Description
The effect of Business Intelligence Tools on Raising the Efficiency of Modern Management Accounting
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
68
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
The effect of Business Intelligence Tools on Raising the
Efficiency of Modern Management Accounting
ZIAD AL-ZUBI
Al-Zaytoonah University of Jordan, Accounting Department, Amman, Jordan
Email: [email protected]
OSAMA SAMIH SHABAN
Al-Zaytoonah University of Jordan, Accounting Department, Amman, Jordan
Postal Address: P.O. Box 130, 11733
Email: [email protected]
Tel No.: +962798 793 473
NABIL ALNASER
Al-Zaytoonah University of Jordan, Accounting Department, Amman, Jordan
Email: [email protected]
Abstract
This research study aims to update existing, traditional management accounting inquiry and decisions
system, in a holistic sense, so management accounting can reclaim its leading role in decision-making. The
main role of management accounting is to use available information in the best possible way to make the
best possible decisions. Handling information to highest possible use in order to increase the efficiency of
management accounting information system can be achieved through the adoption of Business Intelligence
tools (BI). Business intelligence tools such as ETL (Extract, Transform, and Load), OLAP (Online
Analytical Process), DWH (Data Warehouse) have been addressed. For achieving this purpose, number of
40 questionnaires has been designed, circulated by hand to a randomly selected sample of information
technology department and board of directors at the Jordanian Industrial Companies listed at Amman
Stock Exchange, SPSS package applied for the purpose of statistical analysis; arithmetic means, standard
deviations, percentages and Simple Regression. Finally, the study concluded that, the use of business
intelligence tools has a significant positive effect on modern management accounting, the decision process
can be more effective, and Management can save time and money through the use of BI tools.
Key Words: Management accounting, Business intelligence, OLAP, ETL, DWH.
Introduction
All the economist observers in our world agreed that, the current management accounting information
system is neglected. This negligence is due to the current systems, which are producing insufficient and
unreliable information. Because of lack of suitable alternative, today's managers are still using such
systems. Generally, most firms still face lack of regular, consistent information, necessary to accomplish
the basic daily operating functions.
Business Intelligence tools can be used as an effective tool to handle such information technology to make
management accounting or decision making more effective. Business intelligence can be defined as a
specific, integrated information technology of the company, which is based on a global approach, which
will be used to support decision-making. (Bars& Kemper, 2006). The application of Business Intelligence
in management accounting can be done through its tools such as (ETL), (OLAP), (DWH). Business
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
69
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
intelligence applications are one of the three Information Technology systems components; business
transaction application, and collaborative applications (Colin White, 2005). Business intelligence
applications analyze business operations and produce information to help business users understand,
improve and optimize business operations. Recently, there have been significant impacts in the use of
business intelligence applications especially in the field of the costing control systems and management
performance measures. The business intelligence impact is reaching everywhere and its influence is felt in
all the aspects of business. The non-technical users and end users, business analysts, Information
technology departments and external users are greatly influenced by BI (Nadeem &Jaffri, 2003).
Management information system is one of the most important components of management accounting in
any firm, it provides financial and economic information, and takes over other management functions such
as, collection of information for planning, control and decision-making. The information produced by the
management accounting system must be subject to periodic technical assessment, so their effectiveness can
be measured at the point when targets are achieved.
In the eighties of this century, some writers called to bring about a revolution in management accounting, in
order to cope with the revolution of modern manufacturing firms, (Johnson and Kaplan, 1991), in their
book titled "Relevance Lost: The Rise and Fall of Management Accounting, "The authors drew several
criticisms of management accounting, the most important of these criticisms said that, the traditional
management accounting methods do not correspond to modern changes, especially in the competitive
industrial environment. There has been a wide controversy about whether the concepts and teachings of
management accounting (the theoretical academic), conforms to and supports, the practice of management
accounting, (the practical side), (Scapens, 1984).The gap between the theoretical and practical (gap
between theoryand practice), and there has been a tendency to change management accounting research,
focusing on the interpretation and explanation of practice more than a trend to develop complex models.
Also it works on the adoption of research field that is related to reality, and teaching innovative modern
accounting techniques which are applied in successful companies. The use of BI tools by managerial
accounting can place the end users directly with the data they need. It moves data from sources systems to
make better decisions, and it enables users to become responsible for the specification, creation and
regeneration of the reports and analysis (Inmon & William 2002). In this research, we will try to test the
effect of BI application and spread of these tools, and standing on the most important factors affecting its
application and analysis. Also trying to prove that management accounting and through the use business
intelligence tools will bring about tremendous changes to the decision making process, which means; less
time, less efforts, less cost, and finally effective decisions.
Study Problem
The current system of decision making followed in the Jordanian industries is the typical form, which
depends on the flow of financial information from the accounting department, not from a data warehouse,
or data mining process. The current process of decision-making needs more advanced technological
methods. Business intelligence tools, and its usefulness in the field of management accounting can help
management of the Jordanian industries to make more efficient decision. The traditional technique of
management accounting adopted by these industries needs such tools of business intelligence in order to
improve its current decision system. This research study
Study Importance
The importance of this study can be embodied by the necessity of narrowing the gap between modern
management accounting development and its application in reality. In a changing business environment, we
are witnessing rapid development changes in technology, production and distribution. These rapid
technological developments have increased competition and led to the emergence of the modern
administrative techniques, which made companies to search for creating value for their customers, and
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
70
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
coordinating all their activities in order to satisfy customers' need and finally to achieve the firm's main
objectives.
Study Objectives
This research study aims to achieve the following objectives:
4.1 To acknowledge the real practice and effect of business intelligence tools on management accounting
techniques in the Jordanian industrial companies.
4.2 To know the effect of using of business intelligence tools on modern management accounting
techniques by the Jordanian industrial companies.
Study Hypothesis
H0:There is no effect of Business Intelligence tools on raising the efficiency of modern management
accounting
H1: There is an effect of Business Intelligence tools on raising the efficiency of modern management
accounting.
Previous Studies
Moorthy, Voon, Samsuri, Goplan, Tak yew (2012)
The study talked about the application of information technology in management accounting decision
making. The authors used the information technology tools in order to analyze management accounting
decision making. The study also tried to apply and connect information technology tools in management
accounting in order to control cost and to improve the efficiency of management accounting.The study
concluded that using information technology in management accounting will result in better financial
reports which will finally lead to better decision making.
Dolinsek, Strukelj (2012)
The study discussed the effects of technology and wealth on modern management accounting. The study
tried to explain the need for companies to modern technologies in managing their business, and the
challenges of applying modern management technology. The study concluded that, the technology is
changing very fast, and we should follow these changes in order to keep up with a fixed level of
management efficiency.
Yasmin&Hossan (2011)
The study discussed the significance of management accounting techniques in decision making. Budgetary
control, variance analysis, cost volume profit analysis, fund flow analysis, activity based costing, and
opportunity costing, are an examples of the management accounting techniques used in the study. The
study concluded that, companies should put more efforts in improving the use of the management
accounting techniques in order to improve their performance.
Galani, Gravas, Stavropoulos (2010)
The study discussed the impact of ERP systems on accounting process. The study introduced the Enterprise
Resource Planning (ERP), to be used in modern management accounting. Using such system will make on
reducing costs, and make better decision making. The study concluded that, using ERP will lead to better
relation between the company and its suppliers and customers.
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
71
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
Brandas (2010)
The study discussed the effects of decision support system model based on rules and OLAP for costs
management. The paper disclosed a decision making model (DSS), for costs management through the use
of business intelligence tools such as OLAP. The study concluded that, using business intelligence tools as
OLAP, will lead to effective control of business activities, which will lead to achieve the goals of the
enterprise.
Strumickas &Valanciene (2010)
The study discussed the development of modern management accounting system. The study also discussed
the practical and the theoretical parts, in the development of management accounting system within the
environment of the enterprise. The study concluded that, management accounting system is affected by the
internal, external environment and objectives of the enterprise.
Literature Review
Management accounting is the process of identification, measuring, accumulation, analysis, interpretation,
and communicating financial information to internal parties in order to make decisions capable of
achieving organization's goals. (Charles T. Horngren,2010). In other words management accounting
depends on the accuracy of the financial accounting communicated to management, on a timely basis, this
known by "Information Quality". An effective financial information system needs to be able to integrate
information of different types and from different sources (Romney & Steinbart, 2012).
Business intelligence was defined earlier as a specific, integrated information technology of the company,
which is based on a global approach, which will be used to support decision-making (Bars& Kemper,
2006). In other words BI refers to the use of information technology in order to improve business
effectiveness. An effective BI system will provide end users easy access to required information, which
will produce effective decisions to their jobs. BI is considered a precious tool in the hand of management
accounting which can provide a wide variety of relevant financial information for planning, control,
pricing, and other functions. Common functions of business intelligence technologies are reporting, online
analytical processing, analytics, data mining, process mining, complex event processing, business
performance management, benchmarking, text mining, predictive analytics and prescriptive analytics
(Wikipedia, 2013). To perform the functions of business intelligence technologies we should have a data
warehouse DWH. A data warehouse is a data used for reporting and data analysis. It is a central repository
of data which is created by integrating data from one or more disparate sources (Bars& Kemper, 2006).
Data warehouse store current as well as historical data, and it is used for creating trending reports for senior
management reporting, such as annual and quarterly comparisons. The data stored in the warehouse are
uploaded from the operational system. The data may pass through an operational data store for additional
operations before they are used in the DWH for reporting. Online analytical processing OLAP is another BI
tool that encompasses relational reporting and data mining (Pareek, 2007). OLAP applications include all
types of business reporting, budgeting, and forecasting financial reporting. OLAP components are
consolidation, drill-down, and slicing and dicing (Brein & Marakas, 2011). Consolidation involves the
aggregation of data that can be accumulated and computed in one or more dimensions, allowing for
complex analytical and ad-hoc queries with a rapid execution time. The drill-down is a technique that
allows users to navigate through the details. Slicing and dicing is a feature whereby users can take out a
specific set of data of the cube and view the slices from different viewpoints. ETL, refers to a process in
database usage, and especially in data warehousing that extract data from outside sources and transfer it to
fit operational needs, which can include quality levels, and finally loads it into the end target operational.
Business intelligence BI Applications include several techniques, which can be divided into three main
groups:
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
72
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
Data Generation
Both data generation and the magnitude data volume, that belong to a source systems make it impossible to
have direct access to the operating systems to achieve the objectives of analysis. So the first step of
operations process is to use a system that extracts data from various sources and then downloaded in the
areas required. ETL: Extract, Transform, Load. It is compatible with the function (Scorekeeping) in the
management accounting information system.
Data Delivering & Processing
Prior the use of data by the right users, data should be transformed in order to be downloaded into the data
stores (Data warehouse). The transferring process includes all activities necessary for the transfer of data, in
order to make these data interpreted in terms of business and the economy; it's a composite of multiple sub-
processes, such as, filtering, harmonization, aggregation and enrichment. The later process is considered
the first step of drawing attention to the problem.
Data Analysis & Presentation
This stage is composed of many stages. The first stage is the analysis of data and then converted to a legible
manner either online analytical processing (OLAP) Online Analytical Process, or Data Mining. Both of the
two methods provide the possibility of comparing the goals and the actual performance. OLAP is simply an
entrance to answer quick queries analytical multidimensional (MDA: Multidimensional Analysis), and
OLAP is part of the broader group of Business Intelligence, which contains reports related to the
exploration of the Data Mining.
Management accounting has its own objectives which is parallel to BI functions, these objectives can be
summarized by the following levels:
Scorekeeping
It is the process of gathering and accumulating information. This process serves both, the internal and
external parties, and enables them to evaluate organizational performance and position. General journals,
and general ledger, are examples of scorekeeping process.
Attention-Directing
It is the process of analysis, reporting and interpretation of financial information in order to help
management in solving the problem, discovering imperfections, inefficiencies, and opportunities.
Attention-direction is commonly associated with current planning and control and with the analysis and
investigation of recruiting routine internal-accounting process.
Problem-solving
It is the process of making the decision and solving the problem. Problem solving is commonly associated
with nonrecurring decisions, situations that require special accounting analysis of reports.
The above distinctions sometimes overlap or merge. Consequently, it is often difficult to pinpoint a
particular accounting task as being scorekeeping, attention-directing, or problem-solving. The following
Figure-1 explains the relationships just described. Above all, accounting systems are the means, and better
decisions are the ends.
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
73
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
Figure-1
Source: Charels T.Horngren
Research Design
From the above previous studies and literature review, the authors are proposing an integrated framework
that combines management accounting into business intelligence and its tools as a complete combination.
Other research papers mentioned in previous studies have taken one tool only, as it in Galani, Gravas, and
Stavropoulos study. The late researchers focused on ERP system only. The Brandas Study focused on the
use of OLAP only. The Strumickas and Valanciene study discussed the development of modern
management accounting system discussing the practical and the theoretical parts, in the development of
Problem Solving Data
1- Managers for strategic planning
and special decisions
Score Keeping Data
Attention Directing Data
Problem Solving Data
2-Managers for planning and
controlling routine Operations
Score Keeping Data
3-Outsiders for investors, tax
collectors, regulators, etc.
Problem-Solving
Attention-Directing
Management
Accounting Information
System
Scorekeeping
DWH
ETL
OLAP
Standard Reports
Traditional Management
Accounting
BI tools & Management
Accounting
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
74
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
management accounting system within the environment dimension only. Our study is focusing on most of
business intelligence tools, and thereby provides a structure for BI infrastructure that enables a reliable
decision support system to the management of the industrial companies in Jordan
Study Community
The study community is formed out of Forty (40) different industrial companies listed in the Jordanian
stock exchange market. A questionnaire has been developed and distributed among different management
levels. Total of Forty (40) questionnaires was distributed, Thirty two (32), were recovered, which means
that, Eighty percent (80%) of it was valid for analysis. Table (1) shows these results.
Table (1).
Items No. Percentages
Questionnaires Distributed
40 100%
Questionnaires recovered 32 80%
Table(2). illustrates the demographic characteristics distribution of the study community
Variable Group Frequencies %
Sex Male 21 66%
Female 11 34%
Total 32 100%
Age Less than 25 years 3 9%
From 26 years—35 years 11 34%
More than 36 years—45 years 12 38%
More than 46 years 6 19%
Total 32 100%
Professional Certificate Bachelor Degree 20 62%
Master Degree 6 19%
CPA/MBA Degree 6 19%
Total 32 100%
Experiences Less than 5 years 5 16%
From 6 years – 10 years 9 28%
More than 11 years – 15 years 8 25%
More than 16 years 10 31%
Total 32 100%
Statistical Analysis
Table (3). shows that the questionnaire used the Likert scale. The scale has five options as follows:
Table(3): Highly Agreed Agree Moderately Agree Not Agree Highly Not Agreed
1 2 3 4 5
Table(4) illustrates the statistical Median of Likert scale as follows:
Table(4): Low Moderate High
1-2.49 2.5-3.49 Above 3.5
For the purposes of description and analysis of the study data, generally many statistical measures is used
to analyze the questionnaires, such as, Central tendency, Arithmetic mean, standard deviation, frequencies,
t test, percentages, and Cronbach Alpha: The latest measure is used to test the reliability, and the credibility
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
75
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
of the study. As (Sekaran, 2003), explained, Internal reliability coefficient between answers that
statistically acceptable, if the value for this measure is (60%) or more. The results showed that, the
reliability coefficient equal 80%. which indicates that, the questionnaire is reliable.
Data Analysis of the Study Fields
The study takes the deductive form, as it depends on the outcomes of the data analysis derived from the
questionnaire.
Table (5). illustrates these results
Q.No. Questionnaire A.
Means
S.
Deviation
Rank Median Likert
Scale
16 BI will increase the competitive advantage of the
organization.
4.192 0.849 1 High
6 BI will expand the scope and relevance of
management accounting by providing information
about assets, outputs, quality and services.
4.115 0.766 2 High
3 Bi will provide a single integrated source of
relevant cost information.
4.077 0.796 3 High
15 BI will improve knowledge sharing 4.077 0891 4 High
5 BI will enable the use of multiple cost measurement
taxonomies, each customized to provide relevant
costs for specific decisions and uses.
4.038 0.871 5 High
9 BI will ensure that an enterprise resources planning
(ERP) systems is the single source of all operational
reporting and analysis, which will provide reliable
and accurate financial reports.
4.000 0.938 6 High
2 BI will improve specific key business processes that
impact costs, and revenues.
3.923 1.055 7 High
8 BI applications will leverage the structure of the
chart of accounts
3.885 1.107 8 High
1 BI will improve management functions such as
planning, controlling, and budgeting.
3.769 0.992 9 High
11 BI can be used as a monitoring tool 3.769 0.815 10 High
13 BI will improve operational and strategic decisions
from better and timely information.
3.654 1.093 11 High
17 BI will make on reducing risk and minimizing
losses
3.500 1.273 12 High
10 BI can provide senior managers a clear view of its
history, and can identify trends and opportunities
for growth.
3.462 1.208 13 Moderate
4 BI will eliminate time consuming in the searching
process.
3.423 1.270 14 Moderate
7 BI will reduce reliance on financial accounting
information.
3.423 1.172 15 Moderate
12 BI can cure the diseased areas and find the best
possible solutions.
3.346 1.093 16 Moderate
14 BI will improve employee communications and job
satisfaction resulting from a greater sense of
empowerment.
3.077 0.977 17 Moderate
Total 3.748 1.009 High
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
76
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
In order to examine the effect of business intelligence tools in raising the efficiency of modern management
accounting, the researchers had calculated the arithmetic means, and the standard deviation, of the
questionnaire.
It's obvious from table (5), that, the arithmetic means are mostly high, except questions (4,7,12,and 14) it
shows moderate results. The standard deviation also shows relatively close outcomes, which indicates that,
the study community is homogenous, and the study reliability is high.
Results and Testing Hypotheses
The study hypothesis stated that there is no effect of business intelligence tools on raising the efficiency of
modern management accounting. Regression test has been made in order to figure out whether there is an
effect of business intelligence tools in raising the efficiency of modern management accounting in the
Jordanian Industrial companies.
Table (6). illustrates the Regressiontest results
Sig R2 R Calculated
F
Tabulated
F
Result
0.019 0.209 0.457 6.338 2.450 Reject
Table (6) refers that there is significance effect where the adjusted R2 equals (0.209) at the significant level
(? ? 0.05).As the calculated F value equals (6.338) which is higher than tabulated value (2.450), and as the
level of statistical significance amounted to (0.019) which is less than the specified value 0.05, and
therefore we accept the alternative hypothesis and reject the null hypothesis. This means that there is no
statistical significant effect at the level of significance (? ? 0.05). Which means that, business intelligence
tools has significant effect on modern management accounting, and it will increase the efficiency of these
companies.
Conclusions
As per the above data analysis, and hypothesis testing, the study had concluded the following:
1- The use of business intelligence tools has significant effect on modern management accounting,
and it will increase the efficiency of these companies, and it will improve employee
communications and job satisfaction resulting from a greater sense of empowerment.
2- The use of management accounting in harmony with the accounting information system
technology and Business Intelligence BI techniques will help management accounting to retreat its
leading role, and it can participate in achieving the enterprise's goals.
3- With the availability of Business Intelligence tools BI programs can absorb enormous amounts
and variety of relevant management accounting information, to be used in the planning and
controlling, and other administrative functions.
Recommendations
According to the study conclusions the researchers recommend the following:
1- Companies should update its information technology to cope up with recent changes.
2- Companies should introduce the latest technological devices to adapt the changes in information
systems technology.
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
77
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
3- Human resource department should hold continuous training sessions to its employees, in order to
adapt with the changes occurred in information technology, and business intelligence tools.
4- More research to be carried on the same field using other intelligence tools, such as, accounting
intelligence tools.
References
Bill Inmon, William H. (2002). (Business Intelligence in Management Accounting), John Wiley & Sons,
(3
rd
Edition).
BrandasLaudiu, (2010). (Decision Support System Model Based on Rules and OLAP for Costs
Management), Annals of DAAAM International, Vol.21, No.1 Austria.
Brein, James A. & Marakas, George M. (2011). (Management Information System) Mc Graw-Hill/Irwin.
Charles T. Horngren, (2010). (Introduction to Management Accounting), 10th edition. Prentice-hall.
Colin White, (2005). (The Role of Business Intelligence in Knowledge Management), Beye Network.
Deepak Pareek, (2007), (Business Intelligence for Telecommunications), Auerbach Publishers,
Incorporated.
DolinsekSlavko, Strukelj Peter, (2012). (Technology, Wealth & Modern Management of Technology),
Managing Global Transitions, Vol.10, No.1.
GalaniDespina, GravasEfthymios, Stavropoulos Antonio, (The Impact of ERP Systems on Accounting
Process), World Academy of Science, Engineering & Technology, Issue No. 66.
Henning Baars and Hans-George Kemper, (2006). (Integrated Business Intelligence Framwork), University
of Stuttgart.Germany.
Howard Dresner, (2009). (Business Intelligence Journeys and the Roadmap for Change), John Wiley &
Sons, November 2009.
Johnson &Caplan, (1991). (Relevance Lost: The Raise and Fall of Management Accounting), Harvard
Business School Press, Boston, USA.
Marshal B.Romney & Paul J. Steinbart, (2012). (Accounting Information System), Pritice Hall, 12
th
Edition.
Moorthy Krishna, VoonOngi, Samsuri C.A., Goplan M., Tak yew King,(2012). (Application of Information
Technology in Management Accounting Decision-Making), International Jornal of Academic
Research in Business and Social Sciences, Vol.2, No.3, March 2012.
Peter Mertens,(2002). (Business Intelligence), Information management consulting, University of Erlangen.
Vol.17 p 65-73.
Robert W. Scapens, (1994). (Never mind the gap: Towards an institutional perspective on Management
Accounting) Elsevier, Vol.5 No.3-4, Sept. 1994, pp 301-321.
Strumickas Marius, ValancieneLoreta, (2010). (Development of Modern Management Accounting System),
Engineering Economics, Vol. 21, No. 4.
Uma, sekrran,(2003). (Research Method for Business: A Skill Building Approach), 7
th
Edition, John Wiley
and Sons, New York.
Wikipedia org (Definition of business intelligence). www.Wikipedia.org. DOI-414717940.
Yasmin Farjana & Hossan Amran, (2011). (Significance of Management Accounting Techniques in
Decision-Making: An Empirical Study on Manufacturing Organizations in Bangladesh), World
Journal of Social Sciences, Vol.1 No.1, March, pp 148-164.
doc_353953776.pdf
The effect of Business Intelligence Tools on Raising the Efficiency of Modern Management Accounting
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
68
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
The effect of Business Intelligence Tools on Raising the
Efficiency of Modern Management Accounting
ZIAD AL-ZUBI
Al-Zaytoonah University of Jordan, Accounting Department, Amman, Jordan
Email: [email protected]
OSAMA SAMIH SHABAN
Al-Zaytoonah University of Jordan, Accounting Department, Amman, Jordan
Postal Address: P.O. Box 130, 11733
Email: [email protected]
Tel No.: +962798 793 473
NABIL ALNASER
Al-Zaytoonah University of Jordan, Accounting Department, Amman, Jordan
Email: [email protected]
Abstract
This research study aims to update existing, traditional management accounting inquiry and decisions
system, in a holistic sense, so management accounting can reclaim its leading role in decision-making. The
main role of management accounting is to use available information in the best possible way to make the
best possible decisions. Handling information to highest possible use in order to increase the efficiency of
management accounting information system can be achieved through the adoption of Business Intelligence
tools (BI). Business intelligence tools such as ETL (Extract, Transform, and Load), OLAP (Online
Analytical Process), DWH (Data Warehouse) have been addressed. For achieving this purpose, number of
40 questionnaires has been designed, circulated by hand to a randomly selected sample of information
technology department and board of directors at the Jordanian Industrial Companies listed at Amman
Stock Exchange, SPSS package applied for the purpose of statistical analysis; arithmetic means, standard
deviations, percentages and Simple Regression. Finally, the study concluded that, the use of business
intelligence tools has a significant positive effect on modern management accounting, the decision process
can be more effective, and Management can save time and money through the use of BI tools.
Key Words: Management accounting, Business intelligence, OLAP, ETL, DWH.
Introduction
All the economist observers in our world agreed that, the current management accounting information
system is neglected. This negligence is due to the current systems, which are producing insufficient and
unreliable information. Because of lack of suitable alternative, today's managers are still using such
systems. Generally, most firms still face lack of regular, consistent information, necessary to accomplish
the basic daily operating functions.
Business Intelligence tools can be used as an effective tool to handle such information technology to make
management accounting or decision making more effective. Business intelligence can be defined as a
specific, integrated information technology of the company, which is based on a global approach, which
will be used to support decision-making. (Bars& Kemper, 2006). The application of Business Intelligence
in management accounting can be done through its tools such as (ETL), (OLAP), (DWH). Business
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
69
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
intelligence applications are one of the three Information Technology systems components; business
transaction application, and collaborative applications (Colin White, 2005). Business intelligence
applications analyze business operations and produce information to help business users understand,
improve and optimize business operations. Recently, there have been significant impacts in the use of
business intelligence applications especially in the field of the costing control systems and management
performance measures. The business intelligence impact is reaching everywhere and its influence is felt in
all the aspects of business. The non-technical users and end users, business analysts, Information
technology departments and external users are greatly influenced by BI (Nadeem &Jaffri, 2003).
Management information system is one of the most important components of management accounting in
any firm, it provides financial and economic information, and takes over other management functions such
as, collection of information for planning, control and decision-making. The information produced by the
management accounting system must be subject to periodic technical assessment, so their effectiveness can
be measured at the point when targets are achieved.
In the eighties of this century, some writers called to bring about a revolution in management accounting, in
order to cope with the revolution of modern manufacturing firms, (Johnson and Kaplan, 1991), in their
book titled "Relevance Lost: The Rise and Fall of Management Accounting, "The authors drew several
criticisms of management accounting, the most important of these criticisms said that, the traditional
management accounting methods do not correspond to modern changes, especially in the competitive
industrial environment. There has been a wide controversy about whether the concepts and teachings of
management accounting (the theoretical academic), conforms to and supports, the practice of management
accounting, (the practical side), (Scapens, 1984).The gap between the theoretical and practical (gap
between theoryand practice), and there has been a tendency to change management accounting research,
focusing on the interpretation and explanation of practice more than a trend to develop complex models.
Also it works on the adoption of research field that is related to reality, and teaching innovative modern
accounting techniques which are applied in successful companies. The use of BI tools by managerial
accounting can place the end users directly with the data they need. It moves data from sources systems to
make better decisions, and it enables users to become responsible for the specification, creation and
regeneration of the reports and analysis (Inmon & William 2002). In this research, we will try to test the
effect of BI application and spread of these tools, and standing on the most important factors affecting its
application and analysis. Also trying to prove that management accounting and through the use business
intelligence tools will bring about tremendous changes to the decision making process, which means; less
time, less efforts, less cost, and finally effective decisions.
Study Problem
The current system of decision making followed in the Jordanian industries is the typical form, which
depends on the flow of financial information from the accounting department, not from a data warehouse,
or data mining process. The current process of decision-making needs more advanced technological
methods. Business intelligence tools, and its usefulness in the field of management accounting can help
management of the Jordanian industries to make more efficient decision. The traditional technique of
management accounting adopted by these industries needs such tools of business intelligence in order to
improve its current decision system. This research study
Study Importance
The importance of this study can be embodied by the necessity of narrowing the gap between modern
management accounting development and its application in reality. In a changing business environment, we
are witnessing rapid development changes in technology, production and distribution. These rapid
technological developments have increased competition and led to the emergence of the modern
administrative techniques, which made companies to search for creating value for their customers, and
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
70
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
coordinating all their activities in order to satisfy customers' need and finally to achieve the firm's main
objectives.
Study Objectives
This research study aims to achieve the following objectives:
4.1 To acknowledge the real practice and effect of business intelligence tools on management accounting
techniques in the Jordanian industrial companies.
4.2 To know the effect of using of business intelligence tools on modern management accounting
techniques by the Jordanian industrial companies.
Study Hypothesis
H0:There is no effect of Business Intelligence tools on raising the efficiency of modern management
accounting
H1: There is an effect of Business Intelligence tools on raising the efficiency of modern management
accounting.
Previous Studies
Moorthy, Voon, Samsuri, Goplan, Tak yew (2012)
The study talked about the application of information technology in management accounting decision
making. The authors used the information technology tools in order to analyze management accounting
decision making. The study also tried to apply and connect information technology tools in management
accounting in order to control cost and to improve the efficiency of management accounting.The study
concluded that using information technology in management accounting will result in better financial
reports which will finally lead to better decision making.
Dolinsek, Strukelj (2012)
The study discussed the effects of technology and wealth on modern management accounting. The study
tried to explain the need for companies to modern technologies in managing their business, and the
challenges of applying modern management technology. The study concluded that, the technology is
changing very fast, and we should follow these changes in order to keep up with a fixed level of
management efficiency.
Yasmin&Hossan (2011)
The study discussed the significance of management accounting techniques in decision making. Budgetary
control, variance analysis, cost volume profit analysis, fund flow analysis, activity based costing, and
opportunity costing, are an examples of the management accounting techniques used in the study. The
study concluded that, companies should put more efforts in improving the use of the management
accounting techniques in order to improve their performance.
Galani, Gravas, Stavropoulos (2010)
The study discussed the impact of ERP systems on accounting process. The study introduced the Enterprise
Resource Planning (ERP), to be used in modern management accounting. Using such system will make on
reducing costs, and make better decision making. The study concluded that, using ERP will lead to better
relation between the company and its suppliers and customers.
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
71
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
Brandas (2010)
The study discussed the effects of decision support system model based on rules and OLAP for costs
management. The paper disclosed a decision making model (DSS), for costs management through the use
of business intelligence tools such as OLAP. The study concluded that, using business intelligence tools as
OLAP, will lead to effective control of business activities, which will lead to achieve the goals of the
enterprise.
Strumickas &Valanciene (2010)
The study discussed the development of modern management accounting system. The study also discussed
the practical and the theoretical parts, in the development of management accounting system within the
environment of the enterprise. The study concluded that, management accounting system is affected by the
internal, external environment and objectives of the enterprise.
Literature Review
Management accounting is the process of identification, measuring, accumulation, analysis, interpretation,
and communicating financial information to internal parties in order to make decisions capable of
achieving organization's goals. (Charles T. Horngren,2010). In other words management accounting
depends on the accuracy of the financial accounting communicated to management, on a timely basis, this
known by "Information Quality". An effective financial information system needs to be able to integrate
information of different types and from different sources (Romney & Steinbart, 2012).
Business intelligence was defined earlier as a specific, integrated information technology of the company,
which is based on a global approach, which will be used to support decision-making (Bars& Kemper,
2006). In other words BI refers to the use of information technology in order to improve business
effectiveness. An effective BI system will provide end users easy access to required information, which
will produce effective decisions to their jobs. BI is considered a precious tool in the hand of management
accounting which can provide a wide variety of relevant financial information for planning, control,
pricing, and other functions. Common functions of business intelligence technologies are reporting, online
analytical processing, analytics, data mining, process mining, complex event processing, business
performance management, benchmarking, text mining, predictive analytics and prescriptive analytics
(Wikipedia, 2013). To perform the functions of business intelligence technologies we should have a data
warehouse DWH. A data warehouse is a data used for reporting and data analysis. It is a central repository
of data which is created by integrating data from one or more disparate sources (Bars& Kemper, 2006).
Data warehouse store current as well as historical data, and it is used for creating trending reports for senior
management reporting, such as annual and quarterly comparisons. The data stored in the warehouse are
uploaded from the operational system. The data may pass through an operational data store for additional
operations before they are used in the DWH for reporting. Online analytical processing OLAP is another BI
tool that encompasses relational reporting and data mining (Pareek, 2007). OLAP applications include all
types of business reporting, budgeting, and forecasting financial reporting. OLAP components are
consolidation, drill-down, and slicing and dicing (Brein & Marakas, 2011). Consolidation involves the
aggregation of data that can be accumulated and computed in one or more dimensions, allowing for
complex analytical and ad-hoc queries with a rapid execution time. The drill-down is a technique that
allows users to navigate through the details. Slicing and dicing is a feature whereby users can take out a
specific set of data of the cube and view the slices from different viewpoints. ETL, refers to a process in
database usage, and especially in data warehousing that extract data from outside sources and transfer it to
fit operational needs, which can include quality levels, and finally loads it into the end target operational.
Business intelligence BI Applications include several techniques, which can be divided into three main
groups:
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
72
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
Data Generation
Both data generation and the magnitude data volume, that belong to a source systems make it impossible to
have direct access to the operating systems to achieve the objectives of analysis. So the first step of
operations process is to use a system that extracts data from various sources and then downloaded in the
areas required. ETL: Extract, Transform, Load. It is compatible with the function (Scorekeeping) in the
management accounting information system.
Data Delivering & Processing
Prior the use of data by the right users, data should be transformed in order to be downloaded into the data
stores (Data warehouse). The transferring process includes all activities necessary for the transfer of data, in
order to make these data interpreted in terms of business and the economy; it's a composite of multiple sub-
processes, such as, filtering, harmonization, aggregation and enrichment. The later process is considered
the first step of drawing attention to the problem.
Data Analysis & Presentation
This stage is composed of many stages. The first stage is the analysis of data and then converted to a legible
manner either online analytical processing (OLAP) Online Analytical Process, or Data Mining. Both of the
two methods provide the possibility of comparing the goals and the actual performance. OLAP is simply an
entrance to answer quick queries analytical multidimensional (MDA: Multidimensional Analysis), and
OLAP is part of the broader group of Business Intelligence, which contains reports related to the
exploration of the Data Mining.
Management accounting has its own objectives which is parallel to BI functions, these objectives can be
summarized by the following levels:
Scorekeeping
It is the process of gathering and accumulating information. This process serves both, the internal and
external parties, and enables them to evaluate organizational performance and position. General journals,
and general ledger, are examples of scorekeeping process.
Attention-Directing
It is the process of analysis, reporting and interpretation of financial information in order to help
management in solving the problem, discovering imperfections, inefficiencies, and opportunities.
Attention-direction is commonly associated with current planning and control and with the analysis and
investigation of recruiting routine internal-accounting process.
Problem-solving
It is the process of making the decision and solving the problem. Problem solving is commonly associated
with nonrecurring decisions, situations that require special accounting analysis of reports.
The above distinctions sometimes overlap or merge. Consequently, it is often difficult to pinpoint a
particular accounting task as being scorekeeping, attention-directing, or problem-solving. The following
Figure-1 explains the relationships just described. Above all, accounting systems are the means, and better
decisions are the ends.
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
73
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
Figure-1
Source: Charels T.Horngren
Research Design
From the above previous studies and literature review, the authors are proposing an integrated framework
that combines management accounting into business intelligence and its tools as a complete combination.
Other research papers mentioned in previous studies have taken one tool only, as it in Galani, Gravas, and
Stavropoulos study. The late researchers focused on ERP system only. The Brandas Study focused on the
use of OLAP only. The Strumickas and Valanciene study discussed the development of modern
management accounting system discussing the practical and the theoretical parts, in the development of
Problem Solving Data
1- Managers for strategic planning
and special decisions
Score Keeping Data
Attention Directing Data
Problem Solving Data
2-Managers for planning and
controlling routine Operations
Score Keeping Data
3-Outsiders for investors, tax
collectors, regulators, etc.
Problem-Solving
Attention-Directing
Management
Accounting Information
System
Scorekeeping
DWH
ETL
OLAP
Standard Reports
Traditional Management
Accounting
BI tools & Management
Accounting
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
74
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
management accounting system within the environment dimension only. Our study is focusing on most of
business intelligence tools, and thereby provides a structure for BI infrastructure that enables a reliable
decision support system to the management of the industrial companies in Jordan
Study Community
The study community is formed out of Forty (40) different industrial companies listed in the Jordanian
stock exchange market. A questionnaire has been developed and distributed among different management
levels. Total of Forty (40) questionnaires was distributed, Thirty two (32), were recovered, which means
that, Eighty percent (80%) of it was valid for analysis. Table (1) shows these results.
Table (1).
Items No. Percentages
Questionnaires Distributed
40 100%
Questionnaires recovered 32 80%
Table(2). illustrates the demographic characteristics distribution of the study community
Variable Group Frequencies %
Sex Male 21 66%
Female 11 34%
Total 32 100%
Age Less than 25 years 3 9%
From 26 years—35 years 11 34%
More than 36 years—45 years 12 38%
More than 46 years 6 19%
Total 32 100%
Professional Certificate Bachelor Degree 20 62%
Master Degree 6 19%
CPA/MBA Degree 6 19%
Total 32 100%
Experiences Less than 5 years 5 16%
From 6 years – 10 years 9 28%
More than 11 years – 15 years 8 25%
More than 16 years 10 31%
Total 32 100%
Statistical Analysis
Table (3). shows that the questionnaire used the Likert scale. The scale has five options as follows:
Table(3): Highly Agreed Agree Moderately Agree Not Agree Highly Not Agreed
1 2 3 4 5
Table(4) illustrates the statistical Median of Likert scale as follows:
Table(4): Low Moderate High
1-2.49 2.5-3.49 Above 3.5
For the purposes of description and analysis of the study data, generally many statistical measures is used
to analyze the questionnaires, such as, Central tendency, Arithmetic mean, standard deviation, frequencies,
t test, percentages, and Cronbach Alpha: The latest measure is used to test the reliability, and the credibility
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
75
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
of the study. As (Sekaran, 2003), explained, Internal reliability coefficient between answers that
statistically acceptable, if the value for this measure is (60%) or more. The results showed that, the
reliability coefficient equal 80%. which indicates that, the questionnaire is reliable.
Data Analysis of the Study Fields
The study takes the deductive form, as it depends on the outcomes of the data analysis derived from the
questionnaire.
Table (5). illustrates these results
Q.No. Questionnaire A.
Means
S.
Deviation
Rank Median Likert
Scale
16 BI will increase the competitive advantage of the
organization.
4.192 0.849 1 High
6 BI will expand the scope and relevance of
management accounting by providing information
about assets, outputs, quality and services.
4.115 0.766 2 High
3 Bi will provide a single integrated source of
relevant cost information.
4.077 0.796 3 High
15 BI will improve knowledge sharing 4.077 0891 4 High
5 BI will enable the use of multiple cost measurement
taxonomies, each customized to provide relevant
costs for specific decisions and uses.
4.038 0.871 5 High
9 BI will ensure that an enterprise resources planning
(ERP) systems is the single source of all operational
reporting and analysis, which will provide reliable
and accurate financial reports.
4.000 0.938 6 High
2 BI will improve specific key business processes that
impact costs, and revenues.
3.923 1.055 7 High
8 BI applications will leverage the structure of the
chart of accounts
3.885 1.107 8 High
1 BI will improve management functions such as
planning, controlling, and budgeting.
3.769 0.992 9 High
11 BI can be used as a monitoring tool 3.769 0.815 10 High
13 BI will improve operational and strategic decisions
from better and timely information.
3.654 1.093 11 High
17 BI will make on reducing risk and minimizing
losses
3.500 1.273 12 High
10 BI can provide senior managers a clear view of its
history, and can identify trends and opportunities
for growth.
3.462 1.208 13 Moderate
4 BI will eliminate time consuming in the searching
process.
3.423 1.270 14 Moderate
7 BI will reduce reliance on financial accounting
information.
3.423 1.172 15 Moderate
12 BI can cure the diseased areas and find the best
possible solutions.
3.346 1.093 16 Moderate
14 BI will improve employee communications and job
satisfaction resulting from a greater sense of
empowerment.
3.077 0.977 17 Moderate
Total 3.748 1.009 High
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
76
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
In order to examine the effect of business intelligence tools in raising the efficiency of modern management
accounting, the researchers had calculated the arithmetic means, and the standard deviation, of the
questionnaire.
It's obvious from table (5), that, the arithmetic means are mostly high, except questions (4,7,12,and 14) it
shows moderate results. The standard deviation also shows relatively close outcomes, which indicates that,
the study community is homogenous, and the study reliability is high.
Results and Testing Hypotheses
The study hypothesis stated that there is no effect of business intelligence tools on raising the efficiency of
modern management accounting. Regression test has been made in order to figure out whether there is an
effect of business intelligence tools in raising the efficiency of modern management accounting in the
Jordanian Industrial companies.
Table (6). illustrates the Regressiontest results
Sig R2 R Calculated
F
Tabulated
F
Result
0.019 0.209 0.457 6.338 2.450 Reject
Table (6) refers that there is significance effect where the adjusted R2 equals (0.209) at the significant level
(? ? 0.05).As the calculated F value equals (6.338) which is higher than tabulated value (2.450), and as the
level of statistical significance amounted to (0.019) which is less than the specified value 0.05, and
therefore we accept the alternative hypothesis and reject the null hypothesis. This means that there is no
statistical significant effect at the level of significance (? ? 0.05). Which means that, business intelligence
tools has significant effect on modern management accounting, and it will increase the efficiency of these
companies.
Conclusions
As per the above data analysis, and hypothesis testing, the study had concluded the following:
1- The use of business intelligence tools has significant effect on modern management accounting,
and it will increase the efficiency of these companies, and it will improve employee
communications and job satisfaction resulting from a greater sense of empowerment.
2- The use of management accounting in harmony with the accounting information system
technology and Business Intelligence BI techniques will help management accounting to retreat its
leading role, and it can participate in achieving the enterprise's goals.
3- With the availability of Business Intelligence tools BI programs can absorb enormous amounts
and variety of relevant management accounting information, to be used in the planning and
controlling, and other administrative functions.
Recommendations
According to the study conclusions the researchers recommend the following:
1- Companies should update its information technology to cope up with recent changes.
2- Companies should introduce the latest technological devices to adapt the changes in information
systems technology.
ISSN: 2306-9007 Zaid, Osama & Nabil (2014)
77
I
www.irmbrjournal.com March 2014
International Review of Management and Business Research Vol. 3 Issue.1
R
M
B
R
3- Human resource department should hold continuous training sessions to its employees, in order to
adapt with the changes occurred in information technology, and business intelligence tools.
4- More research to be carried on the same field using other intelligence tools, such as, accounting
intelligence tools.
References
Bill Inmon, William H. (2002). (Business Intelligence in Management Accounting), John Wiley & Sons,
(3
rd
Edition).
BrandasLaudiu, (2010). (Decision Support System Model Based on Rules and OLAP for Costs
Management), Annals of DAAAM International, Vol.21, No.1 Austria.
Brein, James A. & Marakas, George M. (2011). (Management Information System) Mc Graw-Hill/Irwin.
Charles T. Horngren, (2010). (Introduction to Management Accounting), 10th edition. Prentice-hall.
Colin White, (2005). (The Role of Business Intelligence in Knowledge Management), Beye Network.
Deepak Pareek, (2007), (Business Intelligence for Telecommunications), Auerbach Publishers,
Incorporated.
DolinsekSlavko, Strukelj Peter, (2012). (Technology, Wealth & Modern Management of Technology),
Managing Global Transitions, Vol.10, No.1.
GalaniDespina, GravasEfthymios, Stavropoulos Antonio, (The Impact of ERP Systems on Accounting
Process), World Academy of Science, Engineering & Technology, Issue No. 66.
Henning Baars and Hans-George Kemper, (2006). (Integrated Business Intelligence Framwork), University
of Stuttgart.Germany.
Howard Dresner, (2009). (Business Intelligence Journeys and the Roadmap for Change), John Wiley &
Sons, November 2009.
Johnson &Caplan, (1991). (Relevance Lost: The Raise and Fall of Management Accounting), Harvard
Business School Press, Boston, USA.
Marshal B.Romney & Paul J. Steinbart, (2012). (Accounting Information System), Pritice Hall, 12
th
Edition.
Moorthy Krishna, VoonOngi, Samsuri C.A., Goplan M., Tak yew King,(2012). (Application of Information
Technology in Management Accounting Decision-Making), International Jornal of Academic
Research in Business and Social Sciences, Vol.2, No.3, March 2012.
Peter Mertens,(2002). (Business Intelligence), Information management consulting, University of Erlangen.
Vol.17 p 65-73.
Robert W. Scapens, (1994). (Never mind the gap: Towards an institutional perspective on Management
Accounting) Elsevier, Vol.5 No.3-4, Sept. 1994, pp 301-321.
Strumickas Marius, ValancieneLoreta, (2010). (Development of Modern Management Accounting System),
Engineering Economics, Vol. 21, No. 4.
Uma, sekrran,(2003). (Research Method for Business: A Skill Building Approach), 7
th
Edition, John Wiley
and Sons, New York.
Wikipedia org (Definition of business intelligence). www.Wikipedia.org. DOI-414717940.
Yasmin Farjana & Hossan Amran, (2011). (Significance of Management Accounting Techniques in
Decision-Making: An Empirical Study on Manufacturing Organizations in Bangladesh), World
Journal of Social Sciences, Vol.1 No.1, March, pp 148-164.
doc_353953776.pdf