Study Material:
3. Information System in Business Functions
University Technology of Sydney 2005
It is often said that the use of information technology makes our work more effective, more
efficient, or even both. What do these terms mean?
Effectiveness: defines the degree to which a goal is achieved. Thus a system is more or less
effective depending on how much its goal is achieved and the degree to which it achieves better
outcomes than other systems do.
Efficiency: is determined by relationship between resources expended and the benefits gained
in achieving a goal
Thus, one system is more efficient than another if its operating costs are lower for the same or
better quality product or if its product’s quality is greater for the same or even lower costs. The
term productivity is commonly used as a synonym for efficiency. However, productivity always
refers to efficiency of human resources. Productivity improves when fewer workers are required
to produce the same amount of output. This is why IT professionals often speak of productivity
tools which refers to software applications that help workers produce more in less time. The
closer the result of an effort is to the ultimate goal, the more efficient the effort. The fewer
resources spent on achieving a goal, the more efficient the effort.
ISs contribute to both effectiveness and efficiency of business, especially when it is positioned in
specific business functions such as accounting, finance, and engineering and when used to help
companies achieve their goals more quickly by facilitating collaborative work.The ISs can be
used in a wide variety of applications. They can automate manual processes, they can make
innovative products and services accessible, they can shorten the routine processes and more
importantly, they can improve an organization’s strategic position.
Accounting
The purpose of accounting is to track every level of financial transaction within a company, from
dollar to multidollar purchases, salaries to benefits, to sales of every item. Without tracking the
, costs of labor, materials and purchased services using a cost-accounting system, a company
may find it too late that it sells products below what it costs to make them. Without a system of
account receivable, managers may not know who owes the company, how much of it and when
it is due. Same as for ISs for account payable, cash flow and so on.
Accounting was among the earliest business functions to embrace IT. Virtually all businesses
use IT for accounting. General ledger, account receivable, accounts payable, and cash flow
books conveniently lead themselves to computerization and can easily generate balance sheets
and profit/loss statements from records. There are also systems to manage capital investments.
Widespread use of accounting ISs placed a new demand on auditors, certified public
accountants hired by shareholders to verify that an organization’s accounting books reflect true
financial information. Electronic Accounting Systems created a new speciality called Electronic
Data Processing (EDP) audit, which ensures that electronic systems cannot be manipulated to
circumvent these principles.
Finance
A company’s health is often measured by its finances and ISs can significantly improve financial
management. The goal of financial managers, including controllers and treasurers, is to manage
an organization’s money as efficiently as possible. They achieve this goal by:
● Collecting payables as soon as possible
● Making paymentsat the latest time allowed by contract or law
● Ensure that sufficient funds are available for day to day operations
● Taking advantage of opportunities to accrue the highest yield on funds not used
for current activities.
All these goals can be best met by careful cash management and investment analysis.
Cash Management
Financial information systems help managers track a company’s finances. These
systems record every payment and cash receipt to reflect cash movement, employ
budgeting software to track plans for company finances include capital investment
systems to manage investments, thus balancing the need to accrue interest or idle
money against the need to have cash available. The systems that deal specifically with
3. Information System in Business Functions
University Technology of Sydney 2005
It is often said that the use of information technology makes our work more effective, more
efficient, or even both. What do these terms mean?
Effectiveness: defines the degree to which a goal is achieved. Thus a system is more or less
effective depending on how much its goal is achieved and the degree to which it achieves better
outcomes than other systems do.
Efficiency: is determined by relationship between resources expended and the benefits gained
in achieving a goal
Thus, one system is more efficient than another if its operating costs are lower for the same or
better quality product or if its product’s quality is greater for the same or even lower costs. The
term productivity is commonly used as a synonym for efficiency. However, productivity always
refers to efficiency of human resources. Productivity improves when fewer workers are required
to produce the same amount of output. This is why IT professionals often speak of productivity
tools which refers to software applications that help workers produce more in less time. The
closer the result of an effort is to the ultimate goal, the more efficient the effort. The fewer
resources spent on achieving a goal, the more efficient the effort.
ISs contribute to both effectiveness and efficiency of business, especially when it is positioned in
specific business functions such as accounting, finance, and engineering and when used to help
companies achieve their goals more quickly by facilitating collaborative work.The ISs can be
used in a wide variety of applications. They can automate manual processes, they can make
innovative products and services accessible, they can shorten the routine processes and more
importantly, they can improve an organization’s strategic position.
Accounting
The purpose of accounting is to track every level of financial transaction within a company, from
dollar to multidollar purchases, salaries to benefits, to sales of every item. Without tracking the
, costs of labor, materials and purchased services using a cost-accounting system, a company
may find it too late that it sells products below what it costs to make them. Without a system of
account receivable, managers may not know who owes the company, how much of it and when
it is due. Same as for ISs for account payable, cash flow and so on.
Accounting was among the earliest business functions to embrace IT. Virtually all businesses
use IT for accounting. General ledger, account receivable, accounts payable, and cash flow
books conveniently lead themselves to computerization and can easily generate balance sheets
and profit/loss statements from records. There are also systems to manage capital investments.
Widespread use of accounting ISs placed a new demand on auditors, certified public
accountants hired by shareholders to verify that an organization’s accounting books reflect true
financial information. Electronic Accounting Systems created a new speciality called Electronic
Data Processing (EDP) audit, which ensures that electronic systems cannot be manipulated to
circumvent these principles.
Finance
A company’s health is often measured by its finances and ISs can significantly improve financial
management. The goal of financial managers, including controllers and treasurers, is to manage
an organization’s money as efficiently as possible. They achieve this goal by:
● Collecting payables as soon as possible
● Making paymentsat the latest time allowed by contract or law
● Ensure that sufficient funds are available for day to day operations
● Taking advantage of opportunities to accrue the highest yield on funds not used
for current activities.
All these goals can be best met by careful cash management and investment analysis.
Cash Management
Financial information systems help managers track a company’s finances. These
systems record every payment and cash receipt to reflect cash movement, employ
budgeting software to track plans for company finances include capital investment
systems to manage investments, thus balancing the need to accrue interest or idle
money against the need to have cash available. The systems that deal specifically with
