The Use of Information Systems to Aid Communication and Financial Management in Business - Assignment Example

The use of Information Systems to aid communication and financial management in business Table of Contents Table of Contents 1 Abstract 2 1- Introduction 3 2- Objectives of the report 3 3- Information System 4 4- Information System as an aid to Communication 4 a- Inter-staff communication 5 b- Inter-organizational communication 5 c- Inter-stakeholder communication 5 d- Firm-consumers communication 6 5- Information System for Financial Management 6 a- Information system for assessing the financial position 7 b- Information system for measuring the profitability 8 c- Information system for analyzing the cash flows 8 d- Information system for preparing the report 8 6- Conclusion 8 7- Recommendation and Implementation 9 References 10 Abstract Information is a virtual asset of an organization and therefore most organization put in efforts to enhance greater productivity and better business operation through a very effective information system. Information system is a system approach to efficiently gathering, storing and disseminating the information so that the business will be able to improve in various functional areas. A business organization with carefully designed and developed information system has been found to achieve sustainable competitive advantage and thus to succeed in its operation as well. 1- Introduction Information is one of the extremely important elements in a business organization because of that it serves as a support tool for business operation, decision making, managerial functions and organizational activities. Information is normally considered to be the most powerful asset in a business. Many businesses are effectively utilizing the information that is rich with and succeed in market by achieving competitive advantage where as many other firms fail in managing it and thus to surviving in the market as well. This piece of research work presents a brief report on how information system can effectively be used to aid communication and financial management. 2- Objectives of the report No matter how small or large the business is, information is highly critical to it and it can help the business attain its goals. Information is essentially important for financial management for various reasons like decision making, and there have been efforts to bring effectiveness in approaching the information and the outcome is that an information system approach has been developed. It is important to identify, explain and evaluate how the information system is useful and how it can be successfully used in communication and financial management. The main objectives of this research report are: To explain what is meant by information system, To describe how information can be used to communicate within a business organization, and To address how information can also be used as an aid to financial management for various managerial activities. 3- Information System Stair, Reynolds and Reynolds (2008, p. 8) pointed that information system is a set of inter-related elements or components that collect, manipulate, store and disseminate data or information and provide a corrective reaction to meet a specific objective. Information System is thus a process or system approach towards collecting the data or information as inputs, manipulating them through processes, storing them as either tacit or explicit and making use of them once they have been disseminated as outputs. An organization can be said to use information system if there is a system in which people, process, technology and information are aligned and integrated. The system may assign some human capital in it to assist, collaborate or cooperate for information gathering, sharing and making use of it for the overall benefits of the organization. There are basically, three elements in an effective information system, they are information collecting, sharing it or managing it and making use of it for the overall benefits of the organization. 4- Information System as an aid to Communication An information system may be either manually designed and developed or computer-based. In the first one, the communication between people and the media used among them will be of papers, scripts and documents. In computer-based information system, the system is fully based on computer and other technologies and the information will be stored, disseminated and processed with the help of hardware and software. When it comes to the communication in business contexts, there are various types and levels of communication. Communication between employees, management levels, communication between various stakeholders such as owners, suppliers, shareholders, customers and creditors, or communication between the firm and consumers. An information system may have to do much in improving the efficiency in information handling and communication between all these channels. a- Inter-staff communication Employees communicate each other. There can be effective or non-effective communication. Formal and information communication also work out. But, an organization that has system approach to information, the organization may facilitate means through which its employees would be able to communicate among them. A better illuminating example is IBM that has facilitated intranet for its people and they have long been communicating or transferring data through the computers the company facilitated for them. b- Inter-organizational communication The information system will have to concentrate on collecting data or information from firm’s internal functional activities and to assess and submit useful, dependable and reliable information to the concerned management team when ever it is required. c- Inter-stakeholder communication An effective information system will be concentrating on gathering information about the internal or external organizational activities and to be processed in order them to make available for any purpose that the concerned stakeholder reports. d- Firm-consumers communication Most firms keep better relationship with customers. They attempt to keep long-term relation with their consumers. In maintaining such a relation, the information system within the organization has to focus on gathering reliable information from them, disseminate them and to make use of them in order to design or develop the products or services according to individual as well as general requirements. All the above mentioned communication levels may depend on various channels like letters, documents, papers, scripts, fax, e-mails, video or audio clips etc. In modern business contexts, the information system would also be able to take care of the security and other issues concerned with the information handling. 5- Information System for Financial Management When it comes to financial management, information is as critical as money. Financial Management and accounting department in any organization give extreme emphasis on maintaining better information system so that they can function properly in assessing the financial position, measuring the profitability, analyzing the cash flows and preparing the report (Williams, Haka and Bettner, 2004, p. 7). All such information are very essential to understanding how good is the firm and therefore a better system approach to gathering, disseminating and submitting the information is required. When there is an effective method of information system in an organization, the system will help the firm provide financial information to both executives and to a broader set of people in order to help them make better decision on daily basis. Some businesses like Dell has depended on customer information data base collected through internet or its own customization facility and it has developed a system in which its customers will be evaluated according to the information the company gathered from them. The main functions that the information system of financial management fulfills are as following: Integrating financial and operational information from multi-faceted sources, such as internet, mobiles and then aligning them to a single system, Providing easier access to data and information for both the financial and other types of users, Making financial data available immediately so that data-analysis turn-around time can be reduced, Analyzing historical and current financial activities, Monitoring and evaluating the use of funds over a stipulated time, and Enabling the data analysis along with multiple dimensions (Stair, Reynolds and Reynolds, 2009, p. 406). The main uses of information system for Financial Management can be summarized as under: a- Information system for assessing the financial position Financial management has to assess and find out the exact financial position of the business and the management in responsible for that normally depends on better information system. With the help of such effective system, the management will be able to assess the liquidity and solvency position of the firm by evaluating assets, liabilities and other available information. b- Information system for measuring the profitability To know whether the business has profitability or not is very critical to decision making. Normally, the financial management requires to take valuable decisions and therefore it needs to know the profitability level of the business. The financial management will be bale to measure the profitability through the analysis of the gathered information in the information system. c- Information system for analyzing the cash flows It is very important that the financial management requires to know the cash inflows as well as cash outflows. If there is an effective information system, the financial management can depend on it and can find out the cash inflows as well as outflows from the stored information. d- Information system for preparing the report Financial management has to prepare and submit the report, and most often it has to be very compliant to the government Or any other accounting board’s norms. The management therefore requires to look at the information it has and to prepare the statement or report accordingly so that it can make sure that a comprehensive report and rather very reliable financial statement is submitted to the external or internal bodies. 6- Conclusion This report has focused on explaining what is information system and has detailed how it can aid communication and financial management in different functions. This report has addressed information system and its use as an aid to communicate between staff, management, stakeholders and customers. This paper has also detailed that the information system is helping the financial management for assessing the profitability, measuring the financial position, finding the cash flows and preparing the reports. 7- Recommendation and Implementation The findings and conclusions of this report recommends the following Information system needs to be established within the organization, considering all major elements such as people, process and technology, It requires to be linked with almost all functional areas within the firm like financial management, knowledge management, change management process, risk and revenue management etc. References Stair, RM, Reynolds, G and Reynolds, GW, 2008, Fundamentals of Information Systems, Fifth revised edition, Cengage Learning, Stair, RM, Reynolds, G and Reynolds, GW, 2009, Principles of Information Systems, Ninth illustrated edition, Cengage Learning, Williams, JR, Haka, SF and Bettner, MS 2004, Financial and Management Accounting, the basis for business decisions, Thirteenth edition, The McGraw Hill Companies Read More