Accounting Information Systems of Pressure Hydraulics - Case Study Example

Accounting Information Systems Name: Professor Institution: Course 17 September, 2014 Executive Summary This is a report whose aim is to give light and solutions to problems facing Pressure Hydraulics. Most of the problems facing Pressure Hydraulics is related to accounting and general management. The report has established that there is need for an office system that will help the office assistant to update and query the company data real time. It is recommended in the report that the company should operate the three service centers interdependently so that there is increased harmonization of its operations and full utilization of its resources. It is observed that there is lost sales due inaapropriate allocation of duties to technicians because of the service centres operating as independent entities. The report has recommended the use of an inventory management system which will enhance the management of supplies that facilitate the operations of the company. Many suppliers are offering quantity discount which at the present the company has not been taking advantage of. This is because the service centres have been operating independently hence the purchase volume has not been qualifying for the quantity discount from the company’s major suppliers. Running the three service centres together will help the company to place large orders for its supplies with the major suppliers hence qualifying for the quantity discounts. Table of Contents Executive Summary 2 Description of the problem 4 Solution objectives 4 Constraints 7 Development plans 8 Preliminary study 8 Feasibility study 8 Facts finding and recording 9 Analysis 9 System design 10 System development 10 System implementation 11 Potential solutions 12 Recommendations 13 References 14 Description of the problem Pressure Нydrаuliсs is faced with major technological problems which are mainly accounting and payroll problems. This is easily achievable by adopting information technology in its business processes. Stock ordering problems: the company is not able to determine how much supplies it has in stock in the different service centres that are run independently. Therefore, there is need to harmonize the ordering of these stocks in order to ensure that no service centres is experiencing shut downs due to lack of required resources. Payroll problems - the existing system is not able to automate the payroll data of each employee hence they need to be contacted to furnish the owner with this information. This is unnecessary and leads to time wastage since it does not add value to the company. such as atask should be automated by implementing an office system that can output this information as and when required by the owner. Solution objectives The service centres should be dependent on each other rather than being operated as independent businesses. This is because the centres are very much related and perform the same functions. All the service centres provide maintenance and servicing apart from Maitland service centre which in addition provides servicing to the mining industry. Operating these service centres as dependent will help to cut down on cost of management and harmonize the operations of the company. Operation efficiency can be improved in a number of ways. Operating the centres as a single entity will help the company to reduce the number of staffs. For instance, with one entity it will be possible to operate the entire company with just one office assistant and one foreman. This will help to allocate duties to staffs more efficiently. As an illustration, when the service centres are operated as independent centres it is impossible to allocate tasks related to Newcastle service centre to Toronto technicians. This will mean that a contract awarded to Newcastle service centre will take a long time to accomplish due to shortage of technicians whereas technicians from Toronto service centre have been lying idle. This defeats logic since they are from the same company and should work together for the good of the company as a whole. Staffs are very valuable resources of a company and the management should make maximum utilisation of these resources. Managing staffs from one centre will enable the management to allocate a certain job to technicians who are available. The use of a database system will help the company to overcome the problem of taking too long to respond to requests on quotes. This is because a database system has a query language which can be used by the office assistant to poke through the data in contained in the company’s database (Lucas & Rafferty, 2008). This will be very helpful to the office assistant since he will find the information to his ad hoc questions about prices from suppliers’ invoices which will assist him to update the price book. This will reduce the time taken by the office assistant to respond to a quote request. Timely response will enable the business to enter into more contracts which means more business volume hence profitability to the company. This will also reduce the workload of the office assistant to allow him to concentrate on other office functions. The company should make use of office automation system in order to avoid the numerous crossings made in a journal whenever there are changes required to be made. The use of a software program like micro soft word will be very useful in this case since any changes made does not results in crossed out entries. Therefore, the records will remain neat hence overcoming the problem of misinterpreting the date when the job is booked in. in addition, the problem of overbooking or slack period will be solved hence the resources of the company will be optimally used. The office system will help to prioritise the book ins and plan against the available resources of the company. The office automation systems will be helpful especially to the office assistant since it mostly relates to the operational level of management. The work of the office assistant is characterised by routine and repetitive duties which can easily be handled by this system. Nevertheless, this system is designed to be used by many office users including the office assistant, the owner, the foreman and the technicians. This is because they are more into generation of information as opposed to the use of the information obtained. Examples of office automation systems that will provide great solution to the problems faced by Pressure Hydraulics include the workflow automation systems. This system involves designing a program which is able to automate tasks that are executed as a work flow (Atrill & McLaney, 2012). In this case, the solution entails the performance of an action in a series of steps. This can be as simple as installing a computer program that is able to access and retrieve data located in different files. For instance, if this system is implemented in Pressure Hydraulics, the office assistant will be able to access and retrieve suppliers invoices and be able to respond to a quote request within a very short time. Constraints There are several constraints to development plans proposed in this report as discussed below The adoption of an Accounting Information Systems in the company will call for recruitment of an information technology staff. This is because Pressure Hydraulics does not have a staff who is knowledgeable in this field. This means that the company has to recruit a new staff from external sources. This process may be expensive because such experts are not easy to come by. In addition, the recruitment of additional staff to the company will cause a significant increase in the salaries and wages expense of the company. The report has recommended the adoption of a database system instead of the traditional record keeping that is occupying so much time of the office assistant. This may require the employment of a database administrator in the company. This too is an additional cost to the company. Another constraint is the budget of the company. Any development plan comes at a cost. The company has to balance between the development plans as proposed in this report against its budget. At the present the company does not have enough funds to carry all the proposed development plans. This is a major limitation to Pressure Hydraulics since it is already servicing some loan and additional of more debt will cause a financial pressure to the company. Time constraint – having all the proposed systems in place will consume considerable time hence the company will not benefit from the adoption of these systems in time. However, this should not deter the company from adopting the use of these systems since the company is a going concern. The benefits of these systems should be assessed on a long term basis rather than short term time frame. This report recommends that Pressure Hydraulics start by implement those systems which do not consume a lot of time and with time it advance to the more complicated systems. Nevertheless, the management of the company is encouraged to stipulate and stick to the time frame. This will help the company to remain focused and avoid the possibility of losing more sales and income as a result of delayed implementation. Development plans Development of an accounting software as the one proposed in this report is a process driven method with several stages that need to be followed with precision if the desired results is to be achieved. The development of an accounting information system requires the developer (system analyst) to follow a series of phases up to the implementation phase which is the final phase of system development. These stages are described below Preliminary study The importance of this stage is to determine whether Pressure Hydraulics needs to the existing system. This stage requires the cooperation of both the management and the work force of the company. The staffs are the ones who are involved in the daily operations of the company hence are better placed to define the problem. The main objectives of this stage will be to have a clear understanding of the characteristics and the objectives of the company; understanding the structure of the company, and the development of accurate problem statement. Feasibility study Hall (2004) observes that this stage is different from the preliminary stage since it is more detailed and is best carried out by a team. Its main aim is to define the problem and make a decision on whether to replace the existing system with a new system and the viability of the proposed system. In this stage the analyst will focus on identifying the scope of the project by assessing the significance of the problem. This involves listing the problems of the existing system and pointing out what is expected of the new system. This is the stage where the analyst will make proper identification of the alternative solutions to the problems experienced by the company and make a recommendation as to the cost effective solutions. Facts finding and recording This is another stage where every employee is required to make their contribution if the new system is to be effective in solving their current problems. The stage involves gathering information about the current system in order to have a good basis of analysis and help in the determination of whether the needs of the users are currently met. Several methods of gathering data will be applied which include the use of questionnaire, conducting interviews and observation. Analysis This stage uses the facts gathered during the facts finding stage to evaluate the existing system. The analyst makes an evaluation of whether the user needs are being met by the existing or the proposed system. If user needs are not being met, the analyst will recommend the action to be taken by the company. The main aim of this stage is the determination of the information needs of the company and all the users of the information. The other aim of the analysis stage is to determine the activities of the existing system and the output intended to be achieved. Therefore, this stage makes three important analysis: organization environment, existing system and the requirement analysis. System design The objective of this stage is to put a logical structure of the actual system in a form that a lay man can interpret. This involves deriving a model on how the system works. This is important because the existing system provides a road map to the development of a new system since the new system is developed to address the weaknesses of the existing system. A good system design should ensure that there is little cost incurred in meeting the user needs and that the data output is accurate and efficient. The system produced should be simple to operate, reliable and functionally working. System development This stage involves three main activities namely; programming, testing and documentation. The programming activity under this stage involves translating the specifications of the system into programme code. The user requirements are integrated into the computer system during programming. The testing activity under system development stage focus on testing of all the programs before the system is converted. The most commonly used testing is the white box testing which focuses on internal construction of a programme. Documentation involves describing the software after the system is developed. Therefore, the analyst will provide manuals, books and diagrams that provide in-depth description of how to operate the system. This is very important in order to avoid the need of referring to the analyst whenever there is a problem with the system. Documentation also helps the future developers of the system and system maintainers if they are different from the system developer. Moreover, it is used as a training guide for users who may join the company after the system has been implemented. System implementation This is considered the last stage of system development. This stage involves four main activities identified as selection, acquisition, and installation of hardware; user training; creation or conversion of files, and the changeover. The company should purchase hardware from a reputable supplier who will offer after sales services such as installation. This is important for Pressure Hydraulics since the company does not currently have a staff who can be relied on in installing the new hardware. The user training activity involves training and familiarising the intended users with the system before the effective date of changeover. This helps to reduce the number of errors made when the staffs are learning through trial and error. It also makes users identify with the system hence they are not likely to oppose the new system. The file conversion activity involves changing the current files into a form that can be used in the new system. For instance, the data recorded in the work book by the office accountant can be captured in the new system by feeding the data into the system. Changeover involves switching to the new sytem. The methods used include pilot changeover, direct changeover, phased changeover and parallel changeover. The most suitable method for Pressure Hydraulics is direct changeover. This is because there are no many staffs in the company and there is only three service centres which is not complicated for changeover. Under this method the operation under the existing system are stopped and the operation under the new system commences almost immediately. This will eliminate the possibility of lost sales due to total closure of the company’s activities. Potential solutions Despite the constraints faced by the company, there are a number of solutions that the company can exploit. This is discussed in great detail under this section. Training of staffs – the company can overcome the need to employ other staffs to serve as IT specialist and database administrators by training some of their staffs. In this case the management of Pressure Hydraulics is required to identify individuals among their working force who can be trained to take over these new positions and duties within the company. This is possible because there are staffs in the company who have been developing their skills in information technology with time. These are the best individuals to be offered training since they are already exposed to the use of information technology in the work place. Training of staffs will not incur the company huge cost compared to the cost of adding new work force in their payroll (Yin, 2003). This can easily be done by attaching the identified staffs with a company which has already adopted the use of technology and the database systems in their day to day operations. This will help the staffs to acquire on the job skills which will be very beneficial to the company. The company chosen should be in the same industry as Pressure Hydraulics. Outsourcing – the cost of buying and installing Accounting Information Systems and managing the database may be too costly to the company and may add financial pressure to the already slim budget of the company. according to Steven, Roby and Gregory (2008), outsourcing will help the company to acquire and adopt these systems without having to buy them. The company will be required to contract a firm which is specialized in carrying out these services to the company. This is advantageous to the company since there will be no need to trainee their staff or add employees in their work force. It will also help the company to focus on its main functions hence improving its efficiency. Moreover, the company will take advantage of the expertise from the outsourced firm. Recommendations It is recommended that the company establishes a web site where its customers can access all information they need about the company. This website should have an application that a customer can download and fill the booking for the work they need to be done and then submit it to the company’s portal. This is important since it will help to overcome the problem associated with making phone calls. Due to the nature of work of the office assistant he is likely to misquote the customer and book them for inappropriate work. This report recommends the management to circulate a time frame to all members tasked with the implementation of the new system so that they stand guided. The duty of overseeing the implementation of the proposal should be assigned to a particular individual will be answerable to the owner of the company. This individual should be provided with the necessary resources to enable him to carry out the functions of the task with efficiency and without disruptions so that there is timely delivery of the end product. References Atrill, P. & McLaney, E., 2012. Management accounting for decision makers. 7th ed. Harlow, England: Pearson education ltd. Hall, J. A., 2004. Accounting Information Systems, 4th ed. Ohio: South-Western Publishing Co. Lucas, M. & Rafferty, J., 2008. Cost analysis for pricing: exploring the gap between theory and practice. The British Accounting Review, 40(2), pp.148-160. Steven R. J., Roby B. S., and Gregory, J., 2008. Managerial Accounting: A Focus on Ethical Decision Making. New Jersey: Cengage Learning. Yin, R. 2003. Case study research: Design and methods, 3rd edn, Thousand Oaks, CA: Sage Publications. Read More