An Introduction to Accounting, Information Technology and Business Solutions

A CHANGING WORLD The profound effect information technology (IT) will have on the accounting Profession since the early days of modern IT. Professionals who can create and value will have a profound impact on shaping the future

THE NATURE AND PURPOSE OF AN ORGANIZATION- CREATING VALUE An organization should create value for customer according to Michael Porter. Creating value has a cost. The concept of creating value applies to both for profit and not for profit organizations. For profit organizations try to maximize their margins. Not for profit organizations, seek to maximize the goods and services they provide with the resources (funds) they receive.

Regardless of the type of goods or services rovided, each organization has at least three business process (see Exhibit 1-1) 1. Acquisition/payments process 2. Conversion process 3. Sales/collection process Management activities can be broadly categorized into planning, executing, controlling and evaluating.

Suppliers Requested input resources Payment for input resources Customer Goods and service for customers Payment for goods and services ORGANIZATION Acquisition/ Payment Process Conversion process Sales/ collection Process Provides input Resources to The Organization Provides Finished Goods and services for Customers Business Process EXHIBIT 1

Managers execute their plan by dividing business processes into smaller activities, assigning people to perform each activity, and motivating them to do a good job. Control is exercised by the reviewing the results of an activity or an entire business process, managers evaluate the operating results to see if the business processes are achieving the organizations objectives.

Plan Information system EvaluateExecute Control EXHIBIT 1-2 Management Activities

Information process (see Exhibit 1-3): recording data about business activity, maintaining or keeping the data about an organization relevant and up to date and reporting useful information to those who execute, control and evaluate the business processes. Information is defined as data that have meaning to the receiver-the information customer. In summary, business processes are directly associated with providing goods and services to customers. Managers obtain information from an information system. An information system provides this information through three main information processes: recording business activity data, maintaining the stores of data and reporting information to management

Information System Maintain Business Data Capture Business Data Report Useful Information Primary Information Process Management Business process EXHIBIT 1-3 The Information System and Information Process

Reenginering requires an organization to rethink how it operates to provide greater value to its customers. Some of the more significant challenges facing the accounting professional include the following - Much of what accountants do was developed by “pre computer thinking” - Most revenues for public accounting firms in the United States - Many managers are dissatisfied with the quality and timeliness of information provided by the accounting systems. - Traditional financial statements are extremely compressed and not released for several weeks after the end of the year.

Business Processes Acq./Pmt. Process Conversion Process Sell/Collect Process Maintain Data Management activities Plan Execute Control Evaluate Manage Business Process Information System Provide Reports Manage Business Process Capture Data EXHIBIT 1-4 Relationship between Business Processes, Information Processes and Management Activities

The primary functions of accounting that have been practiced for thousands of years include: Recording data about business transaction Summarizing results of business activity into useful reports Providing assurances that the business is operating as intended and that the assets of the organization are protected. The infrastructure that supports the production and delivery of accounting’s information product is the accounting information system. A system is a set of resources brought together to achieve some common goal. The objective of the accounting information system is to collect and store data about business processes that can be used to generate meaningful reports for decision makers to help them plan, execute, control and evaluate organization activities.

The top values and competencies possessed by accountans are those that provide them with a competitive advantage in delivering selected services to customers. Solving business problem requires an integration of the organization’s strategy, structure, business processes, information technology and business measurements as illustrated in Exhibit 1-5.

Culture S3 Strategy Business Processes/ Events People and Structure Information Technology Measurements EXHIBIT 1-5 Business Solution Framework

This book will focus primarily on three of the areas business processes, IT and measurements. Accounting can enhance its value to an organization by constainly improving its ability to: Provide useful information Help embed information processes into business processes Help management define business policies We hope we have persuaded you to at least consider the possibility that: The accounting profession my need to change Any changes in the accounting profession should focus on helping organizations provide greater value to customers Accounting and IT must be integrated to develop business solutions IT has a role to play in the future of the accounting profession

Reference Hollander, A. S. Eric L. Denna, J. Owen Cherrington Accounting Information Technology, And Business Solutions. Irwin McGraw-Kill, New York-USA.