Organizational Structure
Discuss about the current organizational structure. What operational problems (e.g., inefficiency, errors) do you think the organisation could experience because of this structure?
2.Discuss about the Development and adoption of the accounting software packages.
In the era of digital business, it has become essential for the firms to make sure that they have adopted the best of technologies so as to smoothen their work process (Xero Blog, 2018). It is also essential that a company has an efficient organisational structure that is capable of managing all the operations. This is due to the reason that there are many operational problems that has arisen because of their organisational structure. A firm must always have a system acquisition method as per their requirement. Commonwealth Bank is one of the biggest banks in Australia and is making use of the software package named XERO. In this report, various aspects related to the software accounting software have been provided. It also highlights the Control problems that are present in the systems as well as frauds that can be possible. It also showcases the leaders that are present in the market as well as current gaps and challenges that are present in the accounting software and packages.
According to Schlagwein, Thorogood & Willcocks (2014) every organisation needs to have an organisational structure that is suitable for its business. In the firm like commonwealth bank where there are several units within the firm, it becomes essential for them to have an organisational structure that simplifies their working process. Presently the company has adopted an organisational structure that is hierarchical in shape. Since there are around 52,000 employees associated with different units hence hierarchical structure is highly efficient for such a huge workforce. Apart this it is also to be considered that firm has a large number of places through information gets generated. Keeping this in mind they have adopted information system that is pyramidal in shape. In many ways it has been installed as per the information that is generated at various levels. Since the information requirement of different levels of the organisation is different hence pyramidal shape also supports the information management. The four levelled pyramidal shape supports in various kinds of decision making. For example, the top level supports the strategic planning and policy making. The second level supports tactical planning for decision making or tactical plannng. Third level helps in the control and operation of the firm. The last stage gathers information that is related to the transactional processing.
Operational Problems Linked with Such Structure
Operational problems linked with such structure
On the contrary Belfo and Trigo (2013) Suggest that several operational problems arise due to the organisational structure Commonwealth bank has adopted. It somehow reduces the operational efficiency of the firm which is not good for facing the competition that is present in the industry. The first and foremost operational problem is the complexity of the organisational structure. This makes the management of the organisational structure difficult. With such organisational structure regulatory problems also arise. Many a time it is seen that there is difficulty in the flow of payments. Another major issue is that the information requirements are changing from time to time and hence providing training to all the employees needs to be done on regular basis so that they can effectively make use of all the systems. Apart from this data abstraction is very essential such a big firm like Commonwealth bank and it must be implemented at various levels. Ensuring this in such a complex organisational structure is a major problem.
System acquisition method
As per Bodnar and Hopwood, (2012) it is essential for every organisation to make sure that they have adopted the best system acquisition method. Due to specific problems, there are facing in the firm they need to have a system acquisition method that is dynamic as well as unique to their business. Customised software packages are taken use by the firms for having software that is made as per their requirements. It helps in reduction of intrusion by external sources. On the other hand, commercial software is something that is available in the market and is used by the manager as per the general requirements. These are also called proprietary software which helps in effective management of the records within the firm (Schorr et al., 2013).
Galliers and Leidner, (2014) believe that ERP systems are something that is an effective method because it is having specific nature and supports the organisation in the manner they do their work. It helps in effective utilisation of resources. It permits the firm to utilise integrated application software for managing the operations and activities in a better manner. It helps in resource planning that helps in forecasting the demand related to sustainable resource utilisation. Along with this ERP system supports features like data Integration to Commonwealth Bank.
In all the system acquisition method the best method that is most likely to be used by the firm is ERP software. It is able to give information regarding the utilisation of resources. It is also capable of making the banking process easier. For example, it aligns all the resources in such a manner that large number of consumers of the bank can be entertained. At the same time, ERP system streamlines the work process and make forecast for the future that helps in storing the data into the centralised system (Soudani, 2012). It reduces the operational cost at the same time it enhances mobility.
System Acquisition Method
System Flowchart
Kallunki, Laitinen & Silvola, (2011) argues that System flowchart is essential for any organisation as it defines the activities that may be carried out in an information system. It is also understood as physical design technique. The process that is followed by the Commonwealth bank is being highlighted in the flowchart and hence is capable of services to wide range of consumers at the same time. In the process of measuring the business operations as well as in the sales management this system flowchart is very beneficial. It is also able to define the sales procedures along with the advanced accounting services. It is a crucial part of the modern-day sales procedure and is adopted by the company so as to enhance the sales and revenue of the firm. The biggest benefit of using system flowchart is that it gives the idea about the flaws that are present in the system and hence helps in finding ways to eliminate it.
Figure 1: System Flow Chart for Commonwealth Bank
Control problems
According to Lim (2013), there are several control problems that exist in systems or software that is used by the firm. These issues reduce the operational efficiency of the entire system. There are several types of control problems that exist in any firm such as Preventive control, Detective control and Corrective control (Toth, 2012). These are generally caused because of the internal and external errors or faults present in the system. Commonwealth Bank is facing several kinds of risks like access, hacking of data, frauds, errors and mischiefs. With the increasing use of malicious contents by various individuals, it has been seen that Commonwealth Bank is at higher risk to get affected by the external attacks. Retaining and hiring new employee has been a challenge for the Commonwealth Bank. Company also faced technical errors many a time due to excessive load on their systems.
Cassidy, (2016) believes that training is required for the employees so as to safeguard them from any external attacks. Apart from this they also had to deal with the control problems such as laggings in the data collection method as well as cybersecurity. Since they are largely dependent on the cloud software for their data management, hence they are at higher risk of getting attacked by hackers. Commonwealth bank has large amount of confidential information linked to their customers hence it becomes crucial to protect these data from getting leaked. If it goes into the hands of unauthenticated persons, then there is a chance that they could misuse that data. Along with all these another significant problem is that ERP software entails application complexities that may be the reason for improper collection of data associated with application and software. Company needs to do regular check-up of the internal control they have so as to find the loop holes that is present in the system and hence can take steps to eliminate them.
System Flowchart
Organisations use accounting software for recording and processing their financial transactions; the software is a key part of the accounting information system of companies. Simunek, Van Genuchten & Sejna (2015) provided that corporations use the accounting software for collecting necessary information and developing business strategies which assist them in making business decisions regarding its financial affairs. These activities prove that the accounting software is not only used for reporting and processing of financial transactions, the management also uses it for handling financial activities and take related business decisions. Commonwealth Bank uses their accounting software to improve the security of their financial information and positively affecting the productivity of its employees. Effective utilisation and growth of ERP System can assist the enterprise in increasing its effectiveness and profitability.
Commonwealth Bank uses Xero accounting software to perform day-to-day business activities relating to saving, and processing of bank feeds automatically. The software enables the enterprise to provide an overview of its financial records. As per McWilliams (2017), the software is a cloud-based platform due to which Commonwealth Bank did not have to install any application or software into its system. Employees use the software through an internet connection, and the company has provided separate username and password to identify users and their work. Furthermore, customers are also able to use the software by using Xero account or NetBank account which enables them to perform their banking tractions from the comfort of their home. The key competitors of the software include Financial Force Accounting, NetSuite ERP, Jira, and Wave.
Current Market Size
As per Kwek (2013), Commonwealth Bank has a market capitalisation of over $100 billion and it investors are receiving high profits on their investments. The corporation has established a regulatory environment which ensures that it is able to generate consistent profits. On the other hand, Xero Limited has a market capitalisation of over $5 billion, and it is one of the most popular accounting software between small and medium enterprises (Investmart, 2018). Other organisations which use Xero and deal with Commonwealth Bank are able to get quick access and accurate information due to the effective infrastructure of the software. Furthermore, customers are able to get instant information about their banking activities and other data by using Xero. Effective implementation of Xero system opens the opportunities for business innovations that can lead to new developments and easier processes which improve the efficiency of the overall procedure.
Control Problems
Current market Leaders and basis of their Competitive Advantage
There are a number of competitors in the industry which investments significant amount of capital in research and development to generating a competitive advantage. Major competitors of Commonwealth Bank include Westpac, ANZ Bank, National Australia Bank, ASB Bank and others. Burdon, Mooney & Kang (2017) stated that these organisations rely on their accounting software to improve the accuracy and efficiency of their operations which resulted in generating a competitive advantage. On the other hand, there are many major competitors of Xero as well which focuses on capturing new clients by improving their services such as Wave, FreshBooks, QuickBooks, NetSuite ERP, Intacct, Financial Force Accounting and others.
In Australia, the financial services industry is an integral of the nation’s economy, and it contributes over $140 billion; the industry employs more than 450,000 people (The Treasury, 2018). Banking organisations use a number of accounting software based on their requirements in order to improve efficiency and accuracy which resulted in generating a competitive advantage. One of the key factors that provide a competitive advantage to the company is a reduction in operating expenses. As per Schiefelbein (2012), effective use of technology has enabled Commonwealth Bank to reduce its IT expenditure by 3 percent. Furthermore, it has reduced its Cost to Income Ration by 46 percent and retail costs by 31.8 percent. The corporation has also launched its mobile application to target its customers and making their banking transactions more efficient.
Moreover, the bank has launched a mobile application called ‘Kaching’ which enable its customers to perform more banking functions through their smartphones (Commbank, 2012). Customers use this application for performing banking activities such as fund transfer, bills payments, online shopping, keeping track of their expenses and others. Effective use of accounting system ensures that each of these transactions is effectively recorded in the system. The enterprise has generated a competitive advantage by assessing their customers’ demands and fulfilling them by using innovative technologies. Effective use of accounting software along with other technologies assists Commonwealth Bank in avoiding errors in their financial reporting and improving overall efficiency which satisfies customers’ demand and generates a competitive advantage.
Current Gaps and Challenges
The accounting software focuses on improving the accuracy and efficiency of banking transactions making it easier for customers to perform their banking transactions; however, there are few gaps which resulted in reducing the productivity of the corporation. According to McWilliams (2017), the risk of cyber-attacks is one of the biggest challenges faces by the enterprise because Xero is a cloud-based platform which can be hacked by cybercriminals. Commonwealth Bank is required to invest in appropriate security measures for improving the security of their accounting data. According to the company, it uses world-class security measures to protect its customers and their data from breaching through the mobile application. It provides 100 percent security guarantee to its customers regarding use its NetBank and CommBank Application. As per Uribe (2017), the company is years ahead in terms of cybersecurity than compared to its competitors.
Recommendations
It is recommended that Commonwealth Bank should improve the control over its accounting operations in order to improve their efficiency. The corporation is using ERP software, and it should use firewalls to protect its data. Although the security system of Commonwealth Bank is solid, however, it is required to improve its authentication process. Effective authentication will result in reducing the risk of unauthorised access; the company should use two-step verification system to protect its customers’ data in the mobile application. Furthermore, it should ensure that the ERP system is linked with external and internal security configuration both of which are focused towards avoiding a data breach. It should also continuously monitor the process of accounting system for avoiding the risk of cyber-attack.
Conclusion
In conclusion, the role and significance of accounting software have increased substantially in the banking industry, and organisations use it to perform various financial activities. The organisational structure of Commonwealth Bank is hierarchical, and it focuses toward controlling its accounting system since it resulted in increasing its profitability and assist the company during adverse business conditions. It uses Xero for performing its accounting related transactions which reduces accounting errors and increase efficiency by automatically recording transactions. The corporation has a large market share, and many customers rely on the effectiveness of its services. It focuses towards fulfilling its customers’ banking requirements while at the same time improving the security of their system. Various recommendations are given in the report that can be used by Commonwealth Bank for improving the security of its ERP systems such as two-step verification, firewalls, and authorisation program. These factors assist the enterprise in increasing its profitability and maintaining its competitive advantage which sustains its future growth.
References
Belfo, F. and Trigo, A., (2013) Accounting information systems: Tradition and future directions. Procedia Technology, 9, pp.536-546.
Bodnar, G.H. and Hopwood, W.S., (2012) Accounting information systems. England: Pearson Higher Ed.
Burdon, S., Mooney, G., & Kang, K. (2017). Lessons in Innovation from the Digital Marketplace. Journal of Service Theory and Practice.
Cassidy, A., (2016) A practical guide to information systems strategic planning. CRC press.
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Kwek, G. (2013). Commonwealth Bank’s market capitalisation rises above $100b. Retrieved from https://www.smh.com.au/business/markets/commonwealth-banks-market-capitalisation-rises-above-100b-20130103-2c6yi.html
Lim, F.P.C., (2013) Impact of information technology on accounting systems. Asia-Pasific Jornal of Multimedia Services Convergent with Art, Humanities and Socialgy, 3(2), pp.93-106.
McWilliams, K. (2017). Productivity in accounting services. Improving service sector productivity: the economic imperative, 118.
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Schlagwein, D., Thorogood, A. & Willcocks, L.P., (2014). How Commonwealth Bank of Australia Gained Benefits Using a Standards-Based, Multi-Provider Cloud Model. MIS Quarterly Executive, 13(4).
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The Treasury. (2018). The strength of Australia’s financial sector. Retrieved from https://fintech.treasury.gov.au/the-strength-of-australias-financial-sector/
Toth, Z., (2012) The current role of accounting information systems. Theory, Methodology, Practice, 8(1), p.91.
Uribe, A. (2017). Commonwealth Bank of Australia years ahead of rivals on cyber security. Retrieved from https://www.afr.com/business/banking-and-finance/financial-services/commonwealth-bank-of-australia-years-ahead-of-rivals-on-cyber-security-20170529-gwfg3y
Xero Blog. (2018). Xero and Commonwealth Bank unveil new innovations in small business banking. Retrieved from https://www.xero.com/blog/2016/07/xero-commonwealth-bank-unveil-new-innovations-small-business-banking/
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