The Benefits of an Effective Accounting Information System - Essay Example

Management operating a business before the advent of computerized accounting programs knows the amount of time and paperwork involved in maintaining core areas of business. Consequently, the first and foremost identifiable benefit of computerized AIS is a reduction in labor hours and time is money to any business.

In constructing an MYOB model for the problem at hand, assume the company that purchased the business simultaneously purchased and installed the necessary software. In the coming months, with a rapid increase in sales, management realized that growth would soon put pressure on infrastructure. They decide to purchase a warehouse. With the benefit of forecasts projected from sales data and financial reports, management undertakes the purchase informed as to the company’s specific and future needs regarding size and location.

Instead of anticipating future inventory and operating costs, the costing analysis feature of MYOB enabled the purchase to be made with the knowledge it is financially viable. More importantly, as the company’s accounting system now reports in real-time and not historically (monthly, quarterly, etc), management can quickly identify problem accounts and implement action, maintaining the necessary cash flow level to service ongoing costs. The growth phase is one of the most critical for a company or business, and to adequately manage, elements of process monitoring and system implementation are vital.

In the case of the art supply company, whether the new owners had overcapitalized is problematic as a culmination of events led to the crisis, however, it may well have been prudent to trade for another year or two and not borrow such a burdensome amount. Accounting information systems are not a panacea for bad business; no company is immune to substandard management or careless decisions. What can be noted from the model, however, is an AIS will centralize information placing all critical company data, including future projections, at management’s immediate disposal. Therefore, the decisions made at the very least will be well-informed. In today’s volatile marketplace, timely information is ever more the key to business success.