accounting software applications

features

A feature is a defining/distinct capability within a software application. Within accounting software applications, features generally refer to specific options or capabilities available within a core or non-core module. For instance, a general ledger module might include XBRL reporting or multiple currency capabilities, an accounts receivable/billing module might include receivables aging or invoice tracking capabilities, an inventory module might include real-time inventory tracking, bar code or RFID tracking, or auto reordering capabilities, and a control module might include encryption or audit capabilities. An integrated accounting software application will contain hundreds of different features. Features are often a key competitive selling points used to distinguish one software application from another similar software application (e.g., QuickBooks vs. Sage)

ERP System Components

An ERP system consists several key components: users, centralized database, the ERP software (integrated applications/modules), servers on which the software and database reside, and the network technology that affords accessibility to the system. Users. Individuals who interact with the system to execute business tasks. Database. Centralized database that stores business data (records/files) utilized by ERP applications. ERP Software. Integrated applications/functions designed to support business processes. Server(s). Server computers that house ERP applications/modules and database Network. Internal network, internet, and/or web technology that affords access to the ERP.

Enterprise-Wide Information System (A.K.A. Enterprise System)

An integrated system that provides comprehensive information processing capabilities across most or all of an organization's functional areas (e.g. accounting, finance, human resources, marketing, production, etc.). The most common example of an enterprise-wide system is an enterprise resource planning system.

electronic spreadsheets

An interactive software tool designed to enable the organization, modeling, and/or analysis of data in table form. Spreadsheets are essentially functional, electronic simulations of paper accounting worksheets. Spreadsheets are organized as a series of columns and rows intersecting in cells within which numeric or text data elements are represented as cell entries. Spreadsheet cells are made functional by use of formulas, macros, and/or other predefined functions that, once constructed and implemented, automatically calculate and display values based on the contents of the cell and other related (as defined by the formula/macro/function) cells. Spreadsheets differ from traditional accounting software applications in that they are actually developed by users on an ad hoc basis to suit a particular need, and as such, are referred to as user-developed applications (see below).

user-developed application (UDA)

Applications developed by end users, independent of a controlled information technology environment and formal systems acquisition, development, implementation, and change processes. As users typically develop spreadsheets on an as needed basis, they are considered UDAs. The structured, but extraordinarily flexible nature of a spreadsheet application, allows relatively unsophisticated users to model complex functions without having to become adept at complex programming languages. Given extensive use of spreadsheets within organizations, spreadsheet development constitutes the most common type of end-user development (but not the only type of end user development, as other applications may also be UDAs).

spreadsheet application advantages

Availability. Spreadsheets readily available and can be developed on demand. Ease of Use. Spreadsheets are easy and quick to develop and use. Flexibility. Spreadsheets are almost infinitely configurable to suit specific business needs

operational

Used to support business processes (e.g., collect business data, create budgets, develop ad hoc documents/reports, forecast performance, sort/store/track data, etc.)

ERP System Configuration

. Refers to how the ERP is deployed. If the ERP is hosted by the organization, the configuration may consist of a client-server architecture that enables access to the system. For example, three-tiered client server architecture might consist of users/user computer systems (user tier), the server or servers housing ERP applications/modules (application tier), and a server housing the centralized database (database tier) (Hall 2019); users access ERP functions and data through an enterprise interface or portal[1] via the internal network. If the ERP is hosted by a cloud service provider (i.e., as SaaS), the service provider maintains the system configuration and users access the ERP functions through an enterprise portal via the Internet. [1] Enterprise Portal. A web-based interface that provides access to enterprise resources/services such as ERP system applications.

spreadsheet application disadvantages

Breaches. Spreadsheets often contain confidential or otherwise sensitive data. In spite of this, most spreadsheets generally lack appropriate control/security making confidential data vulnerable to unauthorized access and disclosure. Errors. Spreadsheets typically contain significant errors and functional problems[1] due to ad hoc/informal development processes, lack of attention to design/poor design, lack of user/developer experience, lack of adequate controls and/or testing, and undocumented changes/lack of version controls. Fraud. Spreadsheets are extremely susceptible to fraud do their inherent functional flexibility, lack of controls within the spreadsheet (such as cell locking, passwords protection, permission restrictions), lack of change/version controls, and lack of assurance (spreadsheets are rarely tested adequately and are often overlooked during the audit process). Poor Design/Development. Lack of formal structured development processes, lack attention to design prior to development, and lack of user/development experience lead to poor development practices which, in turn, result in poorly designed, poorly controlled/secured spreadsheets (see breaches, errors, and fraud above). Note: Spreadsheet errors represent a significant control, reporting integrity, and compliance (e.g. Sarbanes-Oxley) concern as the majority of all spreadsheets contain serious errors with the potential to materially impact financial data integrity. [1] Estimates/research from various sources indicate approximately 80-90% of spreadsheets contain serious errors.

ERP Disadvantages.

Business Process Changes. Unless an organization wants to invest in costly, time-consuming customization, it must adapt to the standardized business processes provided for within the ERP system. Users may resist such changes to business processes and such changes may result in business difficulties and disruptions. In addition, note that necessary significant changes to business processes and/or failure to synchronize business processes with the ERP system are the main causes of ERP failures. Cost. ERP systems result in a high initial cost (possibly hundreds of millions of dollars in the case of a high-end ERP), require specialized personnel to manage, and necessitate substantial maintenance, support, and control/security. Time. Implementing an ERP system is a monumental task. ERP systems may take years to select and fully implement depending on size, modules, and degree of customization. This results in significant business disruption. Complexity. ERP systems are extraordinarily complex to implement and use (as consequence of integrating numerous different functions into a single system). Users may be intimated by the complexity and resist using the ERP system; this necessitates extensive user training and support. Moreover, this complexity can result in errors in implementation and use. Software Training/Support. ERP applications require substantial user training to learn how to use the software and continuous follow-up support to address continuing needs/problems. Customization Issues. Customization can be problematic and time consuming. Moreover, if/when an ERP is upgraded to a newer version, customizations must be re-designed and re-implemented. Data Security. All users and business processes depend upon the ERP system for processing; if the ERP system is compromised, all users and business processes dependent on the system will be impacted. In addition, all users potentially have access to all data and functions. As such, an added layer of control/security is necessary to restrict access/permissions and appropriately secure the ERP system.

classes of commercially available applications

Commercially available integrated accounting software solutions are traditionally categorized into different markets based on the size of the business for which the software application is intended. "Size" may be measured in terms of company characteristics (revenue generated, number of users) and/or software characteristics (cost of software, transaction volume capability). The most common ways of classifying commercially available accounting software applications are monetary (revenue or cost), as such measures are more intuitive with respect to business interests. Note that as the "size" of the software increases, the complexity of the software application (e.g., configurability options, functional/transactional capabilities, integrated modules, number of users supported) generally tends to increase as well.

ERP Evolution

Contemporary ERP systems evolved from early Materials Requirements Planning Systems (MRP I) and later Manufacturing Resource Planning Systems (MRP II) systems (1980s) to systems that integrated key applications/functions to support central business needs other than manufacturing (initially accounting/financials, operations, and human resources) (early 1990s). They eventually evolved into ERP systems that enabled integration of all critical business functions of an enterprise (mid/late 1990s). ERPs initially relied on a basic client-server platform, while later ERPs (early 2000s) evolved to utilize more sophisticated client-server architectures (three-tiered architecture) and most recently, cloud-based computing platforms as software-as-a-service (SaaS).

core modules

Core modules are typically considered to address standard accounting functions traditionally associated with revenue cycle, expenditure cycle, and business reporting cycle processes[1] (cycles/processes common to all businesses). Such functions might be considered "basic bookkeeping" functions associated with selling, procuring, and recording. Typical core modules include: sales order/entry, billing/accounts receivable, cash receipts, payroll, purchasing/receiving, payables/accounts payable, cash disbursements/payments, inventory/stock management, fixed assets, and general ledger/reporting. [1] Refer to the "Transaction Processing/Cycle Notes" for discussion of functions associated with revenue, expenditure, and business reporting cycles/subcycles.

integrated application software disadvantages

Cost. Costs for software licenses, requisite training, upgrades, add-ons and supporting IT infrastructure can be substantial. Software Training/Support. Applications require user training to learn how to use the software and follow-up support to address continuing needs/problems. Human Error. Data entry errors and processing errors are common and more difficult to track. Data Loss. Data is vulnerable to various IT-related risks (e.g., failures, malware, hacking). Requires systematic backups and security measures. This is a particularly significant concern if the application is cloud-based software-as-a-service (SaaS) (e.g., concerns for data confidentiality due to online accessibility). Fraud. Accessibility/configurability of applications makes them susceptible to fraudulent manipulation. Requires additional layers of control/security.

integrated software applicational advantages

Data Accessibility. Immediate convenient access to documents and records. Expeditious Transaction Processing. Increased processing accuracy, speed, efficiency. Cost Savings. Due to transaction processing efficiencies and elimination of paper documentation/records. Control. Most integrated applications include control, security, and/or audit features/functions integrated into the software (e.g., access control, backups, audit logs, etc.). If properly configured, such integrated features improve control.

personal

Designed for individual/very small business use. Examples include Excel, Quicken

mid-range

Designed for midsize to large size business use; typically includes small to midsized ERP solutions. Examples include Sage 100 (formerly MAS 90), Sage 300 (formerly ACCPAC), MS Dynamics GP (formerly MS Great Plains). Most traditional mid-range ASW solutions have evolved into mid-range ERP solutions.

low-end

Designed for small business use. Examples include Sage 50 (Formerly Peachtree), QuickBooks Pro

Mid-Range

Designed for small to midsize size business ERP market; typically includes small to midsized scalable ERP solutions. Examples include Sage 100 (formerly MAS 90), Sage 300 (formerly ACCPAC), MS Dynamics GP (formerly MS Great Plains).

high end

Designed for very large and/or multinational business use. Examples include SAP ERP, Microsoft Dynamics AX, Oracle, Sage 500 ERP (formerly MAS 500).

High-End

Designed for very large business and multinational business ERP market; typically includes midsized to large scalable ERP solutions. Examples include SAP ERP, Microsoft Dynamics AX, Oracle, Sage 500 ERP (formerly MAS 500).

ERP Integration

ERP Integration. Integration is the defining characteristic of an ERP system. ERPs afford three basic types of integration: data, process, and system.Data Integration. Refers to integrated data management; data is maintained in a centralized database within the enterprise system. Process Integration. Refers to integrated business process management; business processes are integrated and linked together within a single enterprise system. Systems Integration. Refers to integrated system management; traditionally separate applications are integrated and managed within a single enterprise system.

ERP Modules

ERP modules may be differentiated as core (essential applications/functions of the ERP system) and non-core (add-on applications/functions). However, note that core and non-core classifications are not the same as they are for integrated accounting software applications and classification may differ depending on the source. In addition, the terms core and non-core are somewhat ambiguous with respect to ERP systems as many modules are autonomous and the modular structure of an ERP system allows organizations to select and implement modules as needed to satisfy business requirements. Moreover, different ERP vendors label and organize key functions within modules differently. As such, note that the following merely offers a synthesis of common core and non-core modules.

Important Note: ERP systems

ERP systems are constructed to afford flexibility to integrate applications/modules needed by a company. As such, what might be considered a core application/module for one company may not be so for another. If you research the core modules of ERP systems online, you will find a great deal of variability re exactly what constitutes a "core ERP module" (depending on the source). Moreover, this may change over time; for instance, business intelligence applications/modules are now considered as "core" ERP applications/module by many sources. Keep in mind that a "core" application/module is simply one that supports primary business processes common to most organizations.

Classes of ERP Systems.

ERP systems are generally classified based on the size of the organization (consistent with classes of integrated accounting software above).

spreadsheet applications

Examples of commercially available spreadsheet applications include Microsoft Excel and Apple Numbers.

module structure

Integrated accounting software is modular in structure, and includes multiple, functionality-integrated/linked software modules. Within integrated accounting software applications, modules are logical components that correspond to distinct accounting cycles/processes or subcycles/subprocesses (e.g., sales order/entry, billing/accounts receivable, etc.). Accounting software modules can be classified as core and non-core modules.

ERPAdvantages

Integration. Business processes, data, and systems functions are integrated into a single system. This integration results in improved business process coordination, efficiency, transparency, and control. Note: See chapter 2 in the course text for additional details re business process coordination and support afforded by ERP systems. Expeditious Transaction Processing. ERPs provide increased transaction processing efficiency due to business process coordination. Data is entered into the system only once and is accessible across the organization. Inclusive functionality contained with the enterprise system reduces the need for ad hoc solutions. Procedures, documents, and reports are standardized across business units enabling coordinated, unified processes. Service. Customer service is enhanced as users can quickly access orders, available inventory, and transaction details throughout the organization in real-time.

non-core modules

Non-core modules address non-standard (or specialized) accounting functions not generally associated with revenue, expenditure, or reporting cycle processes (e.g., financial management, human resource processes, production processes). Examples of non-core modules include appointment management/scheduling, debt collection, bank reconciliation, client/customer relationship management, human resources/benefits management, production processes, electronic/online banking, foreign currency management, job order/process costing, mobile payment management, travel expense management, and tax preparation.

integrated application software

Refers to a software application that packages multiple, integrated functions/processes into a single solution. Integrated accounting software applications are structured as multiple module[1] solutions offering extensive functionality; integrated accounting software applications also allow add-on modules[2] to further augment/expand this standard functionality. Most contemporary integrated accounting software applications support primary accounting functions (i.e., transaction processing, financial reporting, and management reporting functions). [1] Module. A logical component representing a distinct set of related functions within a software application. [2] Add-Ons. Supplementary modules that provide additional functionality; add-ons augment/expand the standard functionality of a software application. As most integrated accounting software applications offer broad functionality, they may not require add-ons. However, some accounting software vendors may not include an inclusive set of modules in their standard product, thereby necessitating the acquisition of some add-on modules (especially in the case of small business accounting software). In addition, if a business has specialized needs it may be necessary to acquire add-on solutions to suit those needs. Add-on modules may be offered by/acquired from the original software vendor or another third-party vendor that specializes in a particular area (e.g., point-of-sale systems).

end-user developed

Refers to activities that involve an end user (i.e., an individual not formally employed or trained as a software developer) developing software applications. Examples of end-user development include (but are by no means limited to) computer simulations, databases, spreadsheets, and website development.

Non-Core Applications/Modules

Refers to add-on applications/functions that complement or enable additional functionality and/or support business processes not common to most organizations. Some key non-core applications/functions include: business intelligence (BI), customer relationship management (CRM), sales force automation (SFA), supply chain management (SCM), product life cycle management (PLM), and supplier relationship management (SRM) (Gelinas et al 2018). Note that add-ons may be offered by/acquired from the original ERP vendor or third-party vendor that specializes in a particular area (sometimes referred to as bolt-on software).

Enterprise Resource Planning System (ERP).

Refers to complex, multiple-module software applications designed to integrate virtually all of an organization's business processes, system functions, and data/information into a single, enterprise-wide software solution. ERPs are integrated software applications structured as multiple business process modules[1] which together offer comprehensive enterprise-wide processing across functional areas such as sales/marketing, distribution, purchasing/procurement, human resources, inventory/materials management, production/logistics, and business reporting (whereas an integrated accounting software application only provides accounting and related functionality, although the lines are somewhat blurred by the inclusive functionality of contemporary accounting software systems). [1] In an ERP, modules are essentially integrated applications/functions that support business processes (e.g., sales/distribution, purchasing/procurement, inventory/materials management, production/manufacturing financial accounting, management accounting/controlling, fixed asset management, human resources/payroll, etc.).

Core ERP Applications/Modules.

Refers to foundational applications/functions designed to support central day-to-day business operations processes common to most organizations. Core ERP apps/modules generally encompass/include the following: sales/distribution/marketing, purchasing/procurement, inventory/materials requirements management, human resources/payroll, planning/production/manufacturing (as relevant), and accounting/finance (financial accounting functions - transaction processing/general ledger/external reporting, management accounting functions - cost accounting/budgeting/performance analysis/internal reporting, financial management functions - financial analysis/forecasting). Note that accounting/finance applications/functions are typically core modules within an ERP system.

core/noncore module confusion

Some modules may be treated as standard or non-standard functions within a particular accounting software application depending on vendor specifications and/or the version of the software application acquired. This often results in confusion with respect to defining core versus non-core accounting software modules. The reason for the confusion relates to how vendors design/package accounting software applications. More complex (and expensive) versions of a software application are typically more inclusive and as such, may include functionality (modules/features) not offered in the more basic version of the software. In addition, vendors may exclude particular functions because they do not believe that the majority of their customers need/want the function or, more likely, because they can offer the function as an add-on for an additional cost. As such, although some modules are technically considered core modules (because they represent standard accounting functions per the definition above), some vendors may treat them as add-ons (at least in base versions of the software).

spreadsheet functions/use

Spreadsheets can be developed to provide integrated or specialized solutions (although most spreadsheets are designed to serve a specialized function). Business use of spreadsheets may be classified as analytical, financial, or operational

financial

Used to accumulate/compute financial transaction amounts and/or balances prior to entry into an accounting software application or in preparation for financial reporting.

analytical

Used to analyze/visualize data (i.e., data analytics), construct computations, model problem scenarios, and/or build simulations to gain insights, draw conclusions, and/or support decisions