Improving Transactional Processing in Accounting Information - Research Paper Example

Improving Transactional Processing in Accounting Information Systems In the current world, all sectors have the need to embrace Technology in development of Information Systems. Technology promises a very clear and prospective atmosphere for businesses. All businesses involve transactions and by improving how transactions are done in accounting is the basis to a developed business. However, it is never “All roses” at it may often appear. At times, technology comes with its own risks which may not be tolerable in the business fields. It is hence important for businesses people to carry out analysis and weigh the advantages and the disadvantages before implementing a new technology into their businesses. Improving Transactional Processing in Accounting Information Systems Transaction is an instance of doing business of any kind and may include buying of stocks from a security market and consumable goods at from a retail shop. In all the instances, there is exchange of money for goods or services. During the transactions, the need to keep the record of transactions increases, in order to be able to monitor the performance of the business. Businesses have adopted several strategies of maintaining their records, preparing forms and reports for financial purposes such as tax among others (Mattessich, 1998). These records are a part of the entire Information System maintained by a business. For a business to remain in market there must be a well set out Information System that enables all the stakeholders to interact with, and benefit from the available information. These systems have further been adopted into accounting due to efficiency, in some cases due to integrity. There has been an upward development of how accounting is carried out since the dawn of civilization. These changes have been necessitated by the tremendous growth of business transactions. Sometimes, the changes have been as a result of complexities involved in these transactions (Mattessich, 1998). With the emergence of technology in the past years, business operations have been affected. This includes how transactions are handled and the parties that are involved. It is however important to note that although technology may be disadvantageous in some cases, its adoption has greatly improved operations of businesses in general and more benefits can be realized should technology be monitored effectively (CBS Library, 2011). Innovative Technology Changes From the old days of Mesopotamia, ancient people kept records of businesses using clay tablets where they inscribed details of transactions (Mattessich, 1998). The inefficiency of such record keeping has over the years, pushed people to develop new methods accounting for business. In this study, we shall highlight two different innovative technology changes that are appropriate for a business. One innovative technological change that would be appropriate for a firm is the development and adoption of Electronic Data Interchange (EDI). According to (Rajesh & Rezaee, 1996), EDI is an on-line transaction system that facilitates computer-to-computer communication of standardized business documents and transactions across organizational boundaries. Computers, databases, and information centers of trading partners are linked via public or other communication networks. EDI captures data from various sources such as electronic communication devices and scanners. These data are then captured and stored for processing and output generation. As compared to the old manual keying in of data, this system has numerous advantages which could not be achieved by reliance on the old fashioned methods of data entry (CBS Library, 2011). This development helps businesses in the generation of their financial progression by helping capture the essential inputs involved. The system also assists businesses in development of an expenditure cycle. This includes capturing the costs involved in for instance buying materials and expenses involved in manufacturing of a product and at a reasonable cost (Mattessich, 1998). This technology is also applied within the human resources where data relating to staff is captured and stored. In some instances, it has been involved in monitoring of staff through acting as registers being signed upon reporting to duty by staff which helps the human resource team greatly in ensuring accountability of company time to effect payment (CBS Library, 2011). Eventually, this improves development of financial reports as every stage of data input is done effectively fast and efficiently thereby maximizing the output of staff members at every level of data interaction. Another innovative technology that would be appropriate for a business to adopt in relation to accounting is the Business Intelligence (BI). This is an analysis tool that is used in analysis. It allows business data to be summarized in limitless formats according to the user’s requirements. The system gathers data on daily basis and imports into the database of business Intelligence software which is then used for analysis (CBS Library, 2011). With the database, the company’s decision makers can use the information as a guide on how to make decisions for the well-being of the company. From such databases, accountants can create reports within the system. The system also improves the probability and access of data making the data mobile to all those who need it (Simha & Jeffrey, 2009). The Business Intelligence system can effectively monitor expenditure cycle by observing data over a long period of time. The comparative data obtained can then be used as an index in determining whether the expenses are within the expected ranges or there is an over expenditure (Simha & Jeffrey, 2009). The human resource could also use the data to determine the effectiveness of a specific group of workers, who are performing better than others or even individuals. These data can then be forwarded to the payroll department to determine rates of incentives. Control of Applications The applications mentioned are both of economic gain and saves time by improving efficiency. However, the systems have to be controlled for effectiveness of operation. In consideration of the Electronic Data Interchange, there is need to secure data involved in the EDI. This can be done by controlling flow and interchange of data carrying exchange only on secure paths (Leslie & Weickgenant, 2008) avoiding sniffers who may then compromise the integrity of data reaching the destination. Additionally, the organization could assign the task of Data intake to an individual who will then be responsible of ensuring that the data captured are of high integrity, and not easily compromised. Such a control strategy restricts compromise of data by introducing an aspect of responsibility a particular person(s). Another way of ensuring that EDI is controlled is adopting effective risk assessment strategies where both internal and external risk factors are assessed (Simha & Jeffrey, 2009). This involves determining the probability of unwelcome events and the related costs and to set up control mechanisms to reduce risk to a tolerable level. The Business Intelligence system also needs to be controlled for a favorable output to be realized. If the system is not put to control, business can lose Personal touch with the clients; an example getting automated services in place of personalized phone calls to clients. Some businesses may necessitate creating a personal atmosphere for success, thus controls of how much automation is necessary (Simha & Jeffrey, 2009). Different Organizations make use of Management Accounting Systems to allow organizational planning, monitoring, and control for a variety of activities. This allows managerial-level employees to have access to advanced reporting and statistical analysis. The systems can be used to gather information, to develop various scenarios, and to choose an optimal answer among different scenarios (Simha & Jeffrey, 2009). Procedures of adopting changes Companies are implementing different types of Information Accounting Systems with varying results. Others have benefited from the systems while others have failed to appreciate the use of such systems (Simha & Jeffrey, 2009). Often, most organizations adopt to modern Information systems without proper planning and the effects may be adverse considering that the development of such systems is not only costly but may also be time consuming, Procedures are set out to give guidance to businesses and help them come up with a decision on whether they want to adapt to the new changes in technology or not. For a business that wants to develop the Electronic Data Interchange, there should be several factors considered before developing the system. These factors may include the size of the involved organization, frequency of data input among other factors (Nancy & Mark, 2007). These constitute to Analysis which is the first step in adapting a new system. Once it is established that the systems is indeed necessary, it is implemented and tested for performance. The next step which is very important yet at times ignored is the training part. The staff has to be given adequate training on the system so that they are aware of the deliverables of the system and are able to easily interact with the system without difficulty (Nancy & Mark, 2007). Finally, maintenance of the newly adopted systems is important as breakdown is prone either due to problems associated with the system or interference by the users who may still not know how to work with the system perfectly. In adopting the Business intelligence system, according to Nancy & Mark, it is imperative to note that the applicable system relies on the perception of Data mining, (p.6). This is where large amounts of data are analyzed from various perspectives then summarized into information that is useful. Business intelligence includes analysis of data such as sales revenue and expenditure, which then helps in developing financial reports (Gale, 2001). The question of whether to adapt to the new changes in technology by businesses is a concern for many businesses. There is need to carry out access in order to determine the necessity of adapting to new changes (Gale, 2001). The essence of a business is generally to make profits. In reality, efficiency plays a major role in the rate of returns. In business, being aggressive in adapting to new Accounting Information Systems is beneficial considering the benefits that are realized from such systems. However with more advancement in technology, more threats are posed along these developments that may hinder adaption. For instance a business that solely relies on Internet for its transactions may lose business if there is a breakdown in connection (Gale, 2001). Other sensitive issues in such information systems could include attacks by external parties in form of viruses which may wipe out all the stored information about the business. This means that caution should be observed when adapting these kinds of systems (Nancy & Mark, 2007). Measures such as data redundancy can come in handy in ensuring data availability at all times even in an event of breakdown in one of the systems. Businesses need to know the costs involved in adapting the new systems. This may require an analysis of cost incurred to the output expected of the systems (Gale, 2001). Majority of systems are relatively expensive hence the need for cost benefit analysis. Conclusion It is good to adapt to these new trends of developing a reliable Accounting information systems. With careful analysis, businesses end up performing very well and expanding their customer base. However, the element of security in general has always been a threat to data handling whether manual or digital. In digital data, the consequences may be worse as bulk data are usually involved. It is therefore important to implement security Systems. This system enhances the security of data only allowing access to those who are authorized. Information relating to revenue generated by a business may not be open to the public hence such details need protection against unauthorized access. These systems deter intruders by prompting for passwords. In some cases, access to rooms containing such data is restricted and the system is implemented by having swipe cards for those who are authorized to access such rooms. We cannot ignore technology but we must know that overreliance on the same technology may be consequential should failure arise thereby implementation of preparedness mechanisms is inevitable. References CBS Library. (2011). Interactive Business Network Resources. Retrieved from Gale, C. (2001). Encyclopedia of Business and Finance. Retrieved from Leslie, T., & Weickgenant, A. (2008). “Accounting Information Systems.” Controls and Processes, 541-544. Nancy, A. & Mark, B. (2007). “Core Concepts of Accounting Information Systems”, 40-41. Rajesh, A. & Rezaee, Z. (1996). EDI Risk Assessment. Retrieved from Simha, R., Jeffrey, W. (2009). “Essentials of Business Processes and Information Systems”, 6,142. Mattessich, R. (1998), “Recent Insights into Mesopotamian Accounting of the 3rd Millennium B.C. – Successor to Token Accounting,” Accounting Historians Journal, Vol. 25, No. 1: 1-27. Read More