U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB


   [X]       QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934 
             FOR THE QUARTERLY PERIOD ENDED   August 31, 1996 
   [ ]       TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM  _________
             TO ________________

   Commission file number    0-23438      


                       Effective Management Systems, Inc.
      (Exact name of the small business issuer as specified in its charter)

             Wisconsin                         39-1292200      
   (State or other Jurisdiction of         (I.R.S. Employer
   incorporation or organization)          Identification No.)


                              12000 West Park Place
                              Milwaukee, WI   53224              
                      (Address of principal executive offices)


                                   414-359-9800          
                           (Issuer's telephone number)



   Check whether the issuer (1) filed all reports required to be filed by
   Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
   such shorter period that the registrant was required to file such
   reports), and (2) has been subject to such filing requirements for the
   past 90 days.  Yes  X     No     


   State the number of shares outstanding of each of the issuer's classes of
   common equity as of the latest practicable date.


      Class                      Outstanding as of August 31, 1996

      Common Stock, $.01 par value              3,978,643

   Transitional Small Business Disclosure Format:   Yes         No  X  

   <PAGE>

                       EFFECTIVE MANAGEMENT SYSTEMS, INC.
                                   Form 10-QSB
                                 August 31, 1996


                                      INDEX



   PART 1 - FINANCIAL INFORMATION                                        PAGE


   Item 1.   Financial Statements: 

             Consolidated Balance Sheets at
             August 31, 1996 and November 30, 1995                          3

             Consolidated Statements of Income for the Three and Nine
             Month Periods Ended August, 31, 1996 and August 31, 1995       5

             Consolidated Statements of Cash Flows for the  
             Nine Months Ended August 31, 1996 and August 31, 1995          6

             Notes to Consolidated Financial Statements                     7

   Item 2.   Management's Discussion and Analysis of Financial 
             Condition and Results of Operations                            8



   PART II - OTHER INFORMATION



   Item 6.   Exhibits and Reports on Form 8-K                              16


   SIGNATURES                                                              17 


   <PAGE>
       PART I Financial Information
       Item 1 Financial Statements


       EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
       CONSOLIDATED BALANCE SHEETS
       (in thousands) (unaudited except for November 30, 1995 amounts)


       ASSETS                                            31-Aug        30-Nov
                                                          1996          1995

       CURRENT ASSETS
          Cash                                        $     17      $    335
          Investments in available-for-sale
           securities                                    1,010         1,263
          Accounts Receivable:
            Trade, less allowance for
               doubtful accounts                         9,515         9,402
          Related Parties                                  796           652

          Inventories                                      668           518
          Refundable Income Taxes                          385           462
          Deferred Income Taxes                            157           157
          Prepaid Expenses and Other Current 
            Assets                                         221           197
                                                        ------        ------
              TOTAL CURRENT ASSETS                      12,769        12,986

       LONG TERM ASSETS
       Computer Software, net                            5,024         4,000
       Investments in and Advances to
         Unconsolidated Joint Ventures                     193           179
       Equipment and Leasehold Improvements, net         3,466         3,223
       Intangible Assets, net                            3,462         3,387
       Other Assets                                        573           557
                                                        ------        ------
              TOTAL LONG TERM  ASSETS                   12,718        11,346
                                                        ------        ------

       TOTAL ASSETS                                  $  25,487     $  24,332
                                                      ========      ========

       The accompanying notes are an integral part of these consolidated 
           financial statements.

 <PAGE>
    EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    (in thousands, except share data) (unaudited except for November 30, 1995
       amounts)


    LIABILITIES AND STOCKHOLDERS' EQUITY                 31-Aug        30-Nov
                                                          1996          1995

    CURRENT LIABILITIES
       Accounts Payable                              $   1,558      $  2,076
       Accrued Liabilities                               1,579         2,182
       Income Taxes Payable                               (372)          -
       Deferred Revenues                                 4,200         3,735
       Customer Deposits                                    42           227
       Current portion of:
         Long-term Obligations                              26            89
                                                       -------       -------
           TOTAL CURRENT LIABILITIES                     7,033         8,309

    LONG TERM LIABILITIES
       Deferred Revenue and Other
       Long-term Liabilities                               435           532
       Long-term Obligations                             2,896            21
       Deferred Income Taxes                             1,293         1,293
                                                       -------       -------
           TOTAL LONG TERM LIABILITIES                   4,624         1,846

       Commitments and Contingencies                       -             -

    STOCKHOLDERS'  EQUITY
       Preferred Stock, $.01 par value;  authorized
       3,000,000 shares; none issued or 
       outstanding                                         -             -
       Common Stock,  $.01 par value; authorized
       20,000,000 shares; issued 3,981,268 and 
       3,906,105 shares; outstanding 3,978,643
       and 3,903,480 shares                                 40            39
       Common Stock Warrants                                 3             3
       Common Stock and Warrants to be issued                            211
       Additional  Paid- in Capital                     11,035        10,662
       Retained Earnings                                 2,757         3,267
       Cost of Common Stock in Treasury
         (2,625 shares)                                     (5)           (5)
                                                       -------       -------
           TOTAL STOCKHOLDERS' EQUITY                   13,830        14,177

   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $  25,487     $  24,332
                                                      ========      ========

       The accompanying notes are an integral part of these consolidated
         financial statements.

<PAGE>
<TABLE>                                                           
 EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF INCOME
 (in thousands, except per share data) (unaudited) 
<CAPTION> 
                                                        THREE MONTHS ENDED           NINE MONTHS ENDED
                                                      31-Aug         31-Aug        31-Aug         31-Aug
                                                       1996           1995          1996           1995 

 <S>                                              <C>            <C>            <C>            <C>
 NET REVENUES:                                                                                              
   Software license fees                          $     4,040    $     2,047    $    11,970    $     6,828 
   Services                                             3,755          3,055         11,152          7,706 
   Hardware                                             1,278          2,128          5,297          4,868 
                                                    ---------      ---------      ---------      ---------
         Total net revenues                       $     9,073    $     7,230    $    28,419    $    19,402 

 COST OF PRODUCTS AND SERVICES                                                                              
   Software license fees                                  922            664          2,587          1,658  
   Services                                             3,017          2,172          8,668          5,360  
   Hardware and other                                     844          1,573          3,932          3,779  
                                                    ---------      ---------      ---------      ---------
         Total cost of products and services      $     4,783    $     4,409    $    15,187    $    10,797

 Selling and marketing expenses                         3,311          2,412          9,825          6,396  
 General and administrative expenses                      942            663          2,736          1,892  
 Product development expenses                             580            353          1,547            840  
                                                    ---------      ---------      ---------      ---------
         Total costs and operating expenses       $     9,616    $     7,837    $    29,295    $    19,925 
                                                    ---------      ---------      ---------      ---------
 INCOME(LOSS) FROM OPERATIONS                     $      (543)   $      (607)   $      (876)   $      (523)

 Other (Income)/ Expense                                                                                   
   Equity (earnings)/loss of unconsolidated
     joint ventures                                       -               67             (3)            10  
   Interest (income)                                      (22)           (58)           (72)          (140) 
   Interest expense                                        45             29             82             47  
                                                    ---------      ---------      ---------      ---------
                                                           23             38              7            (83) 
                                                    ---------      ---------      ---------      ---------
 INCOME(LOSS) BEFORE INCOME TAXES                 $      (566)   $      (645)  $       (883)   $      (440) 
 Income Taxes Expense(Benefit)                           (233)          (255)          (372)          (218) 
                                                    ---------      ---------      ---------      ---------
    NET INCOME(LOSS)                              $      (333)   $      (390)   $      (511)   $      (222) 
                                                    =========      =========      =========      =========
 Earnings(Loss) per share                              ($0.08)        ($0.11)        ($0.13)        ($0.06) 

 Weighted average common and                            3,973          3,634          3,952          3,591
   equivalent shares outstanding 

</TABLE>

 The accompanying notes are an integral part of these consolidated
    financial statements.

<PAGE>
EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)

                                                        NINE MONTHS ENDED
                                                      31-August   31-August
                                                        1996         1995

OPERATING ACTIVITIES
    Net Income(Loss)                                   $   (511)  $   (222)
    Adjustments to reconcile net income(loss) to
      net cash provided(used) by operating activities:
      Depreciation and amortization                       1,010        554
      Amortization of capitalized computer software 
       development costs                                  1,407        627
      Equity in earnings of joint ventures                  -          (41)
      Changes in operating assets and liabilities:
        Accounts Receivable                                   3        893
        Inventories and other current assets               (353        140
        Accounts payable and other liabilities           (1,431)    (1,644)
                                                       --------    ------- 
    Total adjustments                                       671        529
    Net cash provided(used) by operating activities         160        307

INVESTING ACTIVITIES
      Additions to equipment and leasehold inprovement   (1,056)    (1,122)
      Proceeds from sale (purchase) of securities           253      1,817
      Purchase of Affiliate                                  20       (219)
      Software development costs capitalized             (2,431)    (1,299)
      Other                                                 (29)       -
                                                       --------    ------- 
    Net cash provided(used) in investing activities      (3,243)      (823)

FINANCING ACTIVITIES
      Proceeds from exercise of stock options                -         116
      Proceeds(payments) on long-term debt and 
       other notes payable                                2,734        177
      Additional paid in capital                             31        -
                                                       --------    ------- 
    Net cash provided(used) by financing activities       2,765        293
                                                       --------    ------- 
    Net increase (decrease) in cash                    $   (318)  $   (223)
Cash-beginning of period                                    335        280
Cash-end of period                                           17         57


The accompanying notes are an integral part of these consolidated
     financial statements.


<PAGE>

                   EFFECTIVE MANAGEMENT SYSTEMS, INC.

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            August 31, 1996
                              (Unaudited)

   Note 1 - Basis of Presentation

        The accompanying consolidated interim financial statements included
   herein have been prepared by Effective Management Systems, Inc. (the
   "Company"), without an audit, in accordance with generally accepted
   accounting principles for interim financial information and pursuant to
   the rules and regulations of the Securities and Exchange Commission. 
   Certain information and footnote disclosures normally included in
   financial statements prepared in accordance with generally accepted
   accounting principles have been condensed or omitted pursuant to such
   rules and regulations, although the Company believes that the disclosures
   made are adequate to make the information presented not misleading.

        In the opinion of management, the information furnished for the three
   and nine month periods ended August 31, 1996 and 1995 include all
   adjustments, consisting solely of normal recurring accruals, necessary for
   a fair presentation of the financial results for the respective interim
   periods and is not necessarily indicative of the results of operations to
   be expected for the entire fiscal year ending November 30, 1996.  It is
   suggested that the interim financial statements be read in conjunction
   with the audited consolidated financial statements for the year ended
   November 30, 1995 included in the Company's Form 10-KSB filed with the
   Securities and Exchange Commission.
    

   Note 2 - Acquisitions

        Effective March 31, 1995, the Company completed the purchase for
   $793,000 of the remaining 50% of the capital stock of Effective Management
   Systems, Inc of Illinois ("EMS-ILL") not then owned by the Company.  The
   purchase price consisted of (a) 50,200 shares of the Company's common
   stock valued at $395,000 which were exchanged for 9,200 shares of the
   capital stock of EMS-ILL, (b) $380,000 in cash and (c) $18,000 of
   acquisition costs.

        On September 6, 1995, the Company acquired all of the common stock of
   Intercim Corporation for approximately $3,355,000 comprised of 278,193
   shares of the Company's common stock valued at $7.50 per share; 278,193 of
   the Company's warrants valued at $3.75 per warrant; and direct acquisition
   costs of $225,000.   

        On May 18, 1996, the Company issued additional warrants pursuant to
   the Agreement and Plan of Merger, dated as of February 17, 1995, by and
   among the Company, EMS Acquisition Corporation and Intercim Corporation. 
   As of the record date of April 18, 1996, each holder of a warrant was
   entitled to receive .4459 additional warrants.  A total of 123,719
   additional warrants were issued.

        The acquisition of the remaining interest in EMS-ILL and the
   acquisition of Intercim Corporation have been accounted for under the
   purchase method of accounting.  Accordingly, the assets and liabilities of
   EMS-ILL and Intercim Corporation have been adjusted to their estimated
   fair values.  The excess of cost over the net assets acquired has been
   allocated to goodwill ($395,000 for EMS-ILL and $1,437,000 for Intercim
   Corporation). 


   Note 3 - Additional Financial Disclosure

   Equipment and leasehold improvements consisted of the
    following:


                                             8-31-1996      11-30-1995

   Gross                                    $7,490,000       $6,416,000

   Less:  Accumulated Depreciation          <4,024,000>     <3,193,000>
                                            -----------     -----------
   Net                                       $3,466,000      $3,223,000

   Allowance for doubtful accounts consisted
    of the following:

                                             8-31-1996      11-30-1995

   Balance                                   $  239,000      $  312,000


   Provision for doubtful accounts consisted
    of the following:

                                             8-31-1996      11-30-1995 

   Balance                                   $   60,000       $   26,000


   <PAGE>
   Item 2. Management's Discussion and Analysis of Financial Condition and
   Results of Operations


   Overview

   The Company continued its growth in revenues (25.5%) along with a
   corresponding growth in costs and expenses to produce a smaller net loss
   for the third quarter of 1996 compared to the third quarter of 1995. The
   Company experienced a strong expansion in software revenues (97.4%) which
   was offset in part by a reduction in low margin hardware revenues (-40.0%)
   in the third quarter of 1996 as compared with the same period in 1995. The
   increase in software revenues was mainly due to expansion of the existing
   distribution channels and  from the acquisition of two entities mentioned
   below.  The reduction in hardware revenues was primarily the result of
   "software only" sales whereby the customer elects not to purchase hardware
   from the Company because of hardware already in place, or because the
   customer decides to purchase hardware  through a third party vendor.  On a
   year to date basis,  total revenues grew  46.5% with a corresponding
   growth in costs and revenues which resulted in a larger net loss for the
   first three quarters of 1996 compared to the same period of 1995.  The
   corresponding rise in costs and expenses resulted, for the most part, from
   a continued high level of strategic investments in product development, 
   field service infrastructure, and expanded distribution channels. 
   Management believes these strategic investments have the potential to
   positively enhance future revenues and profitability. 

   The 1996 year-to-date consolidated financial statements reflect the
   operating results of Effective Management Systems of Illinois, Inc.("EMS-
   ILL") and Intercim Corporation ("Intercim") for both the third quarter of
   1996 and for the first three quarters of 1996.  The Company acquired the
   remaining interest in EMS-ILL effective March 31, 1995.  EMS-ILL was the
   exclusive distributor of the Company's products  in Illinois and Indiana. 
   Intercim, acquired on September 6, 1995, designs, builds, integrates, and
   supports factory floor information systems to assist companies with the
   control and management of their manufacturing process for the purpose of
   improving quality, productivity, and efficiency.  The results of EMS-ILL
   and Intercim have been included since the respective dates of acquisition
   and, accordingly, are not reflected in the operating results of the third
   quarter of 1995 (except for EMS-ILL after March 31, 1995).  The two
   acquisitions are hereafter referred to as the "1995 Acquisitions".



   Results of Operations

   Total Revenues


   Net revenues increased to $9,073,000 for the three months ended August 31,
   1996, which was an increase of 25.5% from the $7,230,000 for the same
   quarter in the previous year.  The 1995 Acquisitions accounted for
   $1,284,000 of the third quarter increase in revenues.  Net revenues grew
   to $28,419,000 for the nine months ended August 31, 1996, which was an
   increase of 46.5% from the $19,402,000 for the same quarter in the
   previous year.  The 1995 Acquisitions accounted for $6,154,000 of the
   increase in revenues for the first three quarters of 1996.  The mix of
   revenues comprising software, services, and low margin hardware revenues
   as a percentage of total revenues improved to 44.5%, 41.4%, and 14.1%,
   respectively, in the third quarter of 1996 as compared with 28.3%, 42.3%,
   and 29.4%, respectively, in the third quarter of 1995.  This improvement 
   in the mix of revenues was mainly due to strong growth of software sales
   made on a "software only" basis.  The Company offers its products on a
   "software only" basis for those customers who already have hardware or who
   may wish to purchase it from other vendors. The mix of revenues comprising
   software, services, and hardware revenues as a percentage of total
   revenues improved to 42.2%, 39.2%, and 18.6%, respectively, in the first
   three quarters of 1996 as compared with 35.2%, 39.7%, and 25.1% ,
   respectively, in the first three quarters of 1995.  International 
   revenues represented less than 10% of total revenues for all periods
   presented.

   The Company's operating revenues can vary substantially from quarter to
   quarter based on the size and timing of customer orders and market
   acceptance of new products.  The Company has historically operated with
   little backlog because software orders are generally shipped as orders are
   received.  As a result, product revenue in any quarter is substantially
   dependent on orders booked and shipped during that quarter.

   Software License Fees

   Software license fees are customer charges for the right to use the
   Company's software products.  Software license fees increased 97.4% to
   $4,040,000 in the third quarter of 1996 from $2,047,000 in the third
   quarter of 1995.  Of this increase, $932,000 was attributable to the 1995
   Acquisitions.  Software license fees increased 75.3%  to $11,970,000 in
   the first three quarters of 1996 from $6,828,000 in the first three
   quarters of 1995.  Of this increase, $3,301,000 was attributable to the
   1995 Acquisitions.  The remaining increase in software license fees was
   attributable to both the impact of increased levels of sales personnel and
   increased productivity of existing sales personnel.  Between August 31,
   1995 and August 31,1996,  the Company added 7 sales personnel through the
   1995 Acquisitions and 11 through new hiring.  The Company  also continued
   its strategic plan to undertake efforts to incorporate new technologies
   into its products and to integrate certain products into its product lines
   from its acquisition of Intercim.  These activities are intended to be
   completed at various times in the future, and management believes that the
   successful completion of these steps will ultimately provide the Company 
   with significant competitive differentiation. 


   Service Revenues 

   The Company offers a number of optional services to its customers.  Such
   services include a telephone support program, systems integration, custom
   software development, implementation consulting, and formal classroom and
   on-site training.  Service revenues increased 22.9% to $3,755,000 for the
   three months ended August 31, 1996 from $3,055,000 for the same period of
   the prior year.  The 1995 Acquisitions provided an increase of  $431,000
   in service revenues in the third quarter of 1996.  Service revenues
   increased 44.7% to $11,152,000 for the nine months ended August 31, 1996
   from $7,706,000 for the same period of the prior year.  The 1995
   Acquisitions provided  $2,174,000 of increases in service revenues in the
   first three quarters of 1996.  In addition to the impact of the 1995
   Acquisitions, the increase in service revenues was mainly the result of
   the needs of new customers as well as the needs of the established customer
   base.


   Hardware Revenues

   Hardware revenues declined 39.9% to $1,278,000 in the third quarter of
   1996 compared with $2,128,000  for the corresponding period of 1995.  The
   decrease in hardware revenues for the third quarter was mainly
   attributable to a larger number of "software only" sales.  Hardware
   revenues rose 8.8% to $5,297,000 in the first three quarters of 1996
   compared with $4,868,000 for the corresponding period of 1995. The 1995
   Acquisitions contributed $686,000 of the increase in hardware revenues for
   the first three quarters of 1996.  In addition to the 1995 Acquisitions,
   the remaining increase was due to increased sales of software on platforms
   for which the Company frequently supplies hardware.  The amount of
   hardware revenues is generally impacted by three major influences.  First,
   and most significantly, management has decided to focus its efforts on
   sales of higher margin software and services.  The Company offers its
   software on a "software only basis" (no hardware) for those customers who
   already have hardware or who may wish to purchase it from other vendors. 
   Many customers, however, utilize the Company as their hardware supplier in
   order to secure a fully integrated system environment.  The Company
   provides a full range of integration services to satisfy most customer
   needs.  Second, as the volume of business grows, hardware revenues
   generally increase correspondingly.  Finally, hardware revenues are
   related to the number of hardware manufacturers represented at any one
   time by the Company.  The fluctuation of the above factors in regard to
   hardware sales can be offsetting, but, over a three year period, have
   generally resulted in a long-term decline in hardware sales as a
   percentage of revenue.


   Cost of Software License Fees

   Cost of software license fees as a percentage of related revenue was 22.8%
   for the third quarter of 1996, a decrease from 32.4% for the
   corresponding period of 1995. Cost of software license fees as a
   percentage of related revenue was 21.6% for the first three quarters of
   1996, a decrease from 24.3% for the corresponding period of 1995.  This
   decrease was mainly due to  the revenue growth exceeding the relatively
   fixed growth in software amortization.  Software amortization is related
   to past investment in software development and is not consistent with
   variations in software revenues on a quarter by quarter basis.  The cost
   of software license fees is also dependent on the level of third party
   software revenues and their associated costs, which has a direct
   relationship with changes in revenue levels.  In the third quarter of
   1996, the third party revenues and associated costs were up in comparison
   to the associated revenues for the third quarter of 1995.  In the first
   three quarters of 1996, the third party revenues and associated costs were
   down in comparison to the associated revenues for the first three quarters
   of 1995.  Third party revenues can vary by both the number of users sold
   and the number of systems sold.  Additional costs  relating to the 1995
   Acquisitions did not materially affect the cost of software license fees
   as a percentage of related revenue in all periods presented.


   Cost of Services 

   Cost of services as a percentage of related revenue increased to 80.4% for
   the three months ended August 31, 1996 as compared with 71.1% for the same
   quarter in the previous year.  Cost of services as a percentage of related
   revenue increased to 77.7% for the nine months ended August 31, 1996 as
   compared with 69.6% for the same period in the previous year.  The
   increases were mainly  due to both the startup and training costs
   associated with newly hired personnel and additional costs related to the
   building of a service infrastructure ($332,000 year to date, 3.0% of
   service revenues) for both ongoing business growth and the establishment
   of new third party selling relationships. The service infrastructure costs
   include investments to strengthen the support of national and
   international third party suppliers of service in conjunction with the
   continued expansion of distribution channels.  The cost of services as a
   percentage of related revenues was also negatively impacted by the
   issuance of the new 5.3 version of the Company's software.  Typically,
   both new versions of the software and the amount of changes made to that
   software ( the Company has raised investment in new software
   significantly), raise service costs in the short run.   Extra service
   costs include the training of service personnel and the non-bill
   activities associated with the learning and enhancing of the software as
   additional on-site experience is accumulated.  Additional costs relating
   to the 1995 Acquisitions had no material impact on all periods presented.


   Cost of Hardware

   The cost of hardware as a percentage of related revenue decreased from
   73.9% in the third quarter of 1995 to 66.0% in the third quarter of 1996.
   The cost of hardware as a percentage of related revenue decreased from
   77.6% in the first three quarters of 1995 to 74.2% in the first three
   quarters of 1996. The cost of hardware as a percentage of related revenue
   varies with the size of the system, the manufacturer of the equipment, and
   the competitive pressure of the customer sale.  Additionally, the cost of
   hardware as a percentage of hardware revenues can vary due to amount of
   lower margin sales (cost plus 11%) to affiliated joint ventures, which
   were $227,000 and $295,000 in the third quarter of 1996 and 1995,
   respectively, and $1,040,000 and $833,000 in the first three quarters of
   1996 and 1995, respectively.  As of January 1, 1996, the Company charges
   11% over cost on hardware sales to EMS Solutions, Inc., an affiliated
   entity, to match similar terms of the Company's joint ventures.  These
   charges were $9,000 in the third quarter of 1996, and $43,000 in the first
   three quarters of 1996.


   Selling and Marketing Expenses

   Selling and marketing expenses increased $899,000 (37.3%) from $2,412,000
   in the third quarter of 1995 to $3,311,000 in the third quarter of 1996.  
   The 1995 Acquisitions accounted for  $412,000 of the third quarter
   increase.  The remainder of the third quarter increase was attributable to
   additional increases in sales and marketing expenses corresponding to
   growth in total sales margin (total net revenues minus total cost of
   products and services).   Selling and marketing expenses increased
   $3,429,000 (53.6%) from $6,396,000 in the first three quarters of 1995 to
   $9,825,000 in the first three quarters of 1996.   The 1995 Acquisitions
   accounted for $1,224,000 of the first three quarters increase.  The
   additional increases in sales and marketing expenses corresponded to
   growth in total sales margin (total net revenues minus total cost of
   products and services). 



   General and Administrative Expenses

   General and administrative expenses increased $279,000 (42.1%) from
   $663,000 in the third quarter of 1995 to $942,000 in the third quarter of
   1996. The 1995 Acquisitions accounted for $136,000 of the third quarter
   increase.  General and administrative expenses increased $844,000 (44.6%)
   from $1,892,000 in the first three quarters of 1995 to $2,736,000 in the
   first three quarters of 1996.  The 1995 Acquisitions accounted for $467,000
   of the increase in the first three quarters of 1996.  The remainder of the
   increase related to expenses that corresponded with revenue growth,
   including personnel costs, and telephone and insurance expenses.  As a
   percent of total revenues, general and administrative expenses were 10.4%
   and 9.2% in the third quarter of 1996 and 1995, respectively; and were
   9.6% and 9.8% in the first three quarters of 1996 and 1995, respectively. 
   The Company also provides office space, accounting and administrative
   services, computer processing time, and other miscellaneous services to
   EMS Solutions, Inc., an affiliated entity.  The amounts received by the
   Company for these items were $65,000 in the third quarter of 1996, as
   compared with $80,000 in the third quarter of 1995 and were $203,000 in
   the first three quarters of 1996, as compared with $242,000 in the first
   three quarters of 1995.  Amounts received from EMS Solutions, Inc. are
   recorded as reductions in general and administrative expenses. 


   Product Development Expense

   Product development expense increased from $353,000 in the third quarter
   of 1995 to $580,000 in the third quarter of 1996.  Product development
   expense increased from $840,000 in the first three quarters of 1995 to
   $1,547,000 in the first three quarters of 1996.  The 1995 Acquisitions
   accounted for  $67,000 of the increase in the third quarter and  $367,000
   of the increase in the first three quarters of 1996.  The Company
   capitalizes costs in accordance with Statement of Financial Accounting
   Standard (SFAS) No. 86.  The Company capitalized  $814,000 in the third
   quarter of 1996 compared to $449,000 in the third quarter of 1995.  In the
   first three quarters of 1996, the Company capitalized $2,431,000 compared
   to $1,299,000 in the corresponding  period of 1995.  As a percent of
   software license fees,  the total amount invested in software development
   was 34.5%  and 39.2% in the third quarter of 1996 and 1995, respectively,
   and was 33.2% and 31.3% in the first three quarters of 1996 and 1995,
   respectively.  These increases were focused mainly on  the development of
   a pre-integrated factory workstation system, including the integration of
   engineering, customer service, production control, quality, and machine
   controls. Additional expenditures were made to increase the Company's
   investment in the development of future products, including the
   incorporation of various new technologies into the Company's software
   products.




   Other Income\Expense-Net

   Other income\expense-net was $38,000 of expense for the third quarter of
   1995 compared to $23,000 of expense for the third quarter of 1996. Other
   income\expense-net was $83,000 of income for the first three quarters of
   1995 compared to $7,000 of income for the first three quarters of 1996. 
   This decrease was mainly the result of a reduction in the amount of
   interest income and an increase in the amount of interest expense as the
   Company has borrowed under its bank line of credit to continue its
   investment strategy in product development, field service infrastructure,
   and expanded distribution channels.




   Income Tax

   The effective income tax rate provided a benefit of 41.2% for the third
   quarter of 1996 compared to a benefit of 39.5% for the third quarter of
   1995.   The effective income tax rate provided a benefit of 42.1% for the
   first three quarters of 1996 compared to a benefit of 49.5% for the first
   three quarters of 1995.  The change in the effective rate was mainly the
   result of operating losses and the effect of investments in tax-exempt
   securities. 



   Liquidity and Capital Resources


   At August 31, 1996, the Company had cash and marketable securities
   aggregating $1,027,000, including $1,010,000 of available-for-sale
   securities.  During the first three quarters of 1996, the Company's
   operating activities provided $160,000 of cash.  This positive operating
   cash flow was primarily due to non-cash charges to the income statement of
   $2,417,000 less a working capital increase of $1,746,000.  During the
   first three quarters of 1995, the Company's operating activities provided
   $307,000 of cash. This positive operating cash flow was primarily due to
   non-cash charges to the income statement of $1,140,000 less a working
   capital increase of $611,000.

   Investing activities used cash of $3,243,000 in the first three quarters
   of 1996 compared to using $823,000 of cash in the first three quarters of
   1995.  The principal uses of the cash for the first three quarters of 1996
   were $2,431,000 for capitalized product development and $1,056,000 for
   purchases of equipment and furniture. The principal uses of the cash for
   the first three quarters of 1995 were $1,299,000 for capitalized product
   development and $1,122,000 for purchases of equipment and furniture.


   Financing activities provided $2,734,000 of cash in the first three
   quarters of 1996 compared with $293,000 in the first three quarters of
   1995.  The cash provided in 1996 reflected borrowings under the Company's
   bank line of credit.  The cash provided in 1995 reflected sales of
   investment securities.  As of August 31, 1996, the Company had $395,000 of
   availability under its $3,000,000 line of credit based on the level of the
   eligible accounts receivable.  The Company also arranged for a short term
   master draw note, dated August 5, 1996, in the amount of $500,000 which
   expires on November 4, 1996.

   The Company believes its cash flows from operations, funds available under
   its line of credit, funds available from investment  securities  and, to
   the extent necessary, funds available from other capital financing that
   the Company is in the process of obtaining, will be adequate to finance
   capital expenditures and working capital requirements for the next twelve
   months.


   <PAGE>



   Part II - Other Information


   Item 6.   Exhibits and Report on Form 8-K

           (a)    Exhibits

             (27) Financial Data Schedule [EDGAR version only]

           (b)    Reports on Form 8-K

             No Current Reports on Form 8-K were filed during the third
   quarter of 1996.

   <PAGE>


                                   SIGNATURES

   In accordance with the requirements of Securities Exchange Act of 1934,
   the Registrant has duly caused this report to be signed on its behalf by
   the undersigned thereunto duly authorized.


                            EFFECTIVE MANAGEMENT SYSTEMS, INC.



   October 11, 1996         By:  /s/ MICHAEL D. DUNHAM
                                 Michael D. Dunham
                                 President (principal executive officer)



                            By:  /s/JEFFREY J. FOSSUM
                                 Jeffrey J. Fossum
                                 Chief Financial Officer and Assistant
                                 Treasurer (principal financial and
                                 accounting officer)