ems dominate; these companies are financial reporting driven. The companies with third stage systems have customized, managerially relevant cost management, financial reporting, and performance measurement systems, however, these systems are standalone. ERP systems only occur with the fourth stage systems where the ERP systems integrate cost management, financial reporting, and performance measurement (Kaplan and Cooper, 1998, p. 299).
An ERP system has a common data structure that permits data to be entered and accessed from anywhere in the world (Kaplan and Cooper, 1998, p. 275). An activity-based costing system is an integral part of an ERP system, and thus managers have information about present and future activities at operational levels when making decisions (Kaplan and Cooper, 1998, pp. 275-277, 285). With activity-based information, monetary distortions can be reduced. Feedback with activity information improves learning. Thus, in managing at the activity level, costing, budgeting, performance measurement, bonuses, resource spending, forecasting, budgeting, production, etc. can beimproved in terms of efficiency and effectiveness. An ERP system will allow the company to obtain cost and performance information more frequently, even daily, rather than waiting a month (Kaplan and Cooper, 1998, p. 279).
Kaplan and Cooper (1998, pp. 301-306) state that the integration with ERP systems allow all managerial processes, including budgeting, what-if analysis, and transfer pricing to be also based on activities rather than only dollars. Activity-based budgeting gives companies the opportunity to authorize and control resources based on accurate demand information. Accuracy increases because activity-based budgeting is based on facts, and less upon power, influence, and negotiating ability. Furthermore, the activity-level focus of budgeting leads to more accuracy in forecasting the demands for all direct and, especially indirect activities.
At the same time as Kaplan and Cooper’s (1998) important book, Davenport (1998, p. 122) wrote “the business world’s embrace of enterprise systems may in fact be the most important development in the corporate use of information technology in the 1990s.” Davenport (1998, p. 127) expected companies to change with the implementation of ERP systems:
In addition to having important strategic implications, enterprise systems also have a direct, and often paradoxical, impact on a company’s organization and culture. On the one hand, by providing universal, real-time access to operating and financial data, the systems allow companies to streamline their management structures, creating flatter, more flexible, and more democratic organizations. On the other hand, they also involve the centralization of control over information and the standardization of processes, which are qualities more consistent with hierarchical, command-and-control organizations with uniform cultures.
The paradox with ERP systems – streamlined, flatter, and more flexible and democratic (i.e., more control at the frontline) and centralization of control over information and the standardization of processes (i.e., more control at the centre) -- makes Davenport (1998, p. 131) ask how will ERP systems affect companies? Another equally relevant question would be, how will ERP systems affect management accounting? Taken together, Kaplan and Cooper (1998) and Davenport (1998) suggest that ERP systems will change companies, but th
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