Improving Performance Efficiency Among SMEs Via Accrual Accounting Essay

Improving Performance Efficiency Among SMEs Via Accrual Accounting Systems - Essay Example In direct relation to the aforementioned, accounting and organisational management scholars have determined that the right accounting software package can substantially contribute to organisational performance and the maximisation of efficiency and effectiveness (Hirst and Hopkins, 1998). In explaining the importance of selecting accounting software, Johnston (2003) highlights the concept of budgeting versus accounting. Line-based cash accounting software packages are only capable of measuring a firm's financial performance and position. Accrual based accounting packages, on the other hand, fulfil that function in addition to the more important budgetary one. Through the former, SME's may determine, not just their financial position, but are given access to invaluable data on the optimal division and distribution of organisational resources. Although, in this highly developed economy, there is hardly an SME which does not manage its accounts through the use of accounting software, few understand the imperatives of adopting an accrual-based accounting package as would aid in the adoption of a budgetary process which, in itself, will substantially contribute to efficient organisational performance and realisation of strategic objectives. Currently, there is an influx of accounting software pa... Currently, there is an influx of accounting software packages tailored to the needs of various customers. The greater majority of these accounting packages, as mentioned by Bresnahan et al. (1998), are based upon the traditional cash-based, line-accounting system due to the overriding perception that this particular accounting system is the easiest to use, on the one hand, and the most popular among SMEs, on the other. However, the market also provides a choice of accrual based accounting software packages, primarily used by the larger organisations (Bresnahan et al., 1998). These packages execute both accounting and budgetary functions. However, SMEs are often reluctant to adopt them, assuming that they are problematic to implement and difficult to use, on the one hand and that the size of their business concerns and activities does not necessitate the adopting of a budgetary process. Within the context of the above stated, the problem to be investigated is the exigencies of adopting an accrual-based accounting software package. In investigating this problem, the report will outline the strategic business value of doing so and outline a strategy for implementation. From a personal perspective, the transition to an accrual based accounting package will invaluably enhance an SME's capacity for growth and development insofar as it will provide it with the tools needed for the more strategic distribution and utilisation of organisational resources. Research Question (59 words) How can the adoption of an accrual accounting system positively contribute to an SME's operational efficiency and effectiveness Implicit in this question is the need to provide an answer which will measure the costs and benefits of adopting accrual based accounting packages, on the one hand,