Accounting Systems Technology for the 21st Century

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Accounting Systems Technology for the 21st Century

• Presented by
• Liv A. Watson
• LWatson_at_GaitherCPA.com

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Todays Agenda

• Accounting systems technologies and future trends
• There will be two 10 minutes breaks and a 1 hour
  lunch
• XBRL
• Questions and comments are always welcome

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Scalable Architecture Accounting as a System
Professional
Analyst
Casual Viewer
Internet Browser
Field Unit
Functionality
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The Traditional Accounting Information Systems
Architecture
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Multi-tier Computing
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2-tier, 3-tier, and n-tier

• A Tier describes how the computing workload is
  distributed in a client/server system
• When you separate the application logic from the
  presentation and data storage layers, you create
  a third layer the application logic later. So
  2-tier becomes 3-tier.
• n-tier is used describe those architectures in
  which there is more than one application logic
  layer

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• What is Governments role in the development and
  operation of the Net?
• Should (and if so, how) states be able to tax
  activity on the Net passing through their
  jurisdiction?
• Can we effectively eliminate or limit access
  to offensive material, especially by young
  people?
• How can we I improve the security of data
  traveling on the Net?

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Enterprise Resource Planning (ERP) Systems

• MRP (Material Requirement Planning)
• MRP-II (Manufacturing Resource Planning).
• ERP
• Human Resources
• Finance
• Customer Service
• Engineering
• Institute of Management Accountants (IMA)
  provides a course, Benchmarking ERP Systems

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Applying Information Technology to the
Accounting Cycle
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• The operating system (O/S) is the most important
  program that runs on a computer
• Recognizing input from the keyboard
• Sending output to the display screen
• Keeping track of files and directories on the
  disk
• Controlling peripheral devices such as disk
  drives and printers

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Operating systems can be classified as follows

• Single-tasking 
• Generally supports only one a process at a time
      
• Multi-user 
• Allows two or more users to run a program at the
  same time      
• Multi-processing
• Supports running a program on more than one CPU
• Multi-tasking    
• Allows more than one program to run concurrently
    
• Multi-threading
• Allows different parts of a single program to run
  concurrently
• Real time
• Responds to input instantly. General-purpose
  operating systems, such as DOS and UNIX, are not
  real-time.

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Introduction and History

• 1945 -- 1955
• Bare machines -- vacuum tubes and plug boards
• Designed by J.W.Mauchly and J.P.Eckert of the
  University of Pennsylvania in 1945
• No operating system
• 1956 -- 1965
• Transistors and batch systems
• Clear distinction between designers, builders,
  operators, programmers, and maintenance personnel
  
• 1965 -- 1980
• Multiprogramming
• 1980 to present
• Personal computers and workstations
• Network operating systems

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Network Operating Systems (NOS)

• Single User DOS Applications
• Local workstation only not written to work on
  network.
• Network-Aware Applications
• Will work on a network, but only for a single
  user.
• Multi-user Applications
• Applications specifically written for networks.
• Email, Scheduling, Groupware

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Peer-to-Peer NOS Characteristics

• Each machine sends, receives, and processes data
  files (Client and Server).
• Simplistic in design and maintenance.
• Used for smaller number of users (10 to 50).
• Used when users are in same area.
• Used when network growth is not an issue.
• Less expensive (no dedicated server).
• Slower and less secure than File Server

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Security
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Firewalls
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Packet Filters
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CERTIFICATE AUTHORITIES

• There are four principal types of certificates
• Certification Authority
• Server
• Personal
• Software Publisher

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VIRUSES, BUGS AND WORMS

• A virus is a program that attaches itself to
  other files.
• Viruses can be funny, irritable or destructive.
• A bug is a flaw in a browser that can be used by
  a hacker to circumvent a browsers security
  functions.
• A worm is similar to a virus in that it can be
  destructive or irritating.
• Makes copies of itself and send them to other
  users

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ProtectionVIRUSES, BUGS AND WORMS

• There are steps that a user can use to protect
  themselves from these dangers. They include
• Know your source of files and messages
• Use a virus monitoring software to scan incoming
  files or set the software to continuously monitor
  activity on your computer or server
• Only open files after they have been scanned
• Maintain frequent backups so that you can recover
  from a crash or other problem

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THIRD PARTY ASSURANCE SERVICES

• WebTrust
• Better Business Bureau

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e-Insurance Policies

• For example, if your company unwittingly spread a
  virus that wiped out customers database.
• ACE USA
• AIG
• Lloyds of London
• Marsh
• St. Paul
• Zurich

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Relational Database Management Systems
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Relational Database Management Systems (RDBMS)

• A type of database management system that stores
  data in the form of related tables.
• The data is integrated into a single conceptual
  model and a single location
• The data is independent from the application
  programs
• The data is shared 
• Today, most leading accounting software manages
  data almost exclusively on RDBMS technology

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Data Marts

• Data marts are workgroups or departmental
  warehouses, which are small in size, typically
  less than 10GB
• Meta Data
• 1.      The technical data
• contains a description of the operational
  database and a description of the data warehouse
• 2.      The business data
• contains a description of the operational
  database and a description of the data warehouse

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Relational Accounting and Transaction Triggers

• A trigger is a piece of code stored in the
  database.
• Row-level triggers can be executed BEFORE or
  AFTER each row is modified by the triggering
  insert, update, or delete operation.
• Statement-level triggers execute after the entire
  operation is performed

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Why would accountants benefit from triggers?

• Recording the name of user who tried to change an
  account code
• Recording the data and time a transaction
  occurred
• Ensuring that a transaction is in balance before
  it is posted to the ledger
• Alerting the accountant to a budget overrun by
  sending an e-mail
• Printing out an audit trail
• Warning a user of unposted transactions before a
  report is to be run
• Checking that codes added to one table exist in
  other related code tables
• Deleting data from an address table when its
  customer owner is deleted

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Benefits of RDBMS

• Scalability
• Transaction integrity
• Centralized business rules
• Centralized data allows real-time accuracy in
  transaction processing since the single data
  occurrence is always updated
• Shared data eliminates inconsistencies when data
  is stored in several places and not updated in
  all locations    
• Shared data means that all application programs
  use the same data   
• More informed decision making, based on one
  corporate database
• Improved cost efficiencies
• Higher level of customer service
• Enhanced asset/liability management       

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Data Warehousing

• Bill Inmon coined the term "data warehouse" in
  1990. His definition is
• "A (data) warehouse is a subject-oriented,
  integrated, time-variant and non-volatile
  collection of data in support of management's
  decision making process."

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Information is stored in files or tables.

• The emerging problem is not how to retrieve data,
  but how to manage, utilize and optimize the
  mountains of data our increasingly efficient
  information systems are collecting. Within this
  explosion, the challenge of data warehousing has
  become evident.
• Terminology
• A file is made up of a number of records.
• A record is made up of a number of fields, each
  of which has a specific identified name.

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What, Then, Is a Data Warehouse?

• Data warehouses assemble the data from
  heterogeneous databases so that users query only
  a single point
• Internet and World Wide Web technologies have had
  a major impact on data management. Many vendors
  now have interfaced their data warehouses to the
  Web
• Intelligent agent technology will play a major
  role in locating and integrating various data
  sources on the Web
• A data warehouse brings together the essential
  data from the heterogeneous databases, so that
  users need to query only the warehouse

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Data warehouse applications include

• Sales and marketing analysis across all
  industries
• Inventory turn and product tracking in
  manufacturing
• Category management, vendor analysis, and
  marketing program effectiveness analysis in
  retail
• Profitability analysis or risk assessment in
  banking
• Claim analysis or fraud detection in insurance

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Business Intelligence Tools
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What is Business Intelligence Tools?

• Business Intelligence Tools is a kind of software
  that gives users the ability to access and
  analyze information that resides in databases
  throughout an enterprise.
• IT Systems that are designed specifically to meet
  the needs of the knowledge workers.

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BIT v. OP

• Built to enable exploration analysis, and
  presentation of information
• Relatively few inquires which are often wide in
  scope
• Designed to get data out

• Used to automat routine, predictable tasks
• Large volume of small transactions that are
  limited in scope
• Designed to get data in

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The following are three types of Business
Intelligence Tools

• Multi-Dimensional Analysis Software - Also known
  as Multi Software or OLAP (On-Line Analytical
  Processing) - Software that gives the user the
  opportunity to look at the data from a variety of
  different dimensions.  
• Query Tools - Software that allows the user to
  ask questions about patterns or details in the
  data.
• Data Mining Tools - Software that automatically
  searches for significant patterns or correlations
  in the data.

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Data Query and Reporting Tools

• Multi-Dimensional Analysis Software
• Also known as OLAP (On-Line Analytical
  Processing)
• Is the process of analysis that involves
  organizing and summarizing data in a multiple
  number of dimensions.

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OLAP Value Added Decision Support

• "Think of an OLAP data structure as a Rubik's
  Cube of data that users can twist and twirl in
  different ways to work through what-if and
  what-happened scenarios."
• Lee, The Editor, Datamation (May 1995)

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New Analytical Approach

• One of the most prominent and pervasive
  alternative approaches to managing analytical
  data lies in the relationship between knowledge
  management (KM) and decision support.
• The ability of any user, anywhere, to ask any
  questions of any database, at anytime.

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Data Mining Concept and Useful Terminology I

• Data Mining is the process of finding hidden
  patterns and relationships in the data
• Data Mart is a database that has the same
  characteristics as a data warehouse, but is
  usually smaller and is focused on the data for
  one division or one workgroup within an
  enterprise.

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Data Mining Concept and Useful Terminology II

• Data Migration is the movement of data from one
  environment to another.
• This happens when data is brought from a legacy
  system into a data warehouse.
• Data Mining is the process of finding hidden
  patterns and relationships in the data.

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Drill Down and Drill Up
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Benefits of BI

• Supply chain management
• Fraud management
• Risk management
• Product management
• Financial controls

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Transaction Processing
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Transaction Processing

• Transaction processing means that master files
  are updated as soon as transactions are entered
  at terminals or received over communication
  lines.
• Batch Processing Versus Transaction Processing

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Characteristics of Transaction Processing Systems

• Provide fast, efficient processing to handle
  large amount of input and output
• Perform rigorous data editing to ensure that
  records are accurate and up to date
•  Are audited to ensure that all input data,
  processing, procedures, and output are complete,
  accurate, and valid
• Involves a high potential for security-related
  problems
•  Support work processes of large number of
  people loss of the system can cause a severe and
  negative impact on the organization

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Transaction Process Monitors

• TP Monitor makes sure that groups of updates take
  place together or not at all
• This also supports the four TP requirements
• Atomicity
• Consistency
• Isolation
• Durability

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1. Atomicity

• All transactions are either performed completely
  - committed, or are not done at all a partial
  transaction that is aborted must be rolled back.

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2. Consistency

• The effects of a transaction must preserve
  required system properties. For instance, if
  funds are transferred between accounts, a deposit
  and withdrawal must both be committed to the
  database, so that the accounting system does not
  fall out of balance.

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3. Isolation

• Intermediate stages must not be made visible to
  other transactions. Thus, in the case of a
  transfer of funds between accounts, both sides of
  the double-entry bookkeeping system must change
  together. This means that transactions appear to
  execute serially (e.g. in order) even if the work
  is done concurrently.

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4. Durability

• Once a transaction is committed, the change must
  persist, except in the face of a catastrophic
  failure.

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Elements of the Transaction Processing

• Accounting cycle
• Ledgers
• Journals
• Trial balances
• Coding
• Reports
• Source documents

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Transaction Processing Cycle
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Document Image Processing
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Imaging Processing is the automated technology
of

• Image processing systems automate and streamline
  the flow of paper through an organization.
  Imaging is the automated technology of
• Document Storage
• Document Management
• Document Retrieval
• Document Communication.

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Processing systems are good for

• Scanning large amounts of paper-based documents
  into a computer system and indexing them for
  quick and easy retrieval.
• Processing all types of documented information
  either graphical, full-text of combinations of
  both.
• Converts images into a digital format via the
  document scanner and then stores these images
  onto a mass storage device, usually a
  "write-once" optical mechanism.

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Document Image Processing Within the Accounting
Office
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Benefits

• Saves time by retrieving documents quickly and
  efficiently at your terminal.
• Saves time by allowing documents to be shared
  electronically.
• Saves money by releasing valuable filing space.
• Saves money by using electronic forwarding
  instead of photocopying.
• Saves money by increasing staff productivity.
• Enhances customer service by timely and accurate
  retrieval of information.

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GroupWare and Workflow
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GroupWare and Workflow Components and Concepts

• Describe a rapidly evolving collection of
  software tools that have been developed to enable
  more efficient human collaboration.
• Groupware aids in the
• Creation
• Sharing
• And tracking of unstructured information
  within and between organizations in
  support of collaborative activity

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The Major Vendors are

• Lotus Notes/Domino,
• Microsoft Exchange,
• Novell Groupwise, and
• Netscape SuiteSpot/Collabra

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Groupware can be said to encompass at least six
core technologies

• Multimedia electronic document management systems
  (EDMS)
• Electronic conferencing systems
• Electronic scheduling systems
• Electronic mail systems
• Telephony
• Workflow systems

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Pitfalls in implementing a groupware system

• As the system become functionally broader, they
  become more difficult to implement in an ordered,
  logical fashion
• Expectations of the system
• Training
• On-screen graphical flowchart of the module

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Document

• The basic instrument of storage in a groupware
  system is the document.
• A document is the abstract box that holds all
  of the unstructured data you will use in the
  groupware system.
• A document is the equivalent of the table in SQL
  databases, except that it holds unstructured (or
  semi-structured) data instead of highly
  structured relational data.

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Document Databases.

• Research notes
• Blueprints
• Financial statements
• Vacation photos
• Videos
• Voicemails
• Bulletin boards
• Faxes
• E-mails.

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Electronic Conferencing

• Asynchronous Versus Real-time
• Text-based
• Teleconferencing
• Electronic whiteboards
• Data conferencing

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Internet Relay Chat (IRC) and Usenet

• The tools at the disposal of the
  viewer/participant will usually include
• A mechanism to create a new topic or a new thread
• A mechanism for responding to an existing thread
• A user/topic/date search utility.

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Real-Time Conferences

• Allow team members to collaborate on a project
  using near-instantaneously refreshed document
  replicas, electronic whiteboards, and audio/video
  communication tools such as teleconferencing
  systems

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Electronic Scheduling

• Electronic scheduling is a means of sharing
  information about meetings, deadlines, and To
  Do lists between personnel and project members.
• A project member wanting to schedule a meeting
  would simply
• View the calendars of the desired participants
• Choose the best time, date, and location for the
  meeting
• Write the meeting information directly to the
  calendars of meeting participants
• Send reminder notifications via e-mail.

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E-Mail Features

• Address Books
• Automation
• Document Attachments
• Group Broadcasting
• Carbon Copies
• Security
• Notification

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Ad Hoc and Process-Oriented Workflows

• Ad hoc (or unstructured) workflows are those that
  give workers maximum freedom in completing their
  work.
• Process-oriented workflows (or structured
  workflows), on the other hand, are used to
  automate processes that are long-lived,
  repetitive, and well defined

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Benefits for Future

• Unified messaging systems
• Computer-telephony integration (CTI)
• Interactive voice response (IVR.)
• This is a relatively new area of technology
  convergence, so we will probably see many new and
  innovative applications within the next few years
  as new CTI/IVR applications make their way onto
  the groupware playing field.

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Distributing Computing
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Introduction to the Distributing Computing
Concepts

• The trend toward integrated decision support for
  the extended enterprise .
• Use databases on meaning rather than just
  structure.
• A focus on asset management, cellular design,
  self-managing applications, and collaborative
  commerce, to take us beyond ERP systems.

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Distributing Computing Concept
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The Internet and the World Wide Web
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Hypertext Markup Language (HTML)
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 Hypertext Transfer Protocol (HTTP)

• Hypertext Transfer Protocol or HTTP is a set of
  rules for exchanging files on the WWW.
• This represents the application protocol for
  other protocols (principally TCP/IP) used for the
  exchange of information on the Internet

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Common Gateway Interface (CGI)
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Servlets
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Advanced Hypertext Markup Specifications

• The language has three important functions, to
  provide direction as to
• What markup codes are allowed
• What markup codes are required
• How the codes will be recognized as not being
  part of the basic text

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Extensible Markup Language (XML)
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Cascading Style Sheets (CSS)
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E-Commerce and EDI

• The term E-Commerce (Electronic Commerce) brings
  different things to mind depending upon your
  prospective or the context in which it is used.
• EDI (Electronic Data Interchange) is a subset of
  E-Commerce. EDI forms the basis for information
  to flow between two organizations without paper
  (or less of it) using a predefined set of
  parameters

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E-Commerce and EDI Functions

• Virtual Stores and the Online Gold Rush
• Customer Relationship Management
• Self Service Accounting and Human Resource
  Applications
• Customers could check their accounts receivable
  status.
• Vendors could check their account payable status.
• Outside sales people could enter and monitor
  customer orders.
• Employees could review their employee benefit
  accounts and in some cases make changes in
  their preferences or elections.
• Employees could schedule vacation or other time
  away from the work-site.

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Online Banking and Tax Payment Systems

• Some of the types of transactions that might be
  included are
• Transfer of funds between deposit accounts.
• Transfer of funds between deposit and loan
  account (and vice versa).
• Initiate electronic payment to vendors.
• Query their accounts for activity and to aid in
  reconciliation.
• Send messages to customer service representatives
  and receive replies.

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Creating a Technology Plan
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Creating a Technology Plan

1. Get top management committed to the project
2. Do research, make a plan, and create a budget and
   timeline
3. Need assessment
4. Contact vendors and gather your resources
5. Set up the prototype and choose vendor product
6. Establish policies and best practices
7. Educate the employees on what is coming
8. Roll out the hardware and software
9. Install accounting applications
10. Establish maintenance system, audit test
11. Evaluate and continuous improvement

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Projected Goals and Objectives

• What problem will the new accounting system solve
  Where is the pain?
• Top management needs to understand and endorse
  the project? How will you achieve that?
• How technically adept are the participants?
• Project Manager who is that person?

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Benefits vs. Coasts

• Is top management aware of the hard and soft
  benefits and costs of the project?
• What method will you use to determine the ROI of
  your project?
• Will the pilot project be able to demonstrate ROI
  clearly?

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Budget for Each Implementation Phase

• Break project into phases
• 60 days to 6 months
• Construct a budget for each phase of the project

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Database and Legacy System Integration

• Identify all of your companys legacy systems and
  databases.
• Have legacy security issues been addressed?
• Are the candidate legacy system interfaces
  clearly defined?

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Performance Issues?

• Have hardware and software platforms been
  defined?
• Have you planned for different growth scenarios?

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Server Locations, Hosting, and Maintenance

• Will you company have a dedicated server to host,
  or will host the content on a shared server?
• Who will maintain the accounting application?

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Implementation Time and Milestones.

• Have reporting requirements been fully defined by
  management?
• Are there meeting scheduled to review the
  findings with top management?

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Staffing/Resources to Maintain and Support the
Project

• Is there a clear policy in place to resolve
  problems?
• Are there clear maintenance procedures in place?
• Are there clear guidelines for implementing
  upgrades?
• Have backup procedures been developed?
• Does an emergency plan exist for system failure?
• How will ongoing training be managed?

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The Future of Accounting, Information,
Technology, and Business Solutions
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Technology Projections

• Computer systems will be on-line and virtually
  connected.
• Distributing intelligence to handle screen
  layouts, data entry validation and other
  processing steps
• Computers sites will harbor intelligent agents.
• An intelligent agent is a software that waits in
  the background and performs an action if a
  specific event occurs.
• Monitoring systems will focus on exception
  reporting and will place emphasis on fund
  transfer systems. Often called audit by
  exception as opposed to auditing actual
  reporting.
• Viruses and Hackers will continue to be a growing
  concern.

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Future Benefits of Relational Accounting Systems

•  Parallel Processing is an architecture within a
  single computer that performs more than one
  operation at the same time.
• The advent of parallel processing leads to
  dramatic performance and improvements in
  accounting systems.

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Distributing Processing

• Is the distribution of multiple computers
  throughout an organization.
• This structure lets a single transaction span
  multiple databases by ensuring that the process
  completes in either all databases or none.

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Replication Functionality

• The ability to keep distributed databases
  synchronized by routinely copying the entire
  database or subset of the database to other
  server in the network.
• Replication Functionality can be used to publish
  reports and other accounting data to subscribing
  servers for dissemination to users via e-mail or
  the Internet.

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Object-Oriented DBMS

• Provides more flexibility than systems designed
  for relational databases.
• Object-oriented databases allow for many to many
  relationships.
• The ultimate goal of object accounting systems is
  that it should not matter which source language
  they were programmed in or in which computer in
  the network they are running on.

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Other Trends

• Graphical Accounting
• Refers to the use of a Graphical User Interface
  (GUI) to present the accounting systems functions
  and data users. Today practically all major
  accounting system vendor has released their
  accounting software with the same standard GUI
  interfaces.

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Other Trends

• Spread Sheet Accounting
• The integration of spreadsheets software with
  your accounting system.
• Most client/server accounting packages include
  direct transfer of data to and from spreadsheets
  without the need for messy data file export and
  imports.

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Other Trends

• Adaptable Accounting refers to accounting
  software that can be easily adapted or customized
  to fit most business processes. Users often see
  the need for accounting software to adapt to
• The different computing platforms used throughout
  the organization
• The specific terminology and data capture needs
  of local business units
• A variety of business rules in place by
  governmental bodies and regulatory entities
• Differences in the implementation of specific
  business processes
• The demand for add-on functionality not provided
  by the software vendor

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Other Trends

• Adaptable Accounting refers to accounting
  software that can be easily adapted or customized
  to fit most business processes. Users often see
  the need for accounting software to adapt to
• The different computing platforms used throughout
  the organization
• The specific terminology and data capture needs
  of local business units
• A variety of business rules in place by
  governmental bodies and regulatory entities
• Differences in the implementation of specific
  business processes
• The demand for add-on functionality not provided
  by the software vendor

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Internet Accounting (Client/Browser Architecture)

• Allows the users access to accounting related
  information from any Internet connection via
  platform-independent desktop Web browser.
• For example, initiate a transaction, participate
  in a transaction workflow, run a query, or
  request a report without having any accounting
  software on their own PC.

www.netledger.com
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Workflow Accounting Trends

• The automatic routing of accounting related data
  to the users responsible for working on them.
• System setup workflow
• Message-based workflow
• Form-based workflow
• Transaction-based workflow
• Web workflow
• Even-driven workflow

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Component Accounting

• Refers to accounting software that works together
  and cooperate with each other.
• Voice
• Video
• Images

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OLAP Accounting

• OLAP is fast becoming another technology and
  functional differentiator between accounting
  systems.
• The OLAP functionality may be built in to the
  accounting suite or delivered via integration
  with third-party products.

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? Questions and Answers
Liv Watson Senior Director of Information
Technology Lwatson_at_GaitherTech.com
http//www.GaitherTech.com