THE IMPACT OF CHANGES IN THE BUSINESS
ENVIRONMENT AND NEW TECHNOLOGY ON THE
ACCOUNTING INFORMATION SYSTEM OF A SMALL
BUSINESS
Joseph Saenger
Eastern Institute of Technology
Private Bag 1201, Taradale, New Zealand
jsaenger@eit.ac.nz
Tel: (06) 974-8000 (ext 5219)
Fax: (06) 974-8907
The New Zealand Applied Business Education Conference 2002, Christchurch
25 September – 27 September
Abstract
This paper examines the impact of changes in the business environment and new
computer technology on accounting information systems used by small
businesses. Because of these changes and new technology, the users of these systems
should, therefore, be made aware of


the innovative aspects of computer technology, and
the need to acquire the necessary knowledge and skills to effectively
apply the computer based accounting information system in the
business environment.
The discussion will also focus on the role of educators to ensure that these aspects
are addressed, otherwise, through a lack of knowledge and skills, the users are likely
to be much less productive in utilising the computerised accounting information
system
INTRODUCTION
One of the features of business development over the past five years in New Zealand
is the reduction in the size of businesses. Through-out the country, the size of
businesses reduced from an average of seven full time employees in 1994, to just four
employees in 2001, but at the same time, the number of small businesses increased
significantly.
An important issue for small business owners is that of survival. A study by The
National Bank showed that over half of the small businesses started in 1995 were still
in operation after two years and at least one in three businesses were still in operation
after five years. While small businesses do fail, more small businesses have been
created than have failed. Starting a small business is thus a viable career option.
Despite the important economic and social contribution of the small business, very
little is known about them. It is for this reason that we should obtain a better
understanding of the needs, specifically in the accounting environment of the small
businesses to increase their chance of survival.
THE ACCOUNTING INFORMATION SYSTEM
As any large corporation, the modern small business functions in an information age
and consequently requires a steady flow of information to:
·
·
·
make sound planning decisions,
control its operations, and
take advantage of its opportunities and thus gain ground on competitors.
A major part of the overall information required by the small business relates to
information which deals with providing economic and financial inputs to decision
making. This information is called accounting information, and is obtained from the
accounting information system.
The accounting information system of today’s small business is more complex than a
few years ago. The following developments have led to this change:
(i) The growth in the use of microcomputers. The microcomputer has placed
computing power in the hands of the small business by means of software
packages such as accounting packages, spreadsheets, graphics, databases and
word-processing packages. The availability of reasonably priced accounting
packages for personal computers has created an opportunity for small
businesses to computerise their own accounting records, which had
traditionally been carried out by public accounting firms.
In a study undertaken by me in Hawke’s Bay, the following results were
obtained regarding the way in which small businesses performed their
accounting functions:
Accounting function
a) Accounting function performed:
Internally
Externally
93%
7%
b) Accounting function operated:
Manually
Computerised
8%
92%
c) Computerisation of accounting function:
Fully
Partly
77%
23%
(ii)
Technology advances in computer storage have enabled the small business to
store and access vast quantities of information. Storage capacities of
microcomputers have changed from being measured in kilo-bytes to gigabytes. The microcomputer thus packs millions of characters in primary and
secondary storage devices.
(iii)
Advances in communications, such as the internet, have enabled small
business to communicate accounting information effectively to users of this
information. The advent of the internet has seen some packages, such as
Netledger Release 2.0, offer a web based product, with the data being stored
on Netledger’s servers. This also provides opportunities for customers and
suppliers to view the small business records on-line. As this area is still in its
infancy, the future will see more software companies developing and offering
integrated net-based solutions.
Because the accounting information system of small businesses have undergone
significant changes as a result of rapid changes in the business environment and in the
technology of computer systems, the users of the accounting information system must:
1.
2.
be made aware of the innovative aspects of computer technology, and
the need to acquire the necessary knowledge and skills to effectively
apply the computer based accounting information system in the
business environment.
If this is not achieved, the users are likely to be much less productive in utilising the
computerised accounting information system.
UTILISING THE COMPUTERISED ACCOUNTING
INFORMATION SYSTEM
Innovative aspect of computer technology
The most important innovative aspect that the owners of small businesses need to take
notice of and implement in their businesses is the internet.
As I mentioned in the introduction, the size of businesses are shrinking, so that means
that employers will have to look for new and better ways to run their businesses. One
of the first areas that employers should invest in is the internet so that they are able to
use it through the whole of their businesses, in other words utilize it for ordering from
suppliers, paying accounts, creating and keeping customer records, dealing with
government, or for research purposes.
A few examples of ways small businesses could use the internet:




use e-mail to place orders with suppliers or receive orders from
customers
replace paper-based systems (for example purchase orders) with
electronic documents (interactive order processing)
electronic funds transfers
electronic data interchange
Knowledge and skills
The project I was involved in also looked at the level of knowledge of staff that
performed the accounting function in a computerized environment. The businesses
that responded indicated that 77% of their staff had a good knowledge of the basics of
accounting and 74% of the staff had a good knowledge of the computerized
accounting environment in which they were operating. We also wanted to determine
the method by which their knowledge was obtained, both regarding the basics of
accounting and the computer environment. Most of the staff indicated that they
obtained their basic accounting knowledge by means of studies, which was attending
either formal studies or short courses. What was surmising was the fact that the staff
indicated that they gained their computer knowledge by means of on the job training.
Could this indicate that employers are of the opinion that accounting lecturers are not
up to date with the latest in computer technology? I don’t believe this is the situation.
As there is such a wide range of accounting software currently available on the
market, it is impossible for academic institutions to cover all the available packages. I
am of the opinion that if a student is exposed to a computerised accounting system,
whether it be NZA Gold, MYOB or QuickBooks they should be able to adjust to any
other system with minimal help, as the basics of most of these systems are very
similar.
THE ROLE OF EDUCATORS
We as accounting educators provide the people who will ultimately be responsible for
operating the computerized accounting system of these businesses. We will have to
provide these people with the necessary tools to perform their tasks to the best of their
ability. This means that we must send people out into the work force with the
necessary knowledge and skills.
Limitations in the teaching of computerised accounting
In the first place we all know that an accounting qualification, whether it be a diploma
or a degree, is the students’ ticket into the business environment, because employers
are looking for people with strong computer skills and specific knowledge of
accounting software and spreadsheets. To prepare students for this environment, most
academic institutions include in their accounting program only one course in
computerized accounting and a paper on spreadsheets normally taught by computer
lecturers. These computer lecturers usually do not have the necessary accounting
knowledge.
Secondly, I have found that a weakness in the computerised accounting course is that
the exercises are very direct, even down to individual keystrokes, for examples “press
tab three times”. We provide step by step guidelines of how systems operate.
Thirdly, some accounting systems can be customised so that transactions can be
deleted. When I asked a student why he deleted a transaction he responded that it was
easier to delete the transaction than to prepare a reversing entry. After more
discussions I found that this student actually did not know how to prepare the
reversing entry. This led me to believe that students do not make the connection
between fundamental principles they encountered in the theoretical accounting course
and the computerised accounting course.
Fourthly, when confronted with mistakes in assignments, many students will redo the
assignment from scratch. What these students obviously do not know is that by
making regular back-ups, all they then need to do is restore the back-up.
In the last instance, it can be difficult to focus on all aspects of teaching when you are
an accounting instructor in a computer Lab with 30 students and 30 computers. In the
computer lab, the accounting lecturer is his own teaching assistant, and sometimes the
lab technician until the IT help arrives.
Introduction to innovative aspect of computer technology
This can be achieved by including an e-commerce paper into our accounting studies
program.
From a search undertaken on the internet, I found the following institutions include ecommerce or e-business as part of their accounting studies:
Institution
Degree
University of Southern Bachelor of Financial Administration
Queensland
Adelaide University
Bachelor of commerce (accounting)
Curtin University of Bachelor of commerce (accounting)
Technology
Subject
Introduction to ecommerce (Accounting)
Introduction to ebusiness (Accounting)
Accounting (e-issues)
The following learning outcomes could form part of an e-commerce paper:






the role of e-commerce in the organisation
alignment of e-commerce with organisational plans and objectives
legal and taxation implications of transactions on the internet
electronic payment systems
web accounting resources
e-commerce security
Obtaining the necessary knowledge and skills
(i)
we should have a second course in computerised accounting at an
advanced level, where we should expose our students to a new accounting
packages with minimal direction,
(ii)
spreadsheets should be included in the accounting program and taught by
an accounting lecturer,
(iii)
students should be presented with a challenge – exercises should be less
direct. Students should be able to transfer their knowledge to new
situations,
(iv)
choose a text that reinforces accounting aspects, not just the technical
procedures, and take the time in class to review accounting concepts as
well as demonstrating the computer application, and
(v)
students should be taught proper file management. Students more often
than not learn about the importance of back-ups when, after 3 hours of
work, their data files are lost or become corrupted.
CONCLUSION
What we have to remember is that New Zealand is a nation of small businesses and
that these small businesses are creating more jobs than larger firms. It is therefore
important that all of us aim to provide the owners of these small businesses with
employees who have the necessary knowledge and skills in both the accounting and
computer environment. In doing so we can all play a role in ensuring that New
Zealand has a vibrant business community.
References
Computerized Accounting courses: The Weakest Link? [On-line]. Available:
http://www.tcel.com/~car/newsletters/0598/CAAAsum01-e/educatorsforum.html
Leitch, R.A., Davis, K.R., (1992). Accounting Information Systems: Theory and
Practice. Prentice Hall , New Jersey.
O’ Brien, J.A., (1999). Management Information Systems, 4th ed. Mc Graw Hill,
Boston.
Raghunathan, B., Wobster, S.L., (1995). Accounting software selection by small
business organisations. The National Public Accountant, September, 20 -26.
Small Business Monitor (March 2002). The National Bank. New Zealand
Wilkinson, J.W., Cerullo, M.J., Raval, V., Wong-On-Wing, B., (2000). Accounting
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