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Streamlining Operations: The Implementation of Accounting Information

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Recent Advances in Academic Research and Development ISBN: 978-81-965784-2-8

Streamlining Operations: The Implementation of

Accounting Information Systems in SMEs

Priyanka Koundal
Dr. Minie Bhalla**
Amandeep Kaur***
Dr. Veer P. Gangwar****

Introduction
Accounting information systems have grown to become increasingly important
instruments for businesses to succeed and surpass their competitors in the global
market (İyibildiren et al., 2023). Accounting information systems adapt to economic
and technological advancements, enhancing corporate management by modernizing
accounting and reporting, and enhancing analysis, planning, and forecasting
(Kucherenko et al., 2021). Accounting systems have evolved from manual to complex
computerized systems for financial statements, benefiting businesses, governments,
and nonprofits owing to technological advancements(Doucet & Doucet, 2003). (Patel,
2015) concluded that in their studies the accounting information system is highly
effective for decision-making or decision making success, internal control, financial
reporting quality, financial transaction facilitation, and organizational profitability.
Accounting record-keeping positively impacts small-scale enterprises' performance,
as it is crucial for decision-making and a crucial aspect of business operations(Abdul-
Rahamon & Adejare, 2014). WORLD BANK has also quoted on its website that “Small
and Medium Enterprises (SMEs) play a major role in most economies, particularly in
developing countries. SMEs account for the majority of businesses worldwide and are
important contributors to job creation and global economic development. They
represent about 90% of businesses and more than 50% of employment worldwide".
An effective AIS is significant for SMEs given that it streamlines financial processes,

 Research Scholar, Mittal School of Business, Lovely Professional University, Punjab, India.
**
Associate Professor, Mittal School of Business, Lovely Professional University, Punjab, India.
*** Research Scholar, Mittal School of Business, Lovely Professional University, Punjab, India.
**** Professor, Mittal School of Business, Lovely Professional University, Punjab, India.
Streamlining Operations: The Implementation of Accounting Information Systems in SMEs 37

streamlines legal compliance, and fosters informed decision-making, all of which

contribute to their holistic growth and success. Accounting Information Systems (AIS)
enhance SMEs' operations by automating tasks, ensuring data accuracy, streamlining
processes, and enhancing decision-making. They minimize redundancy, produce real-
time financial reports, and ensure regulatory compliance. The accounting information
system (AIS) is crucial for organizational or management decision making, providing
essential financial and non-financial information to managers at various levels(Nworie
& Okafor, 2023). Thus (Johnbest et al., 2020) explained that maintaining proper
record of business transactions plays an important role for businesses of all sizes and
sorts, particularly profit-oriented ones, as it helps finance growth, expansion, and
diversification. A culture of proper bookkeeping benefits small businesses, enhancing
performance and success. This review study addresses the importance of accounting
information systems in increasing the efficiency and accuracy of small and medium-
sized businesses. By automating functions such as bookkeeping, financial reporting,
and inventory management, these solutions enable informed decisions and optimize
specific operations, thereby providing SMEs with a thorough understanding of the
possible benefits of embracing technology.
Emergence of Accounting information system (AIS) adoption in Business
Organizations
Computer technology has revolutionized accounting systems, with General
Electric's first computerized system in 1954. In the mid-1960s, smaller, less expensive
machines increased their use, prompting the industry to develop software and invite
Big Eight firms to develop EDP auditing(Ernest, 2015). Accounting information
systems (AIS) are computer-based software packages that perform accounting
functions such as recording, storing, retrieving, sorting, analyzing, displaying, and
sending data to stakeholders. It enhances communication between departments and
branches by improving information quality and efficiency(Alamin et al., 2015).
According to (Mauldin & Ruchala, 1999) perspective, advanced IT in AIS applications
goes beyond simply enhancing efficiency and precision. It revolutionizes task
processes by offering intricate decision support systems that fundamentally transform
the way organizations operate. This shift highlights the significant impact of advanced
IT on improving the overall decision-making capabilities in AIS. According to (Ernest,
2015), Manual accounting systems use ledgers in paper format for recording financial
transactions, with different ledgers for accounts payable or trade payables , receivable
or trade receivables, and sales. Accountants consolidate these into general ledgers
and create financial statements. A computerized or automated accounting system
combines several components to generate books of accounts and computer-
generated records, enabling accountants to swiftly enter financial data into
spreadsheets, compute information, conduct trending studies, and report
discrepancies(Ernest, 2015).
38 Recent Advances in Academic Research and Development
Thus, AIS transforms economic and financial activities for user-friendly
decision-making by organizing components to accumulate, classify, process, and
analyze financial information for internal and external stakeholders(Alikhani et al.,
2013). The emergence of accounting information systems has many benefits in terms
of workplace efficiency, cost reduction, decision assistance, and competitiveness.
These benefits encourage companies to use AIS to better manage their financial
operations and establish themselves for success and growth. Accounting information
systems are vital for business organizations, including all sizes, streamlined
operations, improved performance, ensured compliance, accurate financial data,
enhanced transparency, and optimized financial management for business success.
Role of Accounting information system (AIS) in Streamlining Business
Operations of SMEs
The Accounting Information System plays an important role in optimizing
SMEs’ operations. It allows for effective financial data administration, automates
tasks, provides accurate reporting, aids decision-making, and improves security.
SMEs may streamline their operations, improve their financial performance, and set
the road for long-term growth using AIS power. Accounting Information Systems (AIS)
serve as an essential component in optimizing numerous business operations in the
following dimensions of SMEs.
S.no Different Dimensions of Business Sources
Operations of SMEs - Streamlined by AIS
(Accounting Information System)
1. Maintaining Financial Records- AIS (Abdul-Rahamon & Adejare,
enables firms to efficiently record and store 2014, 2014; Antony Sibi &
financial transactions, minimizing the need for Antony Lucia Merin, 2020;
manual record-keeping and the risk of errors. Ibrahim et al., 2020; Lather
et al., 2023).
2. Data Processing- AIS swiftly and properly (Al-Hattami & Kabra, 2022;
processes financial and accounting data, Grabski et al., 2011; Hall,
allowing for prompt decision-making and 2019; Trigo et al., 2016).
reporting. Budgeting, forecasting, and
financial analysis.
3. Financial Reporting- AIS generates (Agung, 2015; Aladwan &
complete financial reports for stakeholders Al-Adwan, 2023; Hertati et
such as investors, regulators, and tax al., 2021; Khaghaany, 2019;
agencies, including balance sheets, income Mitrović, 2016; Trigo et al.,
statements, and cash flow statements. 2014).
4. Decision Making Support- AIS aids (Cepêda & Monteiro, 2020;
management in making well-informed A. Monteiro et al., 2021;
decisions by delivering real-time financial data Paula Monteiro et al., 2022;
and analysis, hence enhancing overall Sarajevo, Bosnia and
business performance. Herzegovina et al., 2015).
Streamlining Operations: The Implementation of Accounting Information Systems in SMEs 39

5. Inventory Management- Inventory (Faccia et al., 2019; Hall,

management is streamlined by ERP systems, 2019; Kandelin & Lin, 1992;
which are frequently connected with AIS and Trigo et al., 2014; Wibowo
monitoring stock levels, reorder points, and et al., 2022).
demand, they lower carrying costs and
stockouts.
6. Internal Control- AIS serves in cost (Alzoubi, 2011; Gal & Akisik,
management by monitoring expenditures, 2020; Hall, 2019; Linval
seeing opportunities for cost reduction, and Frazer, 2020; A. P. Monteiro
maximizing resource allocation. Internal et al., 2021; Moreira
controls and safeguards are established by Monteiro et al., 2021; Teru
AIS to prevent errors and fraud. It guarantees et al., 2017; Wibowo et al.,
that financial transactions are correct and in 2022).
accordance with regulations, resulting in
improved financial control.
7. Enhances organizational Operational (Ahmad & Zabri, 2016a,
performance- Organizations are given more 2016b; Beg, 2018;
leverage by AIS by strengthening data Boulianne, 2007; Johnbest
accuracy, efficiency, compliance, risk et al., 2020; Latifah et al.,
management, and strategic planning, which 2020; Paula Monteiro et al.,
ultimately improves operational performance 2022; Škrinjar et al., 2008)
and competitiveness.
This system gathers, stores, and processes financial data, enabling SMEs to
keep track of their revenues, costs, assets, and obligations. An accounting information
system helps firms run more effectively and make decisions based on accurate and
current financial information by automating regular operations, such as bookkeeping
and financial reporting. Additionally, this system offers a single platform for organizing
and analysing financial data, enhancing the general openness and integrity of a
company's financial processes.
Accounting information systems are essential for synchronized business
operations, providing real-time data and analysis across functions. They enhance
decision-making processes, enable accurate financial information, and streamline
financial reporting. They also ensure compliance with regulatory requirements and
reduce errors or fraud risk. Automating routine tasks like data entry and reconciliation
frees up valuable time for employees to focus on strategic activities driving business
growth.
Implications of Research Work
According to a research report, accounting information systems (AIS) have the
potential to improve business operations for SMEs by increasing decision-making,
operational efficiency, resource utilization, and financial transparency. Accounting
theory development and the integration of technology and accounting have two
theoretical implications. Guidance for SME owners and managers on AIS
40 Recent Advances in Academic Research and Development
implementation, best practices, business process optimization, compliance and risk
management, and aiding development and expansion are practical consequences.
This study highlights the significance of considering elements such as cost,
compatibility with current systems, training needs, and data security to enable
successful implementation. Utilizing AIS, SMEs can locate development possibilities,
evaluate their viability, and obtain capital, enabling them to create plans to expand
their operations, break into new markets, and reach long-term growth goals. This
research offers useful insights for academics and professionals working in accounting
and SME management.
Conclusion and Future Research Agenda
The findings section presents an analysis of past studies and provides insights
into the function of AIS in optimizing SMEs' business processes. This emphasizes
AIS's significance of AIS as a strategic tool for overcoming resource constraints,
improving operational efficiency, and improving decision-making capacities. This
study discusses future research objectives and potential areas for further investigation
of the AIS and SMEs. AIS improves internal control systems, data integration,
financial reporting accuracy, and decision-making processes. Furthermore, the
analysis reveals that AIS implementation in SMEs leads to increased efficiency and
productivity, as well as improved decision-making capabilities. These findings suggest
that AIS can significantly contribute to the growth and success of SMEs by enhancing
their overall operational performance.
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