Effect of Enterprise Resource Planning Finance Module Systems on financial performance of Motor Industry in Nairobi, Kenya

Abstract

Companies are increasingly implementing Enterprise Resource Planning (ERP) software solutions to improve operations and provide faster customer response (Copley, 2015) resulting in increased firm financial performance. The key functions of Enterprise Resource Planning financial module systems will include Accounts Payable (AP), Accounts Receivable (AR), Cash Management (CM) and Asset Management (AM) while customer service is catered for through Customer Relationship Management (CRM) module embedded in ERP systems.While there is a rich body of literature on ERP adoption and implementation, there is limited research on post-implementation effect on ERP systems usage. This study therefore seeks to bridge the knowledge gap on the effect of ERP systems usage. Further, considering the huge capital investments outlay used in development and implementation of ERP systems in motor companies, it is important for the motor companies to understand the impact of ERP systems usage on these firms’ performance. The study had five objectives of finding out the effect of ERP systems usage on accounts payable, accounts receivable, cash management, asset management and customer service on financial performance of motor companies in Kenya. The study is guided by Stakeholder Theory which posits that sustainable success in ERP systems usage rests upon a systematic consideration of the views of all key stakeholders of which organizations are made up (Pouloudi & Whitley (1997); Lyytinen et al (1998) in line with two perspectives: inside-in (employees, managers) and inside-out (others: shareholders, partners). Agency Theory is described as a theory that has been proposed as a framework to dealing with many issues in human behavior (Patton & Mchahon, 2006). In this study, the agency theory is concerned with relationships which can be achieved through ERP systems connectivity among stakeholders; it views the organization as a system that consists of individuals who work together with a common goal of building an organization. The research adopted explanatory research design employing the use of mainly questionnaires as the primary data collection tool which was administered to a target population familiar with the use of ERP systems in Motor sector. Reliability and validity tests of research instruments was carried out through a pilot test done from Subaru Kenya Limited. Data was analyzed and presented using descriptive statistics and presented in terms of mean, standard deviation, coefficient of variation (CV) and significance test. Findings indicated a statistical relationship between all the variables tested and performance. Specifically, result indicate statistically significant effect of ERP systems usage on Accounts Payable (p= 0.033), Accounts Receivable (p= 0.024), Cash Management (p= 0.023), Asset Management (p= 0.023), and Customer service (p= 0.019) on financial performance respectively. Overall, there is a positive correlation and a strong relationship (R=0.726) between ERP systems usage and financial performance of Motor Industry in Kenya. The R-Square value of study was 0.527 which implies that ERP systems usage on Accounts Payable, Accounts Receivable, Cash Management, Asset Management and Customer service accounted for 52.7% of the total variance in financial performance of Motor Industry in Kenya. The study recommends that managers in motor companies perform internal ERP systems usage analyses to determine their full utilization in the organizations to ensure that they derive maximum benefits from ERP systems usage. The study concentrated on variables with financial aspects of ERP systems usage hence researchers could therefore consider introducing other variables of strategic nature in ERP systems usage in similar studies such as organizational structure integration efficiency, Employees work efficiency, Regulatory factors compliance among other variables and establish their influence on performance.