Accounting software - Essay Example

Accounting Information System February 3, 2007 Accounting Information System Introduction An Accounting Information System (AIS) is an organized framework which is used to keep the business accounting records and information by an organization (Wikipedia.org, 2006). The system can be a manual system or a software based application. This report covers the essential user requirements for the development of an Accounting Information System application, fully equipped to cater all the requirements of internal and external stakeholders. Statement of Users Needs/ Requirements After conducting a formal and organized users' needs assessment survey, that included interviewing key users and process owners and studying the business processes, the analyst team has identified the major requirements of the proposed accounting information system (Accounting Software Research, 2002). Requirement Description General Ledger Chart of Accounts The software should include ABC's chart of accounts. If this is not set up properly so that revenues and costs are captured and segregated into the best suited categories, the financial reports will be useless and misleading. Transaction Processing All transactions need to be recorded by AIS. No transaction, once entered, will be allowed to be deleted. Transactions may, however, be reversed if incorrectly recorded in the AIS. The AIS should provide facility for transaction processing and activities like real time transactions entries, validation and verification checks, posting and reconciling, balancing totals etc. Financial Statements The AIS should maintain and produce financial statements for the company based on the transactions that are entered into the software. The system should be able to group various items as per the rules already provided in the system and should be able to develop all relevant financial statements of the company like Balance Sheet, Income Statement, Cash Flow Statement, Statement of changes in equity, etc. Accounts Payable Vendor Master File All related information about vendors and suppliers should be stored in the application appropriately and should be accessible to authorized personnel only. Purchasing Controls The procurement process of the company should be automated. There should be features for request for proposal, purchase orders printing and control, vendor and order details, invoice, etc. Check Writing Checks should be automatically printed from the system upon request. The procedure should take into account proper authorizations and verification features. Accounts Receivable Customer Master File All related information about customers is kept in the system and is accessible to authorized personnel only. Invoicing The customer invoice process that is followed by business should be automated; hence invoices will be produced by the system when necessary information is entered by the operator. Cash Receipts and Debt Collection Rules should be defined in the system for the process of cash receiving from customers using cash, bank checks and other means. Similarly, the system should be able to track debts and loans, should be programmed so that the loans are properly aged, and the collection procedures that is being applied to recover the debt, should be recorded in the system. Payroll Employee Files All related information about employees of the company is kept in the system and is accessible to authorized personnel only. Human Resource Management Payroll benefits, skills classification, applications for recruitment, selection procedures, screened candidates' information, training records, employee health and safety records. Vacation records etc. will be maintained in this sub-module. Payroll Check Writing Payroll checks will be produced automatically by the system at due date. The necessary monitoring controls should be applied to ensure proper treatment of rewards, bonuses, stop payments etc. Inventory and Fixed Assets Inventory & Fixed Assets Master Files All related information about materials inventory and fixed assets of the company is kept in the system and is accessible to authorized personnel only. The inventory records should also provide information about the physical inventory drills etc. Inventory Management Inventory costing, receiving, issuance records, inventory losses, disposals, insurance etc. should be recorded in the system under appropriate account heads. Fixed Assets costing and depreciation Proper accounting records should be maintained for fixed assets receiving, pricing, depreciation policies, fixed asset movement and other related information. Budgeting Development and review of budget The AIS should be equipped with a budgeting module which should record the budgetary process of the company. It should also include sub-modules for budget development, allocation, monitoring the variances and budget revision. General (Technology Evaluation Centers, 2007) Audit trails and access logs The AIS should have proper audit trails features that may be required to be accessed in case an error or instance of fraudulent activity is detected. The access logs and user activity logs should be maintained by system; and its access should be restricted to authorized personnel only. Database support The AIS will record the entered data in a database. The database should be a relational database with appropriate table structure and linkages. The database should be interfaced with the AIS front-end software such that all the transactions should be entered in to the front-end software and should be recorded into the database. The system should provide exception reports in case any transaction is not recorded appropriately. User friendliness and attractive GUI support The software should be user friendly. It should have an organized look and feel. The features should be accessible easily and at the same time, the forms and screens should not be complex and should not have too much unnecessary data to look at. Graphical User Interface (GUI) should be provided for easy navigation. Reporting Module MIS Reporting System should be able to develop and provide Management Information System (MIS) reports for all the activities. There will be both standard and user-developed reports that can be customized to users' ad-hoc requirements. The reports should include control reports, financial reports, operating reports, and others. Some of the reports that should be produced by the system include transaction register; invoice summary; bank reconciliation statement; general journal; revenue and expenses reports; vouchers; checks for payment to vendors and employees; financial statements like balance sheet, income statement and others; and inventory valuation reports. In addition, other important reports should also be provided and users should be allowed to develop custom reports based on the elements they desire to include in the reports. Impact on Internal and External Stakeholders Critical Success Factors of the System The critical success factors for the proposed AIS include reliability of data, application availability, accuracy of computations, confidentiality of data and information, correctness and desired report availability, appropriate links across different modules of payables, receivables, payroll, and general ledger where all the accounting transactions are entered for the subsequent generation of financial reports for the company. Internal Stakeholders - The Management The top management of the company will have a better idea and insight into the operations of the company as they will have the entire organization summarized on their computer screen in the form of consolidated reports. They will be able to deal with problem areas in a better way as compared to what they used to do. The new system will also allow the line management to deal with the operational problems in the company. The availability of desired information should assist in making informed decisions. External Stakeholders - Regulators, Customers and Vendors The external stakeholders include regulators, vendors and customers. The regulators will be satisfied with the transparency and correctness of the accounting system and processes in the company; the vendors and customers can be easily integrated into the proposed new system that would give them an easier interface with the company's processes, which will improve the efficiency and effectiveness of the processes. Risks of the new Accounting Information System Although, AIS offers an opportunity to increase efficiency and effectiveness of the business processes for the company yet, it has some risks too which are discussed below. Security Loopholes, Data Confidentiality Issues The system may not be able to provide the required confidentiality level for the data; if not appropriately controlled, intruders may gain access to company's data that may result in breach of confidentiality, data distortion, and may ultimately lead to financial and reputation losses for the company. Inappropriate coverage of user needs The new system, if not implemented as per the plan, may not be able to provide all the required services to the stakeholders; thus making the entire effort to go in vain. If all the users' requirements are not incorporated in the design and functionality of the system, no real value can be added to the business processes and the claims of efficiency and effectiveness will not be fulfilled. Change Management Risks The current system is in place for a long time. The new system might allow the company to let go a few people who will become redundant and will no longer be required. This threat to their jobs might prevent them to accept the new system. Many advocates of old system will emerge and they might try to cause the new system to fail. Initial loss of productivity may result when the new system will be implemented. Summary and Conclusion The new AIS will cater to the information needs of the users by providing them accurate, timely, and reliable business reports; a feature not present in the old AIS due to its lack of integration with various departments and functions. The new system will interact with different divisions like those involved in planning, expenditure cycle, revenue cycle, and human resource management; will ensure availability of information; and will provide consolidated and efficient reports to the higher management; that will allow them to make timely improvements in business processes, detect and prevent instance of fraudulent activities in the company, and may appropriately plan for the future growth of the business. References Accounting Software Research. (2002). List of Features. Retrieved February 1, 2007 from the World Wide Web: http://www.asaresearch.com/articles/features_list.htm Technology Evaluation Centers, Inc. (2007). Accounting Software. Retrieved February 2, 2007 from the World Wide Web: http://rfp-templates.technologyevaluation.com/ Wikipedia. (2006). Accounting Information System. Retrieved February 3, 2007 from the World Wide Web: http://en.wikipedia.org/wiki/Accounting_information_system Read More