleary & Quinn, 2016), after a huge downturn in the business.

The sales structure it follows is the following:In the sales procedure it offers products to the customers directly from its supermarket, it focuses on providing good prices and right range, with great service and fresh products. For increasing the sales Woolworths has made changes in its IT system and started store renewal program with this it has inculcated the strategy of Customer First team and culture.

Three steps of sales are:

Fix the basics, deliver to the customer with efficiency and create the future for the business.

There are two types of frauds that can take place one is Occupational fraud and another one is sales and purchase frauds, occupational frauds are frauds which are committed by the staff member on the job during the course of his employment. (Yigitbasioglu,2015)These are most common types of frauds and do more financial loss to the company than the frauds of any other kind. In general employees tend to hide these frauds from the employer’s eye and seek for some permanent solution. This makes the probability of this fraud more common and the probability of these frauds to reoccur again is more. These frauds can be committed and kept hidden by the employee for extended time period. It means more and permanent financial loss (Yigitbasioglu, 2015).

Identification and control problems: The sales and purchase frauds are the frauds that involve the stealing of items available for sale by the business or in other words these are called as theft of inventory items. This stealing is hidden by the employees by changing and manipulating the sales, purchase records. It completely changes the information which is recorded in the business record books. One other way to hide this theft is changing the inventory and manipulating its records (Yigitbasioglu, 2015).

Things to consider for saving the business from these kinds of frauds are as follows:

  1. It must always kept in mind that inventory and Stock management is not safe from fraud and theft by the employees.
  2. Employees know number of ways in which they can hide such frauds and losses; they can manipulate and falsify these records easily. The false documentation is also done by the employees so that they can change the inventory records in indirect manner (Yigitbasioglu, 2015, p.165).
  3. The assets should have Physical security so that it can stay safe. If the employees do not get direct access to the assets then the chance of theft and stealing will be less.
  4. The Physical security can be useless if the theft is being done while sale or purchase of the item is being processed. These frauds occur easily by manipulating the inventory system. As these items are not being recorded in the inventory system of the business.
  5. Proper control needs to be put in place in order to record the transactions and protect the inventory from manipulation (Cleary & Quinn, 2016, p.245)

Development and adoption of the accounting software packages in Australia: The development of accounting software can be said to begin in the year 1959 when 9PAC named software was developed by IBM, it was the first report generation program of its time. It made users to easily store and access data in the form of database which were rationally structured. It was a revolution in data storage and data retrieval method. When the organizations started departmentalization and functions were done in batches then companies started investing in the accounting systems and software which can perform specific function for the company. With the development of computers of next generation and their capabilities increased, the functionality and complexity of accounting software developed to the large extent. Now accounting software were available in flexible functionalities. Yigitbasioglu (2015), suggested that SAP RF was developed which was multifunctional and could handle a wide range of business functions and operations. It made making financial decisions fast, easy and with limited external interventions. In the year 1981 Peachtree accounting system was developed in order to simplify the data storage process so that customers can extract more value from this accounting system in less time and easy way. Peachtree developed its innovative integrated office suite system with word processor and spreadsheet. The user friendly interface of the software system was introduced by Intuit in the year 1983 its name was Quicken. In the year 1993, Teleware launched a software package which was of its kind product; it caught the attention of nearly all the business entities. After a few years the Australian subsidiaries of Teleware acquired the company. In the year 1993 Teleware was changed its name to MYOB Limited.

Market leaders and competitive advantage of accounting software’s: The disadvantages posed by the traditional accounting systems are conquered by different and innovative software packages available in the market. There are number of software which Australian companies are using now a day’s some of them are MYOB, Xero, Quick books, Fresh books and Zoho books. Currently these are the market leaders in providing accounting software to the companies. The features and services of available software are somewhat similar. Due to immense market competitions the companies offer similar services and features in their current accounting software. Some software lead in some feature and other software lead in other features. The companies keep on innovating so that they can create different products and create competitive advantage for themselves but this is least possible in software producing industry because each company has almost similar accounting needs. The automation and integration are two important benefits that accounting software packages offer. Playing around these two benefits increases the competitive advantage of the software developing companies over there competitors.

The important features offered by accounting software packages are: inventory management, invoicing, reporting and dashboards, online bill payment, accessible through mobile based apps, fast banking, easy expense claim, payrolls etc. Additional features of accounting software are that they also allow multi-currency transactions, help in GST returns filling, generate purchase and sales orders, create business performance reports and help in accounting for fixed assets online, make database for storing the files. The accounting software are cloud based software system so that they provide multi user access to the account information.

Market demand: The demand of accounting software is increasing at a very fast rate in Australian market. The large business organizations and Small organizations both are turning rapidly towards cloud based accounting software system. The automation and integration offered by the accounting software are making them popular and increasing their demand in an exponential rate. Currently 99% of the organizations are using automated and cloud based accounting systems. According to Prasad et al. (2015, p.145), as cloud computing offers facility of using the accounting software without installing in the system as it works on available internet connection, because of this reason also it is very popular in the business. The cloud based computing system is also contributing to the increased demand of accounting software in the business. Accounting software which are popular in Australia are Zoho Books, Xero, Myob and Quick books. The features provided by this software are similar to some extent which offers tough competition to them. The companies usually compare these software packages and install them according to their requirements (Prasad et al. 2015, p.143). Some companies install combination of the software and make use of best of features offered by them in combination. The competition between the companies is based on the offered price. The companies select the software packages based upon their needs and requirements such as banking needs, nature of the business and scale of business operation. Considering scale of business operation the accounting software are more popular with medium and small scale businesses in comparison to large businesses. As Large scale business entities like Coles, Woolworths use conventional methods of accounting with taking a backing from the cloud based software, they usually use combination of the accounting software and mould the usage according to their requirements .The demand of accounting software is predicted to increase in Australia with the increasing GDP and increasing number of medium and small scale organizations.

Challenges of accounting: Setting up the cost for accounting software is not easy as in addition with setting up the cost the company needs to maintain required levels of minimum system standards like RAM, ROM, memory of hard drive, speed of the system processor (Cleary et al. 2016).

Technical support and backup data creation in terms of the usage of the accounting software also takes into account the additional costs. The add-on features determine the subscription and monthly rental rates of the software as it determines the rates per user which is allowed by the software package. Therefore this further enhances the cost of accounting software packages. Some small scale firms avoid using these software packages because they cannot bear the cost of the accounting software.

Not Easy to use: The complex system of cloud based accounting system makes them difficult to use (Ahmad et al. 2015, p.245). The accounting software’s are not based on conventional system and have their specific design which is very difficult to understand some times. The employees who are used to traditional methods of accounting are most reluctant to use this software. These staff members face a lot of difficulty in understanding and operating this software. It makes it compulsory for the organizations to arrange for training facilities for the staff members who are going to use newly embedded accounting software. This will definitely decrease the errors during initial implementation phase.

In the initial phase of installation working with accounting software will consume more time, as creating excel sheet and ledger takes lesser time than creating invoice and sale purchase report in the software. In the due course of time the speed will definitely go up as staff gets used to of the software functions, more the staff become habituated to the software more likely is to increase the speed of work. However, researchers mention that introduction of accounting software leads to temporary decrease in the rate of business operations.

There is a major risk of cybercrime in installing the accounting software. As whole system of cloud computing is based on the internet it increases the risk of cybercrime. The bank account of the business is also linked with cloud which poses a major threat as it allows the owner to access his account from anywhere and in case if he had accessed his account from unsecured connection then his account can be hacked and can create a lot of loss for the business. There is a great risk of malware and phishing.

Suggestions and Recommendations: Training sessions should be conducted after installation of new software package in the business. This makes staff ready to deal with the technicalities of the newly added software (Ahmad et al. 2015). They will easily understand the cloud based accounting software. It is very important in order to train employees the ways the data is added in the software and the way the software really works. They must be properly trained in dealing with all the aspects of the software. It is recommended for the business organization to buy and install anti-virus software on their systems and computers in order to reduce the risk of cybercrimes as accounting software are based on cloud computing which is internet based technology. This will make whole of the accounting process secured and free from the risk of loss of any important data. The costs associated with the purchase and installation of cloud based accounting software can be managed by the organization if they work strategically towards cost control and cost reduction. The business organizations should identify and remove the activities from the business model which are not creating any value for them (Ahmad et al. 2015, p.264).

Conclusion
In the end we can conclude that Australian organizations are rapidly integrating cloud based accounting systems in their business model. It was being found that the implementation of cloud based accounting software has mainly increased among the medium and scale organization and large business organizations implement combination of traditional and modern accounting system. (Cleary et al. 2016, p. 255) these software systems help in invoicing, inventory management, payroll management and online banking transactions. There are many risks of integrating the cloud based accounting system with the business model these risks should be mitigated by proper antivirus installation and the staff should also be properly trained so that they can efficiently use cloud based accounting software.

References:
Ahmad, N., & Mehmood, R. (2015). Enterprise systems: are we ready for future sustainable cities. Supply Chain Management: An International Journal, 20(3), 264-283.

Cleary, P., & Quinn, M. (2016). Intellectual capital and business performance: An exploratory study of the impact of cloud-based accounting and finance infrastructure. Journal of Intellectual Capital, 17(2), 255-278.

Cleary, P., & Quinn, M. (2016). Intellectual capital and business performance: An exploratory study of the impact of cloud-based accounting and finance infrastructure. Journal of Intellectual Capital, 17(2), 255-278.

Prasad, A., & Green, P. (2015). Organizational competencies and dynamic accounting information system capability: impact on AIS processes and firm performance. Journal of Information Systems, 29(3), 123-149.

Yigitbasioglu, O. M. (2015). External auditors' perceptions of cloud computing adoption in Australia. International Journal of Accounting Information Systems, 18, 46-62.

Woolworthsgroup.com Woolworths group [Retrieved from https://www.woolworthsgroup.com.au/page/about-us/our-leadership-team/management-board, on april , 20, 2018]

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