computerized accounting on performance of banks
1.1 Background
Ford et al., (2016) indicates that some of the world’s largest multinational organizations like Toyota have managed to evolve by ensuring that better organizational performance is at the forefront to its economic prosperity.
The complexity and volume of the use of computerized accounting increased globally in the recent years. Some of the causes that can be attributed to this include globalization, out sourcing, intense competition for existing markets as well as complicated and numerous partnership. Over the last fifty years many, of the world’s largest firms have advanced from being simple manufactures of hard goods, or providers of basic services, to being sophisticated vendors using advanced business models. This means that commitment of organizational process to suppliers to contractual obligations has increased, thus, the need for sustainable computerized accounting system (Krappe & Kallayil, 2013).
Computerised accounting systems have been adopted by most Nigerians organizations is used specifically to reduce costs increase efficiency and encourage organizational performance. Some of the technology computerised accounting systems include soft wares and Bar code scanners (Somuyiwa, 2010). On the same note Protiviti, (2009) asserts that the business environment today has been undergoing unprecedented change and many companies are seeking new ways to stand out from the competition by sustaining their competitive advantage. In today’s highly competitive global marketplace, the pressure on organization’s to find new ways of creating and delivering value to customers is growing stronger.
Computerised accounting systems covers vast areas of technologies such as mobile and wireless technology, telecommunications, software development, security, Intelligent systems etc. Computer technology has had a huge impact on industries, the community in general and our daily lives. Computer technology can be applied to many fields like accounting. One of the emerging applications in recent years is in accounting field which has led to the emergency of the term computerised accounting, (Diamond, 2006).
Computerised accounting is fast becoming one of the main drivers of change, posing new strategic challenges (Somuyiwa, 2010). The business environment today has been undergoing unprecedented change and many companies are seeking new ways to stand out from the competition by sustaining their competitive advantage. In today’s highly competitive global marketplace, the pressure on organization’s to find new ways of creating customer satisfaction therefore computing in accounting is inevitable in organizations , according to Lysons, (2012) it is essential to for organizations to adopt the use of computers in accounting inorder to enhance organizational performance in the globalised world.
According to Elaiwi (2009) most organizations in East Africa have not fully developed computerised accounting systems due to lack of quality Human resource and as such they have been left behind their global peers. In the light of technological progress witnessed by different countries in the world today for all scientific and practical fields for both industrial, commercial and services sectors, public institutions, most private organizations have embraced the use of computers in their accounting operations
According to the current trend of computer advancement, computer is an important tool to enhance efficiency and responsiveness in modern-day accounting practices. The introduction, implementation and usage of computer technology in companies are usually motivated by an attempt to reduce costs (Oyesiku, 2010).
Equity Bank was voted the best bank in Kenya in terms of customer deposits amongst banks with a deposit base of over Ksh 75 billion in a recent survey on the performance of Kenyan banks released by accounting and consulting firm RSM Ashvir. Diversification strategy paid off as Equity Group Holdings posts a 13 percent growth in PBT and welcomes new Strategic Investor. Regional financial services provider, Equity Group Holdings, had recorded a 13% increase in Profit before Tax in the first quarter of 2015. The Group‟s pre-tax profits for the period increased by 13 percent to Kshs 6.1 billion up from Kshs 5.4 billion posted over the same period last year. The performance was largely attributed to growth in intermediation business and successful outcomes from the revenue diversification initiatives under implementation. Customer deposits maintained a positive trajectory and grew by 35 percent to Kshs 278 billion up from Kshs 206 billion in March, 2013. The Group‟s total operating income grew by 19 percent to Kshs 13.2 billion up from Kshs 11.1 billion registered in same period previous year.
The increase in income was buoyed by significant successes in driving non- funded revenues which grew by 36 percent to reach 42 percent of total operating income. Total expenses grew by 24 percent to Kshs. 7.1 billion on the back of investments made in an expanding the IT capacity in 2014. Driven by a rich portfolio of diversified investments, Equity Group Holding‟s total assets grew to Kshs 372.5 billion up from Kshs 295.3 billion representing a 26 percent growth year on year. Net loans recorded a 25 percent growth from Kshs. 179.3 billion in March 2014 to Kshs. 224.8 billion in March 2015 while maintaining high quality of the loan book. The Group sustained its track record of value creation for its investors and efficiency in utilization of its assets registering Returns on Equity (ROE) and Return on Assets (ROA) of 27.6 percent and 4.8 percent respectively. The Group‟s latest innovation Equitel, maintained an impressive trajectory managing an 81 percent growth to close the trading period with over 650,000 subscribers (Equity bank official homepage, 2015)
However of recent Equity Bank id faced with numerous challenges, its up on this Background that this study intends to investigate into the role of computerised accounting on organizational performance.
1.2 Statement of the problem
During the year of March 28th 2015 Equity Bank experienced a financial loss of $700,000 from oasis mall Branch in Kampala, this raised many questions to the Bank top management in addition to that Equity Bank also lost $500,000 this generally affected the financial performance of the bank leading to a drop in the net profits in 2015 (Equity Bank records, 2016).
Equity Bank faced a serious challenge in other areas of performance especially the general decline in profitability, this was due to the fact that the Bank faced a drop in net profits by 5.9 percent to Ksh. 15.2 Billion from Ksh. 16.2 Billion in 2015. This challenges was in addition to the rise in Total operating expenses which rose by 23 percent to 27.5 Billion, this was in a large part due to a quadrupling of the loan loss provision from Ksh. 1.2 Billion in 2015 to Ksh. 5 Billion (Mureith, 2016).
Apart from the above challenges Equity Bank in the year 2017 faced a drop in profits by 3 percent, the Group’s Profit before tax reduced from 21.5 billion in 2016 to 20.7 billion in 2017. The profit after tax, therefore, suffered a decline registering 14.6 billion from 15.2 billion in 2016 (Equity Bank Records, 2018).
Despite of the investments in Equity Bank the challenges of drop of profits has been continuously faced among many others that it faces. It’s upon this that this study intends to investigate into the role of computerized accounting on organizational performance, with specific reference to Equity bank oasis branch.
