*Economics / 6. Marketing and Management

BABALOLA YISAU ABIODUN [PhD Student].

Accounting and Auditing Department

Volodymyr Dahl East Ukrainian National University, Lugansk, Ukraine

THE PROSPECT AND CHALLENGES OF ADOPTING PAPERLESS ACCOUNTING SYSTEMS IN SMALL AND MEDIUM ENTERPRISES

Introduction

The modern information system and technologies play an over-increasing vital role in organizational business efficiency and profitability. So, it is clear that companies boosted technology investment spending strongly to address revenue, costs and competitiveness concerns. Automated accounting system is considered to be vital for the development of Small and medium enterprises as these systems would provide the owners with current reports about the financial conditions of their businesses and the direction of their business development; but the adoption of these systems in Small and medium enterprises faces much challenges because of the privacy of deploying such systems in business. The revolution in information and communication technologies has become central to developments in the corporate organizational services where sustainability is considered as one of the major challenges in Small and medium enterprises in most countries; Mohammad (2012) . The accomplishment of sustainability requires the availability of systems within the enterprise that enables rapid revision in different aspects to evaluate the performance of business (Moorthy et al., 2010). Most of Small and medium enterprises relies on traditional systems to save the input expenses to maximize the profit according to the way of thinking of most Small and medium enterprises owners. Automated accounting systems is still a challenging factor in Small and medium enterprises business as most of business owners found it easier to apply the traditional methods either because they lack the cost to establish such systems, lack the experience to run such systems, or they do not recognize the value of such systems to manage their business (Gullkvist, 2002). Meanwhile, technological innovations like modern information and communication technologies are substantially lowered by the advent of lower cost and open standards (Ada, 2002). The products of these enterprises are considered another limitation to lead changes in these enterprises. The product of these enterprises is characterized by being specialized one to be sold for the local or international markets. These enterprises rely on cheap raw materials and low production cost in general which makes these enterprises directed to specific category of consumers.

The discussion of moving from traditional accounting systems to automated systems is discussed by most authors through showing the advantages and disadvantages. In reality, it is more complex as it is related to tendency to innovation and adoption of modern information technology to run business where the manager of business is the owner of the business. This indicates that the change inside the enterprise or shifting from one system to another should start with the owner of the enterprise. Making change inside Small and medium enterprises is not simple, because the owners requires solid base to rely on to accomplish any new success to make the change. Moreover, the change inside Small and medium enterprises requires new expenses since these enterprises depend on low capital. These expenses should meet with tangible returns to be approved by managers.

In Small and medium enterprises, the information technologies infrastructure is not well established compared to large enterprises. The lack of well established information technologies infrastructure will lead to new financial overburden for the enterprise. In Small and medium enterprises any further expenses should be met by new income. With increased globalization, accelerated technical change and the growing demand for higher quality modern products, many traditional small and medium sized enterprises in developing countries face closure or very difficult upgrading. Even modern Small and medium enterprises in developed countries face very difficult competitive challenges in the emerging setting” (Sanjay 2000) cited by Mohammad (2012).

Small and medium enterprises form a considerable percentage of the working enterprises in most countries. The successive and competence of these enterprises will support many attitudes including the gross domestic product (GDP) and solving the social problems related to unemployment and as the backbones in the development of the country.

Methodology

This research is concerned with the prospects and challenges of adopting paperless accounting system with the look of certain factors like Availability; Size of business; Infrastructure; Attempt to use and Competition. Small and medium enterprises owners considered that owning automated accounting systems as luxury need. The owners considered the quantity of data is worthless to have automated accounting system. The general impression of having automated accounting system was negative. The following parts explain the impression of SMEs owners in line with the following factors:

Availability: Most of small and medium enterprises businesses believe that the application of these systems requires building them good software experienced company. This attitude to some extent is true, because such software is not available and using it requires the contract with programming companies to prepare it to match the needs of these businesses and the update of such software is necessary to meet the needs of their businesses.

Size of business: Most of small and medium enterprises businesses use the computer as a cash control only, but they did not have integrated accounting system. Absolutely none of the small and medium enterprises businesses owners have plans to develop his business in the future or increase his competitiveness. This happened because most of these businesses rely on specified customers and suppliers and they do not need to increase their businesses or deals.

Infrastructure: Lack of having computer to run automated accounting system to the cost of such systems in the market.

Attempt to use: Most small and medium enterprises businesses owners did not show their attempt to use such systems. Most of them believe that working such systems requires from them to recruit people to work with them and such system will requires from them to increase their current expenses for maintenance and update of these systems.

Competition: Lack of knowledge of what the automated accounting system can do and how this system can improve their businesses performance.

Conclusion

Despite the importance of automated accounting system to develop business, the owners of small and medium enterprises businesses believe that the need for such system is not crucial to follow up their business development. Most of owners believe that having automated accounting system will require increasing the number of employed staff and so increasing the current expenses as well as the requirements needed to build the suitable infrastructure for this software. Further research is necessary to better understand the status of the automated accounting system adoption and diffusion among small and medium enterprises businesses and efforts of their performance and efficiency.

References

Ada , S. (2002)."Adoption Issues of Business-to-Business internet commerce in European SMEs". 35th annual Hawaii international conference on system sciences.

Gullkvist, B. (2002), “Towards Paperless Accounting and Auditing” Finland: e-Business Research Center

Mohammad W. Hamdan (2012) European Journal of Economics, Finance and Administrative Sciences; ISSN 1450-2275 Issue 46 (2012)

Moorthy, M. et al (2010). The necessities of paperless accounting system. American Journal of Scientific Research. Vol. 7: 106-118.