"Developments in E-Commerce will have a profound effect on the role of management accounting systems, internal auditing and internal control." The question arises, "Are the accountants adequately prepared for the impending changes in their power, relevancy and reach?"
Information is the critical commodity that comes with E-Commerce and is a vital ingredient in the strategic recipe for most modern organisations.
Information is an integral part of electronic commerce, but electronic and traditional commerce each deal with information differently. Conveying information has traditionally been done through paper exchanges, direct personal contact, or through the phone or postal systems.
In electronic commerce, information may be conveyed via a communications network, or other electronic media. The way information is processed in electronic commerce also differs from the way it has been processed traditionally.
Traditionally, information accompanying a business transaction had to be acted upon by the individuals involved in the transaction. In electronic commerce, information processing is automated, reducing or eliminating the need for of paper.
Thus, conducting commerce electronically, differs from conducting commerce traditionally, in the way information is exchanged and processed. Since it is this change in the way information is processed and exchanged that distinguishes electronic from traditional commerce, we formulate the following definition: Electronic commerce is commerce transacted using automated processing procedures integrated with automated procedures for the interchange of information".
One of the major roles of accountants has always been to produce reports and thereby provide vital information to management. Another role has been to put in place systems that capture the data in business transactions inherent to that information.
These two roles have been enhanced by the introduction of Information Technology and E-Commerce to such an extent that accountants can, and sometime must, take active roles as:
1 Providers of information to management, beyond the financial data shown on the balance sheet (for example customer buying trends and the effectiveness of new E--Commerce applications).
2 IT and E-Commerce systems advisors, particularly for clients in small to medium sized enterprises who need help with the use of technology but cannot afford expensive technical consultants to advise them.
E-COMMERCE AND INFORMATION FOR MANAGEMENT The provision of quality information to management is essential if an organisation is to prosper. From the earliest days of computerised data processing, senior management has recognised the potential of IT to provide online information on the progress of the business.
Indeed, one of the attractions of IT was that it would improve the quality of the information, in terms of accuracy and currency, coming directly from the data source.
Earlier research into the provision of information from company data questioned the role of the accountant in this process and it revealed that the management accountant should be prepared to become the organisation's information broker, to ensure that data integrity is maintained, computer technology is used to its fullest potential and a wide range of information be provided to support managerial decision making.
With the advent of the Internet, information is being recognised as a valuable commodity, which can be extracted from company databases and delivered by the web either internally, as an Intranet, or externally, as an Extranet.
The Internet book company, Amazon is well known for passing on the cost savings of E-Commerce to offer lower-priced books to customers. However it also provides customers with a range of additional information services about the books it sells, including reviews, discussions and interviews.
It collects data on customer buying patterns, analyses these and provides suggestions on other books that may be of interest. It is these services that are prominent in giving this company its strategic advantage.
Data collected from customer transactions has considerable economic value. These arrangements allow the automated collection of data on the buying habits of participants as each transaction can be recorded against a particular individual.
It is then easy to extract information by summarising, analysing and displaying the data in management reports that can give a company an important strategic advantage in the market-place.
Such computer-based information systems can take one of three approaches as follows:
1 It can aggregate data to detect gross trends in the market place,
2 It can track detailed transactions, useful for delivery companies such couriers and trucking firms who can answer customer inquiries as to the exact location of their goods, and
3 It can "mine" the data to pick up patterns and linkages within the data.
The role of accountants can include the identification of such opportunities to make strategic use of information in company systems. At the same time they must be aware that there are legal issues concerned with information and new laws are emerging to deal with these issues.
The position is complicated by the global nature of E-Commerce systems where problems transcend national boundaries.
Protecting information privacy is a global issue. Consumer concerns will increasingly have an impact on businesses, which will have to be able to comply with multiple authorities. Clearly there is a need for the public to be able to exercise some control over the way information about them is handled.
The importance of fair information practices has been increasing over recent years as technology has made it cheaper and easier than ever before to collect, store, analyse, compare and share personal information.
One more concern that is becoming an issue within organisations is the privacy of information being processed by individual employees. One question being asked is "what rights do managers have over employees use of email and the Web?" Do they have a right to check the contents of email messages and their enclosures? Can employees zip up or password enclosures?
There are questions as to who owns particular bits of information and at what point that ownership changes. These will be of more concern as the future of E--Commerce unfolds.
ACCOUNTANTS AS E-COMMERCE ADVISORS One of the matters, that is important is the need for accountants to be IT literate, or at least have a thorough understanding of IT issues. There were some accountants who believed that skilled technicians should be available to deal with IT problems.
However most of the accountants recognised that IT was an area that would continue to concern them. In the current climate where there is pressure to adopt new E-Commerce applications there are obvious roles for accountant who wish to take advantage of the opportunity. It is the belief that, for practitioners, the need to attend professional development course and keep up-to-date with current trends, is particularly important with the advances of E-Commerce.
There are many aspects of E-Commerce that can critically affect both the accountants own business and that of their clients. In regard to the latter, clients may ask, or even expect, their accountant to advise them on E-Commerce matters relating to their business and as E-Commerce is so closely integrated with business processes, that it cannot be ignored in the business accounting systems. A knowledgeable accountant could even provide a more proactive as opposed to reactive service to clients than in the past.
Accountants have been among the first group of professionals to use IT. They are the "domain experts" when is comes to spreadsheets and accounting packages. E-Commerce is also looking for domain experts and as repeatedly said by accountants at the IT conference, E-Commerce has as much to do with ways of doing business as it has with new technology.
However many businesses do not have skills within the company to implement E-Commerce. While larger companies can afford expensive consultants, most SMEs are looking for reliable advice that they can afford.
The economics of the Internet makes international trading operations viable for a wide range of businesses. However it was reported that most E-Commerce is being conducted in larger organisations and SMEs have a much lower use of E-Commerce.
There are economies of scale and lower unit cost for large companies. SME do not have the know-how or resources and cannot afford the expensive expert E-Commerce consultants.
Many SMEs are turning to more accessible experts such as accountants for advise on E-Commerce and this in turn provides accountants with some knowledge of the area to play an important role in the future of such companies.
E-Commerce is becoming more and more attractive for SMEs, not only for more efficient ways of doing business but also in the information management area mentioned above. The lack of information on which to base considered decisions is also more acute for small business.
These firms often have little time to address strategic issues, to observe what their competitors are doing, to be aware of developments in technology they could use and to research market opportunities outside their traditional coverage.
Where firms operate without perfect information strategic, decisions are less robust. Electronic commerce, and more particularly on-line technologies, are becoming an increasingly valuable tool in efficiently providing information on markets, customers and competitors.
ACCOUNTANTS MOVE FROM THE BACKROOM TO THE BOARDROOM
1 The changing role of accountants as they become more involved as non-executive directors.
2 Accountancy, long thought by many outside the profession to be immune to change, is about to be transformed.
3 The changes are so great that some even believe the word "accountant" might disappear from job titles.
These are the findings of a report entitled "Next Generation Accountant", released by Robert Half International (RHI).
The report determines how today's trends will shape the future of accounting and finance professions, and identifies the skills which future accountants will need to be successful.
In the report the question asked along the lines of: "What will the accountant of the future be like?" "What will he be doing?" and "What skills and competencies will she need most to be successful?"
To find the answers, researchers interviewed 1,400 chief financial officers (CFOs) in the US, as well as a wide range of accountancy experts and academics. When CFOs were asked "Which areas of specialisation would you recommend to someone just beginning their career in accounting?", 23 percent said personal financial planning; followed by tax accounting (21 percent); e-commerce strategy (17 percent) and assurance services/auditing (12 percent).
The CFOs also predicted that issues and responsibilities outside of traditional accounting functions would account for almost 40 percent of a senior accountant's time five years from now. Apart from financial expertise, they forecast that the important knowledge areas would be technology skills (ranked first by 44 percent); strong communication skills (24 percent) and general business knowledge (16 percent).
This increasing emphasis on strategic thinking, technology and communication skills is perhaps the report's most important findings.
The report claims that 82 percent of CFOs said their accounting departments have become more involved with their companies' technology initiatives in the last five years, and 53 percent said IT training will be their first priority in supporting professional development for their accounting staff in the next two years.
SPECIFIC ISSUES FOR SMES The economics of the Internet makes international trading operations viable for a wide range of businesses. However it was reported at the 1999 IT conference of the Institute that most E-Commerce is being conducted in larger organisations and SMEs have a much lower use of E-Commerce.
There are economies of scale and lower unit cost for large companies SME do not have the know-how or resources and cannot afford the expensive expert E-Commerce consultants. While larger companies can afford expensive consultants, most SMEs are looking for reliable advice that they can afford.
Many SMEs are turning to more accessible advisors, such as accountants, for guidance on E-Commerce and this in turn provides accountants with some knowledge of the area to play an important role in the future of such companies.
One opportunity for accountants is that e-commerce could enable them to act as ASPs (Application Service Providers). This will enable them to operate in a closer-to-live client environment which in turn will allow them to act in a pre-emptive as opposed to post event manner.
Hosting clients' accounting systems will tend to tie their clients to a greater extent while enabling lower cost services to be provided. Opportunities will then exist to provide wider services directly or through an intermediary.
E-Commerce is becoming more and more attractive for SMEs, not only for more efficient ways of doing business but also in the information management area. The lack of information on which to base considered decisions is also more acute for small business.
These firms often have little time to address strategic issues, to observe what their competitors are doing, to be aware of developments in technology they could use and to research market opportunities outside their traditional coverage. Where firms operate without perfect information strategic, decisions are less robust.
Electronic commerce, and more particularly on-line technologies, are becoming an increasingly valuable tool in efficiently providing information on markets, customers and competitors.
Courtesy: The Corporate Secretary
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