Analyzing the Relationship Between ERP Implementation and Improving the Quality of Accounting Information in Saudi Arabia
Analyzing the Relationship Between ERP Implementation and Improving the Quality of Accounting Information in Saudi Arabia
discover | Friday - 29 / 08 / 2025 - 9:54 pm
Analyzing the Relationship Between ERP Implementation and Improving the Quality of Accounting Information in Saudi Arabia : In light of the global digital acceleration, Saudi organizations seek to enhance their operational efficiency and raise the level of transparency and accuracy in their financial reports.
The adoption of enterprise resource planning (ERP) systems has become one of the most important technological transformations in this context.
But, do ERP implementations actually improve the quality of accounting information in Saudi Arabia?
This article seeks to provide an in-depth analysis of this relationship in the Saudi market, based on real-world experiences and models that reflect actual practices in various sectors.
1
What is the ERP system, and why do organizations adopt it?
The ERP system represents a comprehensive information system that combines administrative, financial, and logistical operations within a unified and integrated technical environment.
This advanced system connects various departments of an organization through a central, harmonized database, achieving streamlined information flow, reducing duplication of operations, increasing organizational performance, and enhancing transparency and accuracy.
The Kingdom of Saudi Arabia (KSA) has witnessed a fundamental shift in the use of these ERP systems which have transcended their traditional role as operational tools to become a pivotal strategic pillar in the fabric/ structure of corporations, particularly in the industrial, financial, and governmental sectors. This development comes in response to growing global requirements, most notably the International Financial Reporting Standards (IFRS) and the regulatory controls issued by the General Authority of Zakat, Tax, and Customs.
A Historical Overview on the Digital Accounting Transformation:
The implementation of ERP systems in Saudi Arabia began in the late 1990s, but it has gained prominence over the past decade.
In the early stages, private sector giants, particularly oil and gas companies, were the pioneers of this technological transformation, before the phenomenon gradually expanded to include other vital sectors such as banking, manufacturing industries, and government services sectors.
In 2016, the launch of Saudi Vision 2030 represented a pivotal turning point in this process. The vision set ambitious goals for digital transformation, thus providing a strong incentive for organizations to adopt the latest versions of ERP systems.
Government initiatives, most notably the National Transformation Program, have reinforced this strategic direction through a package of incentives and qualitative investments in the necessary digital infrastructure.
Influential Accounting Legislation and Standards:
The Kingdom of Saudi Arabia has witnessed a qualitative development in its legislative system and accounting standards. This qualitative development culminated in the mandatory implementation of International Financial Reporting Standards (IFRS) for companies listed on the stock market starting in 2017, and then expanded to include other companies in 2018.
This shift toward international standards has created new requirements for accounting information systems, transforming ERP systems from a technical option to a strategic necessity to ensure efficient and effective compliance with international standards.
In the same context, the Saudi Organization for Certified Public Accountants (SOCPA) issued a series of technical guidelines urging the use of advanced technologies in accounting practices, with a particular focus on enhancing standards of accuracy, transparency, and compliance with international requirements.
But what is meant by the quality of accounting information?
The quality of accounting information is not measured solely by its calculation accuracy, but rather by the availability of a set of important characteristics that ensure the effectiveness and strategic value of accounting information. The most notable characteristics are:
Relevance:
The ability of information to provide deep insights that support timely decision-making and meet the needs of diverse users.
Reliability:
The information’s commitment to complete credibility in representing the financial reality of the organization. The accounting information must be free of material errors or bias.
Transparency:
The clarity of data sources and processing procedures, ensuring the ability to track and audit them by relevant stakeholders.
Timeliness:
Providing information within the optimal timeframe that allows it to be utilized before it loses its operational value.
What are the challenges of achieving high-quality accounting information in Saudi Arabia?
Despite the significant development Saudi Arabia is witnessing across various sectors, enterprises still face fundamental challenges in ensuring high-quality accounting information, which is a cornerstone for strategic decision-making and financial transparency. Here are the key challenges:
Cultural and Organizational Challenges:
Implementing Enterprise Resource Planning (ERP) systems faces difficulties adapting to the prevailing organizational culture, as these systems require re-engineering administrative and financial procedures, which may clash with resistance to change from individuals or departments accustomed to traditional work patterns.
Lack of Specialized Skills:
One of the main obstacles is the shortage of qualified personnel to use ERP systems professionally. Operating these advanced systems requires precise technical and practical skills, exacerbating the gap between technological capabilities and the ability to utilize them optimally.
Difficulty in Integrating with Existing Systems:
Many enterprises rely on legacy financial and administrative systems, leading to technical and functional complexities when trying to integrate them with modern ERP systems. This negatively impacts the efficiency of accounting processes and data consistency.
Specificity of the Saudi Regulatory Environment:
Accounting systems require high flexibility to adapt to unique local requirements, such as the Zakat and tax system (including Value-Added Tax), the regulatory framework of the Zakat, Tax and Customs Authority, and compliance with Islamic accounting standards in certain sectors.
How do ERP systems contribute to improving the quality of accounting information?
ERP systems enhance the quality of accounting information through several mechanisms and benefits:
Integration of activities and error reduction:
ERP systems integrate operational and financial activities into a unified system, reducing the likelihood of errors resulting from manual entry or the use of multiple systems, and enhancing the accuracy and reliability of accounting reports.
Enhanced control and compliance:
These systems provide advanced control tools, including access control and real-time process tracking, which enhance data reliability and limit opportunities for manipulation or falsification.
Operational efficiency improvement:
ERP systems accelerate the completion of accounting processes, such as closing financial periods and preparing reports, which increases the organization’s ability to quickly respond to market changes and management decisions.
Achieving transparency and integration:
The system enables tracking transactions starting from their inception to their reflection in financial statements, transforming accounting from a mere recording function to a strategic tool for performance analysis and decision-making.
Now that we’ve reviewed the close relationship between ERP systems and improving the quality of accounting operations in Saudi companies, it’s worth highlighting a group of pioneering experiences from prominent companies that have achieved tangible success in this field.
Keep reading for more valuable information awaits you!
A Success Journey in Digital Transformation: Case Studies of Leading Saudi Companies:
- Oil and Gas Sector: Saudi Aramco:
Saudi Aramco is one of the world’s leading models for adopting advanced ERP systems. Its adoption of the integrated SAP system has contributed to qualitative transformations, including:
- Comprehensive Integration of Operations: Integrating the supply chain with financial and accounting operations into a unified system, which contributed to enhancing operational efficiency.
- Reliability of Financial Reporting: Increasing the accuracy of financial data and accelerating reporting, which contributed to enhancing confidence during the company’s successful initial public offering in 2019.
- Transparency and Compliance:
Unifying accounting standards across its international branches, establishing a solid foundation for financial disclosure in accordance with international best practices.
- Banking Sector: National Commercial Bank of Saudi Arabia (NCB):
Following the merger of the National Commercial Bank (NCB) and Samba Financial Group, NCB has become a prominent model in utilizing ERP systems to enhance its competitiveness, achieving:
- Effective Data Integration: Seamlessly integrating the financial systems of the merged entities, reducing duplication and increasing consistency.
- Efficient Accounting Operations: Reducing the monthly accounting cycle closing time from one week to just 48 hours.
- Financial Forecast Accuracy: Improving the quality of financial forecasts by over 40% thanks to real-time data analytics.
- Regulatory Compliance: Enhancing compliance with Saudi Arabian Monetary Authority (SAMA) standards and international standards such as IFRS.
- Retail Sector: Alhokair Group:
Fawaz Alhokair Group (one of the giants of the Saudi retail sector) achieved a strategic leap by implementing an integrated ERP system, the results of which were evident in:
- Unified Financial System: Integrating financial data coming from more than 1,600 local and international stores into a single platform.
- Improved inventory management: Reduce inventory-related operating costs by 15% through real-time data analysis.
- High-accuracy financial reporting: Provides transparent insights for investors and regulators, while reducing human error.
- Strategic responsiveness: Accelerate financial decision-making through interactive dashboards that reflect real-time performance.
What value does Logix ERP offer its customers?
Throughout two decades of pioneering experience in the ERP field, the company has proven its excellence as a strategic partner with a forward-looking vision, transcending the role of a traditional technology provider. It has reshaped industry standards based on solid strategic foundations, manifested in the provision of:
- A system of smart solutions with professional design.
- A system of continuous technical support.
- Qualitative partnerships with global technology leaders, such as SAP and Microsoft Dynamics, to localize the latest technological innovations into solutions that take into account the specificities of the local market and meet its requirements with utmost precision.
Start your digital transformation journey with a trusted partner – request a detailed proposal now!