Monash University, SIMS, Semester One, BASIC BUSINESS SYSTEMS CSE Information Systems 1 CSE Information Systems 1

Monash University, SIMS, Semester One, Lecture Objectives to be aware of some typical computer- based information systems within business organisations to be aware of some typical computer- based information systems within business organisations to understand concepts and principles of basic business systems to understand concepts and principles of basic business systems

Monash University, SIMS, Semester One, There is a range of information systems to serve the varied needs of users: There is a range of information systems to serve the varied needs of users: Transaction processing systems Transaction processing systems Electronic commerce Electronic commerce Process control systems Process control systems Management support systems: Management information systems, Decision support systems, Executive information systems Management support systems: Management information systems, Decision support systems, Executive information systems Knowledge-based systems: Expert systems, Neural networks, Knowledge-based systems: Expert systems, Neural networks, Multimedia systems Multimedia systems Office automation systems Office automation systems Geographical information systems Geographical information systems Types of Information Systems

Monash University, SIMS, Semester One, Transaction Processing Systems (TPS) capture, process and store business events capture, process and store business events transaction - any business related event transaction - any business related event eg. payment to employees, sales to customers eg. payment to employees, sales to customers deal with basic business operations and functions deal with basic business operations and functions eg. payroll systems, billing systems, ordering systems eg. payroll systems, billing systems, ordering systems high volume of data high volume of data objectives objectives efficient data capture, movement and processing efficient data capture, movement and processing integration with other information systems integration with other information systems providing information to the business providing information to the business developer needs to understand basic business processes and business information needs developer needs to understand basic business processes and business information needs

Monash University, SIMS, Semester One, Electronic Commerce business conducted electronically through computer-to-computer exchange of standard business transactions business conducted electronically through computer-to-computer exchange of standard business transactions possible because of international communication networks (eg. internet) possible because of international communication networks (eg. internet) requires high level of inter-organisational co-operation and standardisation of data formats across multiple business functions requires high level of inter-organisational co-operation and standardisation of data formats across multiple business functions

Monash University, SIMS, Semester One, Process Control Systems similar in nature to TPS, but require the system to have in-built capability to receive information from its environment and respond immediately to given stimuli without operator intervention (real time) similar in nature to TPS, but require the system to have in-built capability to receive information from its environment and respond immediately to given stimuli without operator intervention (real time) range from the very simple (thermostat for air conditioner) to the very complex (online shopping) range from the very simple (thermostat for air conditioner) to the very complex (online shopping) requires the developer to understand the way the system works and the nature of the specialised technology required - appropriate technical expertise is necessary requires the developer to understand the way the system works and the nature of the specialised technology required - appropriate technical expertise is necessary

Monash University, SIMS, Semester One, Management Support Systems general term to cover a variety of types of system which aim to support management decision making general term to cover a variety of types of system which aim to support management decision making based on aggregate transactions, not individual ones based on aggregate transactions, not individual ones provide basis for management action provide basis for management action E.g. management information systems, decision support systems, executive information systems

Monash University, SIMS, Semester One, Management Information Systems draws on diverse yet predictable data resources to aggregate and summarise data into a meaningful form to help managers draws on diverse yet predictable data resources to aggregate and summarise data into a meaningful form to help managers provide routine scheduled reports (weekly, monthly, etc..) of the state of business operations provide routine scheduled reports (weekly, monthly, etc..) of the state of business operations could be detailed, summary, exception, trend or on demand reports could be detailed, summary, exception, trend or on demand reports generally provide support for business environments which are structured, stable and predictable generally provide support for business environments which are structured, stable and predictable developer needs to: developer needs to: be aware of management information needs be aware of management information needs identify routine structured problems for which an MIS can help identify routine structured problems for which an MIS can help be able to draw information from different TPS be able to draw information from different TPS

Monash University, SIMS, Semester One, Other types of Information Systems Decision Support Systems (DSS) Decision Support Systems (DSS) Executive Information Systems (EIS) Executive Information Systems (EIS) Knowledge based systems Knowledge based systems Expert systems Expert systems Multimedia systems Multimedia systems Office automation Office automation Geographical Information systems Geographical Information systems

Monash University, SIMS, Semester One, Types of information systems a large and ever-expanding range of specialised software is available for all these types of system a large and ever-expanding range of specialised software is available for all these types of system each type of system requires a particular set of technical skills on the part of the system developer each type of system requires a particular set of technical skills on the part of the system developer different types of system tend to have different types of key users involved in their development - executives, managers, knowledge workers, clerical workers, etc. different types of system tend to have different types of key users involved in their development - executives, managers, knowledge workers, clerical workers, etc. different system development approaches are needed for these different types of systems different system development approaches are needed for these different types of systems if you become involved in any area you will need to learn a whole new set of skills, reference literature, software etc. if you become involved in any area you will need to learn a whole new set of skills, reference literature, software etc.

Monash University, SIMS, Semester One, Example basic business systems Supermarket Supermarket Supplier of product to Supermarket Supplier of product to Supermarket Supermarket’s bank Supermarket’s bank

Monash University, SIMS, Semester One, Basic Business Systems Large business organisations process the majority of routine transactions by computer Large business organisations process the majority of routine transactions by computer Management information systems and other computerised systems Management information systems and other computerised systems Systems analysts need a working knowledge of business principles and basic business systems Systems analysts need a working knowledge of business principles and basic business systems

Monash University, SIMS, Semester One, Typical organisational units and systems: Typical organisational units and systems: Customers Customers Accounting Accounting Materials/Purchasing Materials/Purchasing Human resources Human resources Production Production Marketing Marketing Basic Business Systems

Monash University, SIMS, Semester One, Business applications for information Customers: Customers: customer history, customer orders customer history, customer orders Accounting: Accounting: Accounts payable, accounts receivable, general accounts Accounts payable, accounts receivable, general accounts Materials: Materials: Assets, consumables, inventory control Assets, consumables, inventory control

Monash University, SIMS, Semester One, Business applications for information Human resources: Human resources: Payroll, personnel Payroll, personnel Production: Production: Planning, scheduling, requisitions Planning, scheduling, requisitions Marketing: Marketing: Sales, promotion and publicity Sales, promotion and publicity

Monash University, SIMS, Semester One, Basic business cycles SUPPLIER THE BUSINESS CUSTOMER Products Money Products Money Inventory (purchasing & receiving) Inventory (finished products/services) Accounts payableAccounts receivable

Monash University, SIMS, Semester One, Basic business applications Order entry & invoicing Inventory control Accounts receivable General ledger Accounts payable SUPPLIER CUSTOMER stock Invoice, order, credit note Products ordered, Products returned Statement, customer payment Invoice, credit note Stocktake, products received &supplied Purchase order Supplier invoice, Statement, payment summary Business information

Monash University, SIMS, Semester One, Order entry & invoicing To meet customers’ demand (customer orders) for goods or services. Request payment for goods or services supplied to the customer. Information required: Up-to-date records of goods available or service providers Up-to-date records of goods available or service providers Customers’ credit status Customers’ credit status Location of goods. Location of goods. What goods were packed and despatched What goods were packed and despatched Which carrier delivered the goods, and when Which carrier delivered the goods, and when How much was request in payment from customer; when? How much was request in payment from customer; when?

Monash University, SIMS, Semester One, Order processing: Order processing: Verify order; check customer credit rating Verify order; check customer credit rating Order filling: Order filling: Verify stock available; pick stock Verify stock available; pick stock Order packing and delivery: Order packing and delivery: Produce packing slip (or invoice); prepare delivery docket Produce packing slip (or invoice); prepare delivery docket Invoicing (billing): Invoicing (billing): Produce invoice for customer; Send copy invoice to accounts receivable Produce invoice for customer; Send copy invoice to accounts receivable Order entry & invoicing process

Monash University, SIMS, Semester One, Information produced: Picking slip: assists warehouse staff to locate goods (what, where, in what order) Picking slip: assists warehouse staff to locate goods (what, where, in what order) Packing slip: has freight data for transport (e.g. weight, volume, quantity, handling) Packing slip: has freight data for transport (e.g. weight, volume, quantity, handling) Delivery docket: accompanies goods and provides proof of delivery and is often a copy of the invoice Delivery docket: accompanies goods and provides proof of delivery and is often a copy of the invoice Backorder: created when stock is not available and a customer’s order is “held” until it can be filled Backorder: created when stock is not available and a customer’s order is “held” until it can be filled Credit note: issued to customers for returned goods - inventory and accounts receivable notified Credit note: issued to customers for returned goods - inventory and accounts receivable notified Order entry & invoicing

Monash University, SIMS, Semester One, Data accessed: Data accessed: Customer, inventory, supplier and product files Customer, inventory, supplier and product files Links to other subsystems: Links to other subsystems: Inventory control, and accounts receivable (debtors) subsystems Inventory control, and accounts receivable (debtors) subsystems Order entry & invoicing

Monash University, SIMS, Semester One, Inventory control information systems To ensure adequate stock levels to satisfy customer demand while minimising costs of holding stock Information required: Stock on hand: quantity of stock currently held Stock on hand: quantity of stock currently held Reorder point: when to order more stock Reorder point: when to order more stock Reorder quantity: how much to order Reorder quantity: how much to order

Monash University, SIMS, Semester One, Inventory control EOQ (economic order quantity): the ideal quantity to order to minimise BOTH ordering costs (clerical processing, handling) and holding costs (purchase, space, maintenance, investment loss) EOQ (economic order quantity): the ideal quantity to order to minimise BOTH ordering costs (clerical processing, handling) and holding costs (purchase, space, maintenance, investment loss) “Just in time”: alternative approach of producing goods at the latest possible time “Just in time”: alternative approach of producing goods at the latest possible time Stocktaking: a count of physical stock to compare with expected quantities Stocktaking: a count of physical stock to compare with expected quantities Stock demand patterns: may be constant demand, seasonal demand, increasing or decreasing trends Stock demand patterns: may be constant demand, seasonal demand, increasing or decreasing trends

Monash University, SIMS, Semester One, Inventory system processes Report stock status; produce inventory status report (on hand – not on hand – on order) Report stock status; produce inventory status report (on hand – not on hand – on order) Produce purchase orders; produce reorder report Produce purchase orders; produce reorder report Add new stock (on delivery); adjust quantity on hand (when stock sold). Add new stock (on delivery); adjust quantity on hand (when stock sold). Set stock reorder points (safety stock levels, lead times – time it takes to get stock from supplier to wearehouse) Set stock reorder points (safety stock levels, lead times – time it takes to get stock from supplier to wearehouse) Stocktakes of stock on hand; Produce stocktake report Stocktakes of stock on hand; Produce stocktake report Accept returned goods; return/write down faulty goods. Accept returned goods; return/write down faulty goods. Computerised inventory systems assist with accurate and up-to-date information and calculations of past and future demand

Monash University, SIMS, Semester One, Inventory control Data about stock items typically required: Data about stock items typically required: Descriptive: Description, price, unit of measure, cost, supplier Descriptive: Description, price, unit of measure, cost, supplier Reordering: reorder point, reorder quantity, safety stock level, seasonal variation Reordering: reorder point, reorder quantity, safety stock level, seasonal variation Status: quantity on hand, quantity on order, quantity on backorder Status: quantity on hand, quantity on order, quantity on backorder Historical: qty sold last month, last year, month-to-date, year-to-date Historical: qty sold last month, last year, month-to-date, year-to-date Stock item codes or SKU barcodes are used Stock item codes or SKU barcodes are used

Monash University, SIMS, Semester One, Inventory control Data accessed: Data accessed: Stock/product file (includes stock movements and stocktake data). Stock/product file (includes stock movements and stocktake data). Links to other subsystems: Links to other subsystems: Order entry Order entry Accounts receivable Accounts receivable Warehouse system (often source of physical stock location data) Warehouse system (often source of physical stock location data)

Monash University, SIMS, Semester One, Accounts receivable (Debtors) To minimise the outstanding debt to the business from customers; produce regular requests for payment (statements) Information required: Customer debts owed and payments made (account balance) Customer debts owed and payments made (account balance) Length and extent of individual outstanding debts (delinquent debtors) Length and extent of individual outstanding debts (delinquent debtors) List of all customers showing total balance owing as well as amounts overdue 30, 60 and 90 days. List of all customers showing total balance owing as well as amounts overdue 30, 60 and 90 days.

Monash University, SIMS, Semester One, Major outputs (Information produced) Major outputs (Information produced) Statements: a request for payment usually issued monthly, lists transactions during the period and aged account balance, Statements: a request for payment usually issued monthly, lists transactions during the period and aged account balance, Remittance advice/payment slip: for customer to make payment Remittance advice/payment slip: for customer to make payment Sales journal: a list of all sales made in chronological order showing date, amount, customer, salesperson, sale transaction details Sales journal: a list of all sales made in chronological order showing date, amount, customer, salesperson, sale transaction details Cash receipts journal: a list of payments in chronological order showing date, amount paid, payment details and invoice or statement the payment relates to Cash receipts journal: a list of payments in chronological order showing date, amount paid, payment details and invoice or statement the payment relates to Aged debtors list Aged debtors list General ledger transaction summary General ledger transaction summary Accounts receivable (Debtors)

Monash University, SIMS, Semester One, Record sales (invoices) to maintain sales journal Record sales (invoices) to maintain sales journal Record payments to maintain cash receipts journal Record payments to maintain cash receipts journal Record credit notes in the sales return journal Record credit notes in the sales return journal Calculate customers’ account balances: Calculate customers’ account balances: Balance forward: apply payment to oldest transaction first Balance forward: apply payment to oldest transaction first Open item: apply each payment to a specific transaction Open item: apply each payment to a specific transaction Produce customer statements Produce customer statements Produce summary of transactions for the general ledger Produce summary of transactions for the general ledger Accounts receivable processes

Monash University, SIMS, Semester One, Data accessed: Data accessed: Customer files Customer files Links to other subsystems: Links to other subsystems: Data from order entry and invoicing is used to maintain customer account balances and delinquent debtor data is fed back Data from order entry and invoicing is used to maintain customer account balances and delinquent debtor data is fed back Summary of transactions is input to the general ledger system Summary of transactions is input to the general ledger system Accounts receivable (Debtors)

Monash University, SIMS, Semester One, Accounts payable (creditors) To keep track of debts payable by the organisation to its suppliers (e.g. purchase of raw materials for production, finished goods for retail, services etc) Information required: Appropriate time for payment (cash flow) Appropriate time for payment (cash flow) Any discounts offered by supplier for early payment Any discounts offered by supplier for early payment (Most businesses are carried “on account” by their suppliers)

Monash University, SIMS, Semester One, Major outputs (information produced): Major outputs (information produced): Cheques: drawn on appropriate account to pay suppliers Cheques: drawn on appropriate account to pay suppliers Remittance advices: what is being paid for Remittance advices: what is being paid for Cheque register: record of all cheques written with for whom, for how much and which invoices ( the business must assign its own reference or voucher number to each invoice for tracing) Cheque register: record of all cheques written with for whom, for how much and which invoices ( the business must assign its own reference or voucher number to each invoice for tracing) Cheque reconciliation:list of all cheques and their status-cancelled, cashed, paid, outstanding Cheque reconciliation:list of all cheques and their status-cancelled, cashed, paid, outstanding Manual payments: must be recorded Manual payments: must be recorded Accounts payable (creditors)

Monash University, SIMS, Semester One, Accounts payable (creditors) Major outputs (Information produced): Major outputs (Information produced): Up-to-date accounts payable register: list of all new charges made to the creditors system in chronological order with date, amount, vendor, general ledger accounts affected, transaction details Up-to-date accounts payable register: list of all new charges made to the creditors system in chronological order with date, amount, vendor, general ledger accounts affected, transaction details Open item report: invoices due for payment Open item report: invoices due for payment Cash requirements report: all items past due, currently and optionally due Cash requirements report: all items past due, currently and optionally due Vendor analysis report: analysis of this year’s activity for comparison Vendor analysis report: analysis of this year’s activity for comparison General ledger distribution General ledger distribution

Monash University, SIMS, Semester One, Record vendor payables (invoices to pay) Record vendor payables (invoices to pay) Determine payables this period and payables held over Determine payables this period and payables held over Process payables this period Process payables this period Process payables summaries: reports, general ledger distribution, expense reports Process payables summaries: reports, general ledger distribution, expense reports Accounts payable processes

Monash University, SIMS, Semester One, General ledger (G/L) “general”: many areas “general”: many areas “ledger”: place to keep accounting records “ledger”: place to keep accounting records Consolidates all financial transactions to summarise financial activity by account number, changes to assets and liabilities, and to profit and net worth Consolidates all financial transactions to summarise financial activity by account number, changes to assets and liabilities, and to profit and net worth Major inputs (information required): Major inputs (information required): Chart of accounts, journal vouchers, G/L summaries Chart of accounts, journal vouchers, G/L summaries Major outputs (Information produced): Major outputs (Information produced): Balance sheet, profit and loss statement, consolidated G/L, trial balance report Balance sheet, profit and loss statement, consolidated G/L, trial balance report

Monash University, SIMS, Semester One, Chart of accounts: codes different types of assets, liabilities, revenues and expenses into specific accounts Chart of accounts: codes different types of assets, liabilities, revenues and expenses into specific accounts Balance sheet: compares assets with liabilities to determine net worth Balance sheet: compares assets with liabilities to determine net worth Profit and loss statement: shows expenses, revenues, and profit and loss for the accounting period (e.g. one month) Profit and loss statement: shows expenses, revenues, and profit and loss for the accounting period (e.g. one month) Cash flow statement: flow of funds into and out of the business - increase or decrease Cash flow statement: flow of funds into and out of the business - increase or decrease General ledger (G/L)

Monash University, SIMS, Semester One, Major inputs (G/L summaries or distributions): Major inputs (G/L summaries or distributions): Sales journal from invoice processing: may be an invoice summary report Sales journal from invoice processing: may be an invoice summary report Cash receipts journal from accounts receivable Cash receipts journal from accounts receivable Payables journal from accounts payable Payables journal from accounts payable Disbursements journal from the payables cheque register Disbursements journal from the payables cheque register Payroll journal from payroll cheques and other employee expenses Payroll journal from payroll cheques and other employee expenses General journal of amounts outside these journals General journal of amounts outside these journals General ledger (G/L)

Monash University, SIMS, Semester One, Record (post) all general (major) journal transactions Record (post) all general (major) journal transactions Post subsidiary journals e.g. fixed assets Post subsidiary journals e.g. fixed assets Produce trial balance: a list of ledger account balances to prove that debits equal credits Produce trial balance: a list of ledger account balances to prove that debits equal credits Produce financial statements Produce financial statements General ledger (G/L)

Monash University, SIMS, Semester One, Record (post) all general (major) journal transactions Record (post) all general (major) journal transactions Post subsidiary journals e.g. fixed assets Post subsidiary journals e.g. fixed assets Produce trial balance: a list of ledger account balances to prove that debits equal credits Produce trial balance: a list of ledger account balances to prove that debits equal credits Produce financial statements Produce financial statements General ledger (G/L) processes

Monash University, SIMS, Semester One, Double entry bookkeeping: the practice of recording equal credits and debits for every business transaction Double entry bookkeeping: the practice of recording equal credits and debits for every business transaction Importance of a clear audit trail: Importance of a clear audit trail: begin with G/L, trace an account entry to its subsidiary journal (e.g. sales journal), totals in the journal can be traced to daily batch balance totals, and individual transactions traced to customer orders etc. begin with G/L, trace an account entry to its subsidiary journal (e.g. sales journal), totals in the journal can be traced to daily batch balance totals, and individual transactions traced to customer orders etc. Business records

Monash University, SIMS, Semester One, Reference HOFFER, J.A., GEORGE, J.F. and VALACICH (2005) 4th ed., Modern Systems Analysis and Design, Benjamin/Cummings, Massachusetts. Chapter 4