Correlation of Accounting Software

To SME’s Performance Page |1

The Perception of Accountancy Students on the Correlation of Accounting Software

to a Small Mid-size Enterprise’s Performance in the Philippines
Xaveiry Mel Cabanatan | ACCTRES-366
Jia Ocayo | ACCTRES-366
EJ Portillo | ACCTRES-366
Saint Paul School of Professional Studies

January 2022

Author Note

Xaveiry Mel Cabanatan, Jia Ocayo, EJ Portillo, Saint Paul School of

Professional Studies.

Correspondence concerning this paper should be addressed to Xaveiry Mel

Cabanatan, Jia Ocayo, EJ Portillo, Saint Paul School of Professional Studies,

Campetic, Palo, Leyte 6501. E-mail: 20181301@spsps.edu.ph.

Correlation of Accounting Software
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Abstract

This research identifies the variables to be analyzed, the knowledge of accounting

software and use or adoption of accounting software among SMEs accountants. As

per the limited knowledge of the researcher, there are no previous qualitative study

that used and empirically examined the relationship between knowledge and use of

accounting software among accounting professionals of SMEs in the Philippines. This

research consequently has assessed this phenomenon and analyzed literature in an

effort to determine the knowledge and use of accounting software and evaluated the

relationship between the accounting practices and SMEs in the Philippines. Likewise,

this research has made an influential contribution to the literature regarding the

influence of the knowledge of accounting software and the accounting professionals

among various SMEs. The results have further revealed that the knowledge of

customized accounting software exerts a significant impact on the use or adoption of

accounting software in current accounting practices of SMEs or enterprise resource

planning (ERP). Thus, there is a strong relationship between the knowledge

Philippine Financial Reporting Standards (PFRS) and use or adoption of accounting

software to record day-to-day accounting transactions.

Keywords: [Accounting Software, Influential, SMEs, ERP, PFRS]

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The Perception of Accountancy Students on the Efficiency of Accounting Software to

a Small Mid-size Enterprise in the Philippines

Professional accountants today make use of various of computer applications

to carry out their day-to-day operations. Information and communication technology

(ICT) has long been seen as a critical component of an effective and efficient

accounting system, with the potential to significantly improve organizational

performance. ICT has been utilized to improve organizational performance and

accounting data reliability. Accounting information systems consist of both computer

software and hardware that aid in the recording of accounting data. The rapid

adoption of Information Technology (IT) by businesses helps in the acquiring and

implementation of daily accounting operations using computerized accounting

software. Most of the accounting software are user-friendly for accountants, which

resulted in functioning of accounting tasks on a daily basis, in a timely manner and

accurately. Most of the organizations now replaced their traditional method which is

manual accounting system with computerized accounting systems. It is encouraged

that continuous effort is required to equip future accountants with necessary IT

knowledge and skill as the interconnectedness among IT and accounting functional

areas in an organization is invariably important (Turner et al., 2020; Lin et al., 2005;

Allen, 1999). Over the years, scholars have also found some of the major difficulties

faced by small and medium enterprises (SMEs) are incomplete records, lack of

finance, staff inexperience, poor power supply, among others (Capușneanu et al.,

2020; Chhabra and Pattanayak, 2014). Prior to the 21st century, most organizations

preferred traditional method of recording accounting transactions, which, of course, is

very time-consuming and involves too much paperwork (Kumar, 2020). Some of the

records prepared by their accountants were incomplete due to not being able to reach

proper decisions by the management. These and many more difficulties are
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encountered while using the traditional method of recording of accounting

transactions, which has given birth to ICT (Turner et al., 2020; Nyathi et al., 2018).

The enhanced use of accounting software has changed the accounting process, which

involves transactional entry, data storage and preparation of financial statements and

related information, and has an impact on the decisions of stakeholders who use

financial statements for various purpose. This is also useful for internal control

systems employed by the entity (Turner et al., 2020; Senft et al., 2016). The

professional accountant should have sufficient knowledge of various accounting

software (Mustafa, 2020) to identify and post various items in ledgers, which comes

under financial statements, and to ensure fairness of financial statement. The

accountant should acquire additional knowledge of accounting software and

generalized enterprise resource plan (ERP) (Draijer, 2020) in order to ensure the

companies accounts are recorded as per applicable accounting standards or

International Financial Reporting Standards (PFRS). Accountants have now been

using generalized accounting software to do all the accounting tasks instead of using

the traditional ways of accounting (Kumar, 2020), such as manual recording of

accounting transactions and finalization of financial statements (Turner et al., 2020).

Omani students learn theoretical knowledge of basics of accounting. Therefore, there

is a need to learn how to use specialized accounting software (Shaffer et al., 2020)

and gain a broad understanding of the finance, accounting and commercial segments,

even within an international context. Professional accountant should also have

adequate practical experience to use generalized accounting software such as Tally,

Peachtree and QuickBooks. IT helps overcome the challenges of an accounting

profession (Rındașu, 2017). Replacing traditional accounting paper records with

computer-based records brings many advantages, especially for SMEs. The

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advantages include increased reliable and accurate financial reports and faster access

of financial data, and it ensures fairly improved generation of accounting information

through financial statements (Gokten and Ozdogan,2020; Ghasemi et al., 2011).

Accounting software is a major instrument in accounting information systems (AISs),

offering timely, accurate and reliable information. Undoubtedly, it is no secret that

technology has evolved to the extent that no current business enterprise can operate

without it (Huy and Phuc, 2020; Thottoli, 2020; Situmorang, 2020; Ramazaniet al.,

2012). When compared to small-scale organizations, large-scale organizations set

more weightage on the development of accounting information. However, SMEs in

China face many problems as a result of no implementation of accounting policies.

This was one of the barriers of economic growth of China. Hence, improving the level

of accounting policies and other related information of SMEs is essential (Yu et al.,

2020; Wen, 2020; Zhou, 2010). Lack of use and knowledge of accounting software

leads to continued manual accounting that may be very hard for business owners,

especially SMEs, to monitor financial health of their businesses. This leads SMEs not

meeting their business goals (Alhatabat, 2020). As there are no specific studies that

examine the knowledge and use of accounting software among SMEs in the

Philippines, there is no clarity regarding the accounting practices that accountants

follow in an ICT-enabled or accounting software environment. Thus, the objectives of

this study are to examine the knowledge and use of accounting software among SMEs

in Philippines and how it affects its performance.

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Literature Review

There are number of literature studies identified that highlighted the

importance of the use of ICT or accounting software in SMEs. Baporikar (2020),

Idota et al. (2020) and Ashrafi and Murtaza (2013) in their study mentioned that it has

been widely accepted that SMEs generally play a crucial role in a country’s economy,

and their role is the key to a country’s economic stability to achieve targeted gross

domestic product (GDP). Hernandez (2020) and Amidu et al. (2011) suggests that

accounting function contributes an important role in the success or failure of any SME

or modern business organization. Ibrahim et al. (2020) and Jinga et al. (2010)

mentioned that AISs are helpful for recording accounting transactions, analyzing,

monitoring and analyzing financial statements of any company. AISs also help to

prepare documents necessary for taxation purpose and generate information that

support many other organizational tasks. Bashorun et al. (2020) highlighted that prior

to the emergence of personal computers, companies used only manual approaches for

recording accounting transactions which result in lack of fair financial data. Araya-

Leandro et al. (2020) and Azih (2018) noted that manual accounting systems consist

of accounting ledgers prepared using paper, typewriters and calculators. Thottoli et al.

(2019a, b, c) found in their study that ICT has a significant impact on the auditing

practices. It means that there is a significant and positive relationship between the ICT

and the auditing practices of accounting professionals. Another view of Tychalas and

Karatza (2020) and Arcega et al. (2015) was that by using computerized accounting

system, the respondents tend to complete their jobs successfully, and it also enhances

their quantity and quality of work. Meanwhile, in employing the manual or traditional

way of accounting system, the interviewees claimed that although they are able to

complete their job accurately, launching a computerized accounting system is more

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convenient (Xu, 2020). Alternatively, Ibrahim et al. (2020) and Amanamah et al.

(2016) have claimed that the usage of computerized accounting system by SMEs has

much improved their performance. Negative effects of the usage of accounting

software are increased cost, lack of education on the benefits of the usage and lack of

knowledgeable personnel. Ibrahim et al. (2020) and Pulakanam and Suraweera (2010)

analyzed and found that small businesses, while implementing small business

accounting software, face many barriers, such as non– user-friendly and non-

availability of software vendors’ support and guidance (Bakr, 2020). Ashrafi and

Murtaza (2008) in their study provided that only a very a smaller number of SMEs in

Oman are aware of the available accounting software and its adoption. Further, most

SMEs outsource majority of their accounting services. Most of the SMEs lack internal

capabilities, are unable to bear high implementation cost of IT in business and lack

information about appropriate IT solutions and implementation, which were some of

the main restrictions in adopting IT. Damak-Ayadi et al. (2020), Alabdullah et al.

(2019) and Rudzani and Manda (2016) identified in their study that SMEs are

required to use PFRS and many of these organizations are finding it hard to adopt or

incorporate PFRS for numerous reasons, including lack of available expertise. The

latest updates should be incorporated in the accounting software as and when

required. Buiet al. (2020) and Everaertet al. (2006) found that some SMEs are facing

issues managing their accounting tasks. The reason for such issues is lack of expertise

knowledge in basic accounting, lack of knowledge in generally accepted accounting

principles and lack of applicable tax regulation. It is also essential that one should

know the benefits of the application of rules in a given business environment. Mishina

et al. (2020) and Maseko and Manyani (2011) say that because of lack in accounting

knowledge, and as a consequence, there is inefficient use and entry of accounting

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transactions that will affect fairness of financial statements and its performance

measurement. Most of the SMEs are not maintaining complete accounting records.

Jimoh et al. (2020) and Amahalu et al. (2017) expressed their view that the usage of

computerized accounting system has shown a marginal increase in profitability of

banks compared with when banks were using manual system of accounting. Hassan

(2020), Ahmed et al. (2020) and Rahman et al. (2015) emphasized that by using

accounting software technology, SMEs can reduce their operating cost drastically and

increase profitability marginally, thereby achieving competitive advantages. They

suggested that the knowledge of Excel should be included in university accounting

programs, since Excel is the most frequently utilized software / tool by majority

SMEs. Lee et al. (2018) found that the use of Excel in accounting areas such as audit,

tax, advisory and corporate is considered as important by majority of small

organizations. In addition, accounting / ERP software, Adobe Acrobat, PowerPoint

and the FASB Codification were recognized as often employed across various

accounting areas and practical knowledge levels. Andiola, Masters and Norman

(2020) noted that accounting and auditing practitioners in their practicing areas

require experience, analytic skills and data visualization skills. These are important,

but data analytic skills are more important than data visualization skills. Amoako

(2013) in his study found that the majority of SMEs fail to keep complete accounting

records. Small business owners think that keeping accounting records are not required

and gives less need or important to expose their financial position. They also

suggested that training programs must be organized to alert managers to understand

the importance of maintaining proper books of accounts using computer.

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Conceptual Framework

The research model was developed based on information processing theory

advocated by Galbraith (1973). The information processing perspective was later

refined and re-emphasized by other prominent researchers such as Tushman and

Nadler (1978), Egelhoff (1982, 1991), and Daft and Lengel (1986). Information

processing is one of several theories that can be classified as contingency theory

(Bolon, 1998). Information processing theory postulates that organizational

information processing capacity must match organizational information requirements

if it is to have a significant impact on organizational performance. It assumes that dan

organization is a complex system whose primary problem of relating to its

environment is the acquisition and utilization of information. The greater the

uncertainty, the greater is the amount of information that needs to be processed to

achieve a given level of performance (Galbraith, 1977). Organizations would respond

to the increasing information demand by increasing their information processing

capabilities. The information processing capacity is largely represented in terms of the

capacities of different kind of organizational structures and processes, including

computer-based information systems, to transfer information within and across an

organization (Egelhoff, 1991). The conceptual model underlying the current research

is depicted in Figure. 1

AIS
Characteristics
Accounting Requirements
SMEs
Information
Performance
System Alignment AIS capacity of
available
softwares
Figure 1
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Despite these conceptual and empirical research efforts aimed at a wide range

of accounting and IT issues in SMEs, there is still a lack of understanding of the fit or

alignment of accounting information requirements with accounting information

systems processing capacity of these firms, as well as the impact this alignment may

have. To address these concerns, this research will first look into accounting

information requirements as represented by AIS requirements and accounting

information systems processing capacity as represented by AIS capacity, then look

into the fit between AIS capacity and AIS requirements as represented by AIS

alignment, and finally look into the impact of AIS alignment on SMEs' performance.

Whilst Galbraith’s information processing model refers to organizational

information requirements and information processing capacity in a broad sense, this

study focuses on the alignment between accounting and the computer-based

information systems processing capacity to generate the information. This is in

tandem with Van de Ven and Drazin’s (1985) suggestion that the concept of fit or

alignment should not be confined to structural contingency theory only but can be

applied to any theory that postulates that organizational performance is a function of

the match, congruence, intersection, or union of two or more factors. Therefore, the

initial stages of this study are concerned with the exploration of the concept, and

measurement, of fit between AIS requirements and AIS capacity. The fit between AIS

requirements and AIS capacity is generally referred to as AIS alignment and the

model in Fig. 1 shows AIS alignment directly related to organizational performance.

The model specifically links AIS alignment with performance. It does not suggest a

direct link between either AIS requirements and performance or AIS capacity and

performance. Instead, any link between AIS requirements or AIS capacity and

performance is via AIS alignment. The argument is that the effectiveness of AIS
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capacity will be contingent on the AIS requirements as suggested by information

processing perspective (Galbraith, 1973, 1977; Tushman and Nadler, 1978; Egelhoff,

1982).

Research Question / Objective of the Study

the objective of the study was to examine the knowledge and use of accounting

software among SMEs in Philippines and its correlation to performance with the aim

to answer the following:

1. Is there a direct impact of either accounting on performance or IT on SMEs

performance?

2. Is IT an essential tool, but not sufficient by itself?

Research Hypotheses

To link AIS requirements to performance is unrealistic. For example, Gul and

Chia (1994) argued that managers could perceive some characteristics of accounting

information to be useful but that information may not be available. Hence, the central

idea is that AIS capacity must be aligned with AIS requirements to have a significant

impact on performance, which leads to the hypothesis ‘AIS alignment is positively

related to SMEs performance’ This hypothesis implies that SMEs that are highly AIS

aligned perform better than less well aligned SMEs, regardless of AIS requirements

and regardless of AIS capacity. This is important as misalignment between AIS

requirements and AIS capacity inflicts unnecessary expenses on the organization. For

example, for firms that are faced with high levels of accounting information

requirements, providing managers with less accounting information than required

would affect the quality of the decisions made, which could eventually impede

performance. On the other hand, investing in sophisticated IT may turn out to be an

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inefficient and costly accounting information processing mechanism for firms that are

faced with lower levels of accounting information requirements (Rhee, 2001).

Furthermore, providing managers with unnecessary accounting information would

only cause information overload which could eventually hamper the performance

(Gul, 1991).

Method

Participants

To choose the required respondents for the survey, this study has used a

purposive sampling method to make ease of estimation procedure. The Saint Paul

School of Professional Studies Registrar provided a Total of three hundred fifty-three

(353) Names of Batch Pwersa accountancy students that already finished taking

ITATBUS and ACCTSYS. A total of three hundred fifty-three (353) Students of Saint

Paul School of Professional Studies were selected as sample size. The rationale for

selecting the respondents was their experience and basic knowledge in accounting and

accounting software and their applications within the SMEs in Philippines on the

subject to a Case study the samples took during their ITATBUS and ACCTCYS.

Research Design

In the analysis process of the collected data, researchers used a quantitative

descriptive research design to determine the level and correlation of students' using a

five-point scale to describe how AIS Requirements and Capacity (independent

variable) influenced the AIS alignment of a SME and their Performance (dependent

variable).
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Measures

An email questionnaire survey was used to gather data. Both AIS requirements

and AIS capacity were measured in relation to these 19 items (Future events, Speed of

reporting, Sectional reports, Frequency of reporting, Summary reports-sections,

Summary reports-organization, Temporal reports, non-financial (production),

Immediate reporting, Decisional models, non-financial (market), Precise targets,

Organizational effect, Automatic receipt, non-economic information, What-if

analysis, Effects of events on functions, Sub-unit interaction, and External

information) using two separate five-point scales.

Procedure

The Saint Paul School of Professional Studies Registrar provided a Total of

three hundred fifty-three (353) Names of Batch Pwersa accountancy students that

already finished taking ITATBUS and ACCTSYS as defined in this study. Although

by using Slovin’s Formula a Hundred and eighty-seven (187) Students are needed to

reach a sample size necessary to achieve a certain confidence interval of the 353

Samples. Ten (10) addresses were used for the Pilot Survey, and the rest were used

for the main survey. The questionnaires were addressed to the Accountancy Students.

Three Hundred Thirteen (313) usable questionnaires were eventually returned

representing an 89% response rate, which is considered a very good response rate

considering the numbers provided in the slovin’s formula.

Results

The descriptive statistics for the nineteen items used to measure AIS

requirements are reported in columns 2 and 3 in Figure 2, with items arranged in

descending order of their means, which represent their importance to the business.
Correlation of Accounting Software
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Responses for each item took the full range of values from 1 to 5. The results show

that the mean values for the AIS requirement items range from 3.45 to 4.21. The

highest rated items were future events, speed of reporting, sectional reports, frequency

of reporting, summary reports-sections, and summary reports-organization. External

information, sub-unit interaction, effects of events on functions, what-if analysis, and

non-economic information were ranked lowest. Despite these variations the generally

high values of all the means indicate that on average SME have a good grasp of the

importance of most of the characteristics listed.

Items AIS REQUIREMENT AIS CAPACITY

Mean S.D. Mean S.D.

Future Events 4.21 0.85 2.95 1.08

Speed of reporting 4.10 0.90 3.28 1.00

Sectional reports 4.09 0.83 3.25 1.03

Frequency of reporting 4.09 0.77 3.47 0.98

Summary reports-sections 4.07 0.88 3.25 1.05

Summary reports-organization 4.07 0.90 3.29 1.06

Temporal reports 4.01 0.78 3.29 1.01

Non-financial (production) 3.94 0.89 2.95 1.11

Immediate reporting 3.85 0.95 2.95 1.02

Decisional models 3.82 0.87 2.86 1.06

Non-financial (market) 3.81 0.97 2.56 1.08

Precise targets 3.78 0.95 2.73 1.08

Organizational effect 3.78 0.97 2.75 1.08

Automatic receipt 3.77 0.97 2.94 1.13

Non-economic information 3.69 0.98 2.29 1.03

What-if analysis 3.56 0.92 2.41 1.04

Effects of events on functions 3.53 0.86 2.57 1.06

Sub-unit interaction 3.52 0.92 2.48 1.01

External information 3.45 0.98 2.29 1.09

Figure 2. Mean rating for nineteen AIS requirements and nineteen AIS capacity items
Correlation of Accounting Software
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Since the AIS requirements were measured using nineteen items and nineteen

matching items were used to measure AIS capacity, it was possible to explore how

important a specific accounting information item was to a firm and how well this

information was supported by their computer-based information systems. Given the

variations in the requirements and capacity scores of the nineteen information

characteristics, it seems likely there would be important differences in how well the

different information characteristics matched up on requirements and capacity. This

sub-section reports the results of doing this comparison by cross tabulating the scores

for each of the nineteen information characteristics. To simplify the following

description, the responses for point ‘4’ and point ‘5’ of the five-point scale for the AIS

requirements items are treated as one category called ‘important’. Similarly, point ‘1’

and point ‘2’ are treated as one called ‘not important’. The point ‘3’ is labelled the

‘neutral’ category. The same approach was applied to AIS capacity items. The

responses for point ‘4’ and point ‘5’ are treated as one category called ‘available’.

Similarly, point ‘1’ and point ‘2’ are treated as one category called ‘not available’.

Three examples of the cross tabulation produced are shown in Figure 3.

AIS Capacity
AIS Requirement
Not Available Neutral Available

Future events
Not important 9 1 0

Neutral 18 27 1

Important 33 75 149

Non-economic information

Not important 30 3 0

Neutral 52 43 3
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Important 85 64 33

Temporal reports
Not important 7 3 0

Neutral 17 21 11

Important 66 99 89
1
Figure 3. three examples of different patterns of AIS alignment using cross-tabulation

The results of the cross-tabulation analysis indicate similar patterns for

sectional reports, temporal reports, summary reports-sections, summary reports-

organization, speed of reporting, frequency of reporting, and non-financial

production. The patterns for these information characteristics show a large number of

occurrences in the cells that represent the category ‘important-available’. In other

words, many of the participants perceived that these types of information are

important for the SMEs and at the same time they perceived that their computer-based

information systems provide the information. A second pattern refers to a group of

items with a large number of occurrences in the cells representing the categories

‘neutral-not available’ and ‘important-not available’, which implies that while quite a

number of companies perceived that these types of information are important or being

neutral about them, many of them also perceived that their computer-based

information systems are not providing the information. These items were non-

economic information, external information, non-financial marketing, effects of

events on functions, what-if analysis, and sub-unit interaction. The third and final

pattern represents a group of items that received an important rating for AIS

requirements but a mixture of responses for AIS capacity. These variables include

future events, decisional models, precise targets, organizational effects, automatic

receipt, and immediate reporting. The cross-tabulation data indicates varying degrees

of alignment between AIS requirements and AIS capacity for different information
Correlation of Accounting Software
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characteristics. This initially suggested that fit or alignment was a complex multi-

faceted concept and needed to be further explored at the level of each of the nineteen

information characteristics. It also raised the question of whether there were groups of

SMEs with similar profiles in terms of AIS alignment. For instance, are there some

SMEs reporting nearly all the nineteen characteristics in the ‘important-available’

cell, whereas another group has some of the nineteen characteristics in that cell but

others in the ‘important-neutral’ cell, and maybe a third group have the nineteen

characteristics spread across cells with available, neutral and not available. Hence, it

is important to try and identify any such grouping, which can be done by exploring

the alignment scores for each of the nineteen information characteristics

AIS alignment using the moderation approach was measured by multiplying

the ratings for AIS requirements item with the corresponding AIS capacity item (Chan

et al., 1997; Cragg et al., 2002). In this case, a high rating for an AIS requirements

item and a high rating for AIS capacity item will result in a high alignment measure.

On the other hand, a low rating for AIS requirements item and a low rating for AIS

capacity item will give a low alignment score. For each company and each

information characteristic, the rating for AIS requirements was multiplied by the

rating for AIS capacity. The mean for each information characteristic was calculated

by summing up the result of the multiplication for AIS requirements and AIS capacity

items from all the participants responses and dividing by the total number of

participants. For the moderation approach, the analytical scores ranged from 1 to 25.

The data in Figure 4. shows that frequency of reporting, summary reports-

organization, speed of reporting, summary reports-sections, sectional reports, and

temporal reports had high alignment scores, while external, non-economic, what-if

analysis, and sub-unit interaction received low alignment scores.

Correlation of Accounting Software
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AIS Requirement/AIS Capacity Items Mean Standard Deviation

Frequency of reporting 14.54 5.65

Summary reports-organization 13.93 6.09

Speed of reporting 13.93 5.83

Summary reports-sections 13.73 5.95

Sectional reports 13.72 5.95

Temporal reports 13.58 5.62

Future events 12.78 5.94

Non-financial (production) 12.01 5.71

Immediate reporting 11.80 5.76

Automatic receipt 11.61 6.29

Decisional models 11.29 5.65

Organizational effects 10.89 5.83

Precise targets 10.70 5.70

Non-financial (market) 10.00 5.31

Effects of events on functions 9.42 5.18

Sub-unit interaction 9.04 5.05

What-if analysis 8.92 5.11

Non-economic 8.76 4.99

External 8.26 5.28

Figure 4. Mean alignment scores for each item

The degree of variation in alignment between the items had not been predicted and

clearly there was also considerable variation from Student to Student. These

variations suggest it would be dangerous just to add the nineteen alignment scores for

each firm together to obtain an overall alignment rating for the SME. Furthermore, as

reported in Figure 3, the cross-tabulation data revealed there were different pattern of

alignment apparent for different groups of the nineteen information characteristics.

This raised the question of whether there were groups of SMEs with similar profiles

in terms of alignment. Maybe there were some with low alignment on all nineteen

items, some low on several items but highly aligned on other items and some with
Correlation of Accounting Software
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other combinations of alignment. Thus, it seemed important to identify any significant

groups with different types of alignment before the hypothesis could be tested.

Discussion

Over the last few decades many studies have investigated the issues of

accounting information practices and IT utilization in SMEs but almost always

separately. This study represents a first attempt to investigate these two important

issues in a single study. The findings of this study suggest that while SMEs in the

sample perceived strategic accounting information as being important for their

business, many of them felt that their computer-based accounting information systems

were not able to match the accounting information requirements. While there is a high

degree of alignment for some accounting information, the mismatch is more apparent

for other accounting information. This suggests that Philippine SMEs are using

different IT strategies for different accounting information. Future studies could focus

on specific accounting information to understand how each is supported by IT. Maybe

some accounting information is easier to support with IT or firms may be targeting IT

at specific accounting information. This study explored the fit or alignment between

AIS requirements and AIS capacity and examined its impact on performance in

SMEs. Similar to Chan et al. (1997) and Cragg et al. (2002), who found a positive

relationship between IT alignment with business strategy and firm performance, this
Correlation of Accounting Software
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study found a positive relationship between AIS alignment and firm performance.

Even though these earlier studies were examining a different type of IT alignment, it

is interesting that the current results for Philippines are consistent with those from

Cragg et al. (2002) collected in the United Kingdom and Chan et al. (1997) collected

in the United States and Canada. This suggests that findings from IT alignment

studies conducted in North America and European countries can also be applied in

some ways in the Asian context.

Traditionally, the concept of fit as suggested by information processing theory

has been used for the analyses of information management issues mainly in the

context of large organizations (e.g., Egelhoff, 1982, 1991; Daft and Lengel, 1986;

Lengel and Daft, 1988; Bolon, 1998). Many of these studies also focus on

organization structure as the main information processing mechanism. To our

knowledge, no study has yet applied the information processing perspective to the

issue of accounting information management and explicitly in the context of SMEs.

This study also focuses on computer-based accounting information systems as the

main and important information processing mechanism in SMEs. The results of this

study should give other researchers confidence to measure AIS requirements and AIS

capacity using a similar set of information characteristics. It should also give other

researchers encouragement to explore further issues related to AIS alignment using

the moderation approach to combining AIS requirement and AIS capacity scores

In this paper, we have explored the fit between AIS requirements and AIS

capacity and whether this fit is linked to performance in SMEs. As a first step, we

measured AIS requirements in terms of importance to the business attached to 19

accounting information characteristics. An interesting by-product of this study was to

note that Accountancy students in the sample do acknowledge the importance of

Correlation of Accounting Software
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strategic accounting information to SMEs. AIS capacity was measured in terms of the

IT support available for each of the 19 accounting information characteristics. The

results suggest that in many cases the firms’ AIS processing capacities were

insufficient to match their AIS requirements, which implies that the managers of

SMEs were not being as effective as they could be in utilizing IT. Importantly the

results also showed that the participants were distinguishing between the importance

of, and the support for, the 19 accounting information characteristics. Having

quantified AIS requirements and AIS capacity, the question of whether the fit of AIS

capacity and AIS requirements is a measurable concept was explored. The initial

results suggested that fit was a complex multi-faceted concept, which had to be

explored at the level of each of the 19 information characteristics. Further, the results

of the moderation perspective of measuring fit indicated varying degrees of alignment

of the nineteen information characteristics. Interestingly, whilst the results of many

past studies indicate that SMEs were not using IT strategically and were unable to

support strategic decision-making, the results of this study suggest that some of the

participants perceived that SMEs in the Philippines had achieved a high degree of

alignment between AIS requirements and AIS capacity. Consistent with results from

recent studies that suggest that IT helps SMEs to implement business strategy (Lesjak,

2001; Levy et al., 2001; Cragg et al., 2002), these findings thus suggest that some

SMEs are also capable of using IT strategically, more than just focusing on

administrative efficiency.

Limitations

It is important to note that this study was subject to a number of limitations.

First, this study used a subjective orientation to measure AIS requirements. Future

research could employ a more objective approach by asking respondents about the
Correlation of Accounting Software
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importance of specific accounting techniques to their business. Second, the study was

based on a survey. This approach has shortcomings as it captures a situation or an

event at a point in time. Future research could employ a more qualitative approach

such as the case study or a longitudinal study. Third, this study measured AIS

alignment based on the moderation approach to combining paired items for both AIS

requirements and AIS capacity. Future research could explore other ways of

measuring fit, and possibly explore whether it is valid to add the nineteen alignment

scores to form a single alignment value which would open the way for further

analysis. Another limitation of the study concerns the cause and effect relationships

between AIS alignment and organizational performance. There are potentially other

factors that could influence alignment and business performance. A cross-sectional

study such as this cannot prove cause and effect relationships.

Correlation of Accounting Software
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Appendices
Correlation of Accounting Software
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Correlation of Accounting Software
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