Page 28 - CMA Journal (Nov-Dec 2024)

F oc us S ec t ion

2.2 Adoption of ERP in Public Sector Accounting software [iv] . Without the necessary IT infrastructure, Furthermore, maintaining and upgrading ERP software 2.4.2 Enhanced Transparency and Accountability nancial management. While the road to digital
organizations are unable to fully leverage the demands specialized IT expertise, which is often lacking transformation may be challenging, the potential
The public sector in many countries, including Pakistan, capabilities of ERP systems, limiting their e ectiveness. in public sector organizations. The limited availability of ERP systems also enhance transparency and bene ts make it a worthwhile endeavor for public sector
has traditionally relied on manual or semi-automated skilled IT professionals poses a signi cant challenge to accountability in public sector accounting. By providing organizations worldwide.
accounting systems. During the on-site visit to various 2.3.2 Operational Challenges the e ective utilization of ERP-based accounting real-time access to nancial data, stakeholders can
public sector organizations and discussions with systems. monitor the organization's nancial performance and Acknowledgement: The authors acknowledge the
stakeholders, it was noted that for tasks, nearly 80% of Operational challenges also play a signi cant role in make sure resources are being spent e ciently thanks invaluable guidance of Dr. Saadia Irfan under whom a
the requires software is missing. The Khata system is still hindering the integration of ERP systems. The 2.3.5 Resource-Based Challenges to ERP systems. This transparency is particularly related research endeavor was performed and
in use, and most tasks are performed manually. This requirement for precise and trustworthy data is one of important in the public sector, where accountability to reproduced in this article, where necessary.
reliance on manual processes not only increases the risk the main operating challenges. ERP systems need Finally, resource-based challenges, including nancial taxpayers and other stakeholders is a key concern.
of errors but also limits the ability of public sector precise data inputs in order to produce useful results, and human resources, are a signi cant barrier to the References
organizations to generate accurate and timely nancial but many public sector organizations struggle with data integration of ERP systems. The implementation of ERP One of the participants highlighted that accrual [i]. Ullah, I. and Ali, A., 2022. Government Accounting in Pakistan: transition from
reports. Additionally, ine ciencies arise from the lack of quality issues. As noted, The validity of the information systems requires substantial nancial investment, both accounting improves accountability and transparency, a Legacy system to the New Accounting Model.
integration between several accounting activities, is di cult to obtain. Information is complicated, and in terms of software licensing and hardware i.e., end users are aware of ERP’s potential bene ts. By [ii]. Buzdar, Fahd Haider. 2020. "Problems in Implementation of PIFRA's New
including payroll, accounts payable, and accounts creating it takes a long time [xiv] . infrastructure. Organizations must also spend money on integrating ERP systems, public sector organizations can Accounting Model." ECOSAI Circular 25 (1): 18--29.
receivable and makes it di cult to achieve a Another operational challenge is the need for extensive change management and training to make sure sta move towards accrual-based accounting, which [iii]. Arnaboldi, M. and Lapsley, I., 2009. On the implementation of accrual
comprehensive view of the organization's nancial training and change management. The transition from members can utilize the new technology e ciently. provides a more accurate picture of the organization's 3.3 Phased Implementation Approach accounting: a study of con ict and ambiguity.
health [v]. manual or semi-automated systems to ERP systems It is noted that the nancial and resource-based nancial health and improves accountability [xii] . [iv] Adhikari, P. and Garseth-Nesbakk, L., 2016, June. Implementing public sector
accruals in OECD member states: Major issues and challenges. In Accounting
2.3 Challenges in Integrating ERP Systems in Public requires a signi cant shift in the way employees work. implementation costs as seen from the perspectives of 2.4.3 Greater E ciency in Operations Organizations should adopt a phased approach to ERP Forum (Vol. 40, No. 2, pp. 125-142). No longer published by Elsevier.
integration, beginning with pilot projects before
[ix]
Sector Accounting This shift can be di cult to achieve, particularly in audit and nance, poses a signi cant challenge . Since [v]. ACCA 2017. IPSAS implementation current status and challenges.
organizations where employees are accustomed to many public sector organizations have little funding, Lastly, by automating repetitive processes and expanding system-wide implementation. This allows for [vi] Elahi, T., 2015. The Project to Improve Financial Reporting and Auditing
Many governments have embraced digital traditional accounting practices. It is highlighted that allocating the resources required for ERP adoption can be minimising the need for human data entry, ERP systems gradual adaptation, minimizing operational disruptions (PIFRA): Issues in the implementation of ERP in Public sector of Pakistan
transformation by adopting ERP systems to enhance the vast majority of employees in the nance and challenging. Furthermore, the lack of quali ed the e ciency of accounting operations. In addition to and resistance from employees. (Doctoral dissertation, University of Essex).
nancial reporting and budgetary control. The New accounting divisions lack accounting knowledge and accounting professionals in the public sector exacerbates reducing the likelihood of errors, this automation frees 3.4 Government and Stakeholder Support [vii]. Brusca, I. and Martínez, J.C., 2016. Adopting International Public Sector
Accounting Standards: a challenge for modernizing and harmonizing public
1. Introduction ERP systems, and the potential bene ts of this digital Accounting Model (NAM) in Pakistan, developed under experience . Without adequate training, employees the challenge, as organizations struggle to nd the up employees to concentrate on more important duties sector accounting.
[ii]
transformation. The article is structured into four main the Project to Improve Financial Reporting and Auditing may struggle to adapt to the new system, leading to expertise needed to manage and maintain ERP systems. like planning and nancial analysis. As the system in For public sector accounting reforms, strong
The digital transformation of accounting practices has sections: an introduction to the topic, a detailed debate (PIFRA), introduced ERP-based solutions to improve resistance and ine ciencies . place only records the cash portion of each transaction government commitment and support from [viii]. Connolly, C. and Hyndman, N., 2006. The actual implementation of accruals
accounting: caveats from a case within the UK public sector.
[iv]
become an essential element of modern nancial of the integration of ERP systems in public sector public sector accounting [ii] . The NAM incorporated 2.4 Bene ts of ERP Systems in Public Sector and completely ignores the other aspects, the stakeholders such as the World Bank and IMF are crucial. [ix]. Harun, H., Van Peursem, K. and Eggleton, I., 2012. Institutionalization of
management. The adoption of technology-driven organizations, best practices for implantation of ERP, SAP-based ERP systems, shifting from manual 2.3.3 Resistance to Change, Lack of Training and Accounting previously employed single-entry method of the Governments should establish clear policies and accrual accounting in the Indonesian public sector.
accounting solutions, such as Enterprise Resource and a conclusion with recommendations for the way record-keeping to a double-entry accounting Policy Shifts previous period did not provide a true and fair picture of allocate su cient resources to ensure the successful [x]. Dissanayake, T., Dellaportas, S. and Yapa, P.S., 2020. The di usion adoption of
Planning (ERP) systems, has revolutionized how forward. framework . Despite the challenges, the integration of ERP systems the entity's nancial situation [xiii]. By adopting ERP adoption of ERP-based accounting systems [ix]. accrual accounting in Sri Lankan local governments.
[ii]
organizations process nancial data, maintain records, Cultural challenges also play a signi cant role in in public sector accounting o ers numerous bene ts. systems, organizations can move away from these [xi]. Hyndman, N. and Connolly, C., 2011. Accruals accounting in the public sector:
and ensure compliance. Digital transformation in 2. Digital Transformation in Accounting However, despite these advancements, Pakistan and hindering the adoption of ERP systems in the public These bene ts include improved nancial management, outdated practices and achieve greater e ciency in 4. Conclusion and Way Forward A road not always taken.
accounting facilitates real-time data processing, Practices several other developing economies continue to face sector. In many cases, there is a lack of willingness enhanced transparency and accountability, and greater their accounting operations. [xii]. Jeppesen, K.K., 2019. The role of auditing in the ght against corruption.
enhances nancial transparency, and improves challenges in fully adopting ERP systems. Key obstacles among employees to embrace new technologies and e ciency in operations. The integration of ERP systems in public sector accounting [xiii]. Lapsley, I., Mussari, R. and Paulsson, G., 2009. On the adoption of accrual
decision-making by integrating di erent accounting 2.1 Evolution of Accounting Systems: include inadequate IT infrastructure, resistance to processes. It is noted that There are many accountants 2.4.1 Improved Financial Management 3. Best Practices for ERP Implementation in represents a signi cant opportunity for improving accounting in the public sector: a self-evident and problematic reform.
functions into a single digital ecosystem . change, and insu cient training for accounting and clerks in government organizations who are Accounting nancial management, transparency, and e ciency. [xiv]. Ahmed, I. 2018. Conceptual and Statutory Framework for Public Sector
[i]
Historically, accounting practices relied on manual professionals . completely content with their work and methods. This Among the main advantages of ERP systems is their However, as highlighted in this article, the adoption of ERP Accounting-Pakistan.
[vi]
ERP systems have become an integral component of bookkeeping, single-entry accounting, and fragmented complacency can make it di cult to implement new ability to provide real-time nancial information, 3.1 Strategic Planning and Feasibility Analysis systems is not without its challenges. Technical, About the Authors: Dr. Muhammad Azhar Khan graduated
digital transformation in accounting. These systems nancial management systems. Over time, 2.3.1 Technical Challenges systems, particularly if employees perceive the changes enabling organizations to make more informed operational, cultural, and resource-based barriers must be from the National University of Sciences & Technology (NUST),
consolidate nancial information from various organizations transitioned to digital solutions, adopting as a threat to their job security or routine. decisions. Payroll, accounts payable, and accounts Before integrating an ERP system into accounting addressed in order to guarantee successful deployment of Islamabad, with a PhD in Business Administration (Finance). In
departments, streamline accounting processes, and computer-based accounting software that automated One of the primary technical challenges in integrating receivable are just a few of the accounting tasks that ERP processes, organizations should conduct a feasibility ERP systems in the public sector. addition, he holds the designation of Fellow Chartered
provide robust reporting capabilities that aid in nancial key processes such as bookkeeping, payroll, and ERP systems is the complexity of the systems Additionally, frequent changes in government policies systems combine into a single platform, providing a study to assess their readiness for digital transformation. Management Accountant (FCMA), Certi ed Internal Auditor (CIA),
and Fellow Public Finance Accountant. Dr. Khan has worked in the
management. Many public and private sector nancial reporting. The introduction of ERP systems themselves. ERP systems are highly sophisticated and and leadership in countries like Pakistan impact the comprehensive view of the organization's nancial This includes evaluating existing nancial management To overcome these challenges, public sector public, governmental, and developmental sectors for over 18 years,
organizations worldwide have implemented ERP further enhanced this evolution by integrating all require signi cant customization to meet the speci c consistency of ERP implementation e orts. Many digital position [VII]. This integration allows for more accurate practices, identifying potential risks, and estimating organizations may implement ERP in stages, beginning gaining practical knowledge in accounting, auditing, and nance.
solutions to transition from traditional, often accounting functions into a centralized database, needs of public sector organizations. It is noted that transformation initiatives are disrupted due to policy nancial reporting and better management of implementation costs. with pilot projects and gradually expanding the system’s Dr. Khan is an active visiting faculty member at various universities
[ix].
fragmented accounting methods to a uni ed and allowing for seamless nancial operations and real-time there are issues with using the fair value concept for shifts and lack of long-term strategic planning resources. 3.2 Training and Capacity Building functionality. Additionally, to guarantee that sta and DAIs in addition to his professional activity. Financial
[iii]
automated approach. However, integrating ERP systems reporting . asset identi cation as well. [iii]. This complexity is further 2.3.4 IT and Data Security Concerns members can utilise the new technology e ciently, reporting, risk-taking, corporate governance, investor protection,
into accounting comes with signi cant challenges, compounded by the need to integrate ERP systems with One of the participants in this research highlights that Comprehensive training programs for accountants, organization may invest in trainings and change nancial restrictions, investment e ciency, and Islamic nance are
among his areas of research.
particularly in countries with evolving nancial Organizations can switch from traditional cash-based existing legacy systems, which may not be compatible ERP systems require robust cybersecurity measures to the main characteristic of NAM was how SAP was nancial managers, and IT personnel are essential for management. Finally, governments and donor agencies
[iii]
infrastructures, such as Pakistan . accounting to accrual-based accounting with the help with modern software . protect nancial data from breaches and unauthorized con gured to record a transaction's double entry. This successful ERP adoption. Organizations should invest in should provide the necessary nancial and technical Mr. Muhammad Mazhar Khan is a Chartered Management
[ii]
of ERP-based accounting systems, aligning nancial access. Many organizations struggle with implementing double-entry accounting system provides a more support to facilitate the adoption of ERP systems in the Accountant (FCMA) and a distinction holder. With 14 years of
This article explores the integration of ERP systems in reporting with international standards. Many developed Additionally, the lack of IT infrastructure in many public advanced security protocols, leaving ERP-based accurate re ection of the organization's nancial workshops, online courses, and certi cation programs public sector. hands-on experience in accounting, audit and nancial
to enhance employees' ERP pro ciency.
accounting practices, with a focus on the public sector. countries, including the UK, Australia, and New Zealand, sector organizations poses a signi cant barrier to the accounting systems vulnerable to cyber threats . position, enabling better decision-making and resource management, Mr. Khan has expertise spanning across nancial
[x]
Drawing on insights from practically exploring the have successfully adopted accrual-based accounting adoption of ERP systems. It is highlighted that most allocation . In conclusion, the integration of ERP systems in public analysis, budgeting, taxation and business advisory. Mr. Khan also
[xi]
public sector, we examined the current state of through ERP systems, improving nancial transparency public sector organizations do not have up-to-date sector accounting is a critical step toward achieving specializes in MS Excel automation, Power BI and data analysis,
helping businesses transform raw data into valuable insights.
[iv]
accounting systems, the challenges faced in adopting and accountability . greater transparency, accountability, and e ciency in
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