OVERVIEW OF BUSINESS PROCESSES

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OVERVIEW OF BUSINESS PROCESSES

• Chapter 2

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Business Activities, Decisions Information Needs
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Business Activities, Decisions Information
Needs (cont)
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Business Cycles

• A transaction is
• An agreement between two entities to exchange
  goods or services OR
• Any other event that can be measured in economic
  terms by an organization.

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Business Cycles

• The transaction cycle is a process
• Begins with capturing data about a transaction
• Ends with an information output, such as
  financial statements

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Basic Subsystems in the AIS
Expenditure Cycle
Human Resources
Financing Cycle
General Ledger Reporting System
Production Cycle
Revenue Cycle
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Revenue Cycle

• Involves interactions with customers

Give Goods
Get Cash
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Revenue Cycle

• Other transactions in the revenue cycle include

• Handle customer inquiries
• Take customer orders
• Approve credit sales
• Check inventory availability
• Initiate back orders
• Pick and pack orders
• Ship goods
• Bill customers

• Update sales and Accts Rec. for sales
• Receive customer payments
• Update Accts Rec. for collections
• Handle sales returns, discounts, bad debts
• Prepare management reports
• Send info to other cycles

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Expenditure Cycle

• Involves interactions with suppliers

Give Cash
Get Goods
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Expenditure Cycle

• Other transactions in the expenditure cycle
  include

• Requisition goods and services
• Process purchase orders to vendors
• Receive goods and services
• Store goods
• Receive vendor invoices
• Update accounts payable for purchase
• Approve invoices for payment

• Pay vendors
• Update accounts payable for payment
• Handle purchase returns, discounts, and
  allowances
• Prepare management reports
• Send info to other cycles

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Production Cycle

• Transforms raw materials and labor into finished
  goods

Give Raw Materials Labor
Get Finished Goods
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Production Cycle

• Other transactions in the production cycle
  include

• Design products
• Forecast, plan and schedule production
• Requisition raw materials
• Manufacture products
• Store finished goods
• Accumulate costs for products

• Prepare management reports
• Send info to other cycles

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Human Resources/Payroll Cycle

• Involves interactions with employees

Give Cash
Get Labor
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HR/Payroll Cycle

• Other transactions in the HR/Payroll cycle
  include

• Recruit, hire and train employees
• Evaluate and promote employees
• Terminate employees
• Update payroll records
• Pay employees
• Process timecard and commission data
• Prepare and distribute payroll

• Calculate and disburse tax and benefit payments
• Prepare management reports
• Send info to other cycles

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Financing Cycle

• Involves interactions with investors and creditors

Give Cash
Get cash
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Financing Cycle

• Other transactions in the Financing cycle include

• Forecast cash needs
• Sell securities to investors
• Borrow money from lenders

• Pay dividends to investors and interest to
  lenders
• Retire debts
• Prepare management reports
• Send info to other cycles

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Basic Subsystems in the AIS
Funds
Expenditure Cycle
Human Resources
Financing Cycle
Funds
General Ledger Reporting System
RawMaterials
Labor
Production Cycle
Revenue Cycle
Finished Goods
Funds
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Data Processing Cycle

• Data input
• Data storage
• Data processing
• Information output

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Data Input

• Source documents are special forms used to
  capture transaction data
• A number of actions can be taken to improve the
  accuracy and efficiency of data input
• Turnaround documents
• Source data automation
• Well-designed source documents and data entry
  screens
• Using pre-numbered documents or having the system
  automatically assign sequential numbers to
  transactions
• Verify transactions

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Data Processing Cycle

• Data input
• Data storage
• Data processing
• Information output

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Data Storage

• After transaction data have been captured on
  source documents, the next step is to record the
  data in a journal.
• The general journal records infrequent or
  nonroutine transactions and to summarize routine
  transactions.
• Special journals simplify the process of
  recording large numbers of repetitive
  transactions.

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Data Storage

• Ledgers summarize the financial status of
  individual accounts.
• The general ledger contains summary-level data
  for every account of an organization.
• A subsidiary ledger records all the detailed data
  for any GL account that has many individual
  subaccounts.

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Data Storage

• An audit trail provides a means to check the
  accuracy and validity of ledger postings.

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Preparation of Financial Statements

• Prepare the trial balance
• Prepare adjusting entries
• Prepare the adjusted trial balance
• Prepare the income statement
• Prepare closing entries
• Prepare
• Statement of stockholders equity
• Balance sheet
• Statement of cash flows

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Data Storage

• Fundamental computerized data storage concepts
• Entity
• Attributes
• Data values
• Field
• Record
• File
• Data base

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Data Processing Cycle

• Data input
• Data storage
• Data processing
• Information output

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Data Processing

• Updating can be done through several approaches
• Batch processing
• On-line Batch Processing
• On-line, Real-time Processing

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Data Processing Methods
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Data Processing Cycle

• Data input
• Data storage
• Data processing
• Information output

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Information Output

• Output can serve a variety of purposes
• Financial statements can be provided to both
  external and internal parties.
• Some outputs are specifically for internal use
• For planning purposes
• For management of day-to-day operations
• For control purposes
• For evaluation purposes

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Information Output

• Behavioral implications of managerial reports
• YOU GET WHAT YOU MEASURE!

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Information Output

• Budgets can cause dysfunctional behavior
• Foregone expenses
• Focus can be redirected to creating acceptable
  numbers instead of achieving organizational
  objectives

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Role of the AIS

• The traditional AIS captured financial data.
• Non-financial data was captured in other,
  sometimes-redundant systems
• Enterprise resource planning (ERP) systems
  integrate all aspects of a companys operations

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Summary

• We have
• Explained the basic business activities in which
  companies are engaged and the types of
  information they need
• Described the major transaction cycles
• Described the data processing cycle
• Described the role of the information systems in
  modern organizations
• Introduced the concept of enterprise resource
  planning systems