Financial Information System free essay sample

A financial information system (FIS) accumulates and analyzes financial data used for optimal financial planning and forecasting decisions and outcomes. FIS is used in conjunction with a decision support system, and it helps a firm attain its financial objectives because they use a minimal amount of resources relative to a predetermined margin of safety. FIS can be thought of as a financial planner for electronic commerce that can also produce large amounts of market and financial data at once obtained from financial databases worldwide. Financial data analysis may be conducted through trend evaluations, ratio analyses and financial planning modeling. Data outputs that are produced by FIS can include operating and capital budgets, working capital reports, accounting reports and cash flow forecasts. The predictive analytics included in these applications may also narrow down exactly what could be expected from a business interaction or transaction that has yet to take place. The management of financial information in an e-commerce business is paramount in order to gain maximum operating results in the shortest amount of time. An FIS can also yield huge amounts of data for daily business operations. Financial markets traders and salespeople have the greatest demand for FIS because they work in very fast environments and their on-demand computing systems must keep up with real-time activities in order to allow these professionals to operate in real time. Broker investigating, investment and trade data along with fiscal asset classes can be relayed through an FIS. This also works for smaller businesses that need to obtain financial data about local markets. FIS is a form of real-time operating system that works to enhance financial information exchanges. Term for a system that accumulates and analyzes financial data in order to make good financial management decisions in running the business. The basic objective of the financial information system is to meet the firms financial obligations as they come due, using the minimal amount of financial resources consistent with an established margin of safety. Outputs generated by the system include accounting reports, operating and capital budgets, working capital reports, cash flow forecast, and various what if analysis eports. The evaluation of financial data may be performed through ratio analysis, trend evaluation, and financial planning modeling. Financial planning and forecasting are facilitated if used in conjunction with a DECISION SUPPORT SYSTEM (DSS). Features of FIS Main Modules Systems typically have three main modules. The financial accounting module records all accounting and financial transactions and produces financial statements. Funds management identifies funding sources and overall spending consistent with budgets. Controlling tracks revenue and expenses for each project or department. Processes and modules within IFIS: The following services and features are available through IFIS * Accounts Payable allows online entry of invoices and maintenance of vendor data. * Budget and Staffing provides input, storage, maintenance, and reporting of budget and staffing data. * Chart of Accounts (COA) provides codes necessary for recording, organizing, and reporting financial information. * Communications defines groups and tracks notices, bulletins, and announcements. Express Order enables online reporting, placement of telephone orders to vendors, and invoice remittances. General Accounting encompasses fund accounting, chart of accounts, system table maintenance and update, and grants and contract accounting. * Person/ Entity records and maintains basic information on individuals and entities such as vendors, third parties, and institutions. * Purchasing facilitates buying activities, such as requests for goods and services, and online ordering and buying. * Security maintains all IFIS security activities. * Travel enables online reporting and maintenance of travel accounting. * Utilities contain additional table maintenance and system features used throughout IFIS. Availability Major global software providers such as Oracle and SAP develop and sell financial information systems. Increasingly, systems are available as Internet-based applications that need not be installed on company servers. Cost Systems are not cheap. Costs include the initial software license, system installation and integration, annual maintenance contracts for support and upgrades, and staff training on system features and use. Implementation Systems need to be integrated with other business applications such as Human Resources modules on pay and benefits. Therefore, businesses often hire integration specialists. System deployment and integration is complex and time consuming, and raises overall cost Benefits A financial information system is not suitable for everyone. Due to its complexity and cost, it is better suited for medium- and large-sized organizations. Types of FIS Accounting Software Business size and needs determine the type of account software needed. A basic accounting software program can assist a business with invoicing and financial statement reporting but is limited for complex organizations, particularly ones with overseas operations. A sophisticated accounting program can incorporate sales, audit, treasury (cash management), inventory tracking and other functions. For a company with overseas operations, a sophisticated financial information system can integrate various parts of the business operations, taking into account currency conversion. Mid-Market A company needs great enhanced financial information as it becomes larger and more complex. Accounting functionality is usually bundled in a robust software package as part of an enterprise resource planning (ERP) program. ERP software combines all processes and data used by a business into a single system. A mid-market ERP program can accommodate a business with 10 to 100 employees and revenue of $10 to $50 million. Mid-market ERP software offers database capabilities and better analytics. An example of a mid-market ERP program is SAP Business One. A mid-market ERP program can cost a company as much as $75,000 as of 2011. High-End Systems Companies such as IBM utilize high-end ERP software to handle their vast operations. Examples of high-end ERP vendors include SAP, PeopleSoft, Great Plains and Oracle. A high-end financial information system can cost as much as $500,000 as of 2011 and, depending on business needs, can run into the millions of dollars. Vertical Vertical financial information systems are often proprietary in nature so no two systems are alike, even for companies within the same industry. For example, a bank can use vertical accounting software to analyze profitability by specific banking product and identify profitability by branch location. Considerations Before considering a financial information system, perform a cost-benefit analysis. You must not only account for cost but how the system should fit your business needs and whether it can grow with your business. You also have to consider implementation time, training and customer support. System Complexity * FIS is far more complex, but more dynamic, than the current FRS system. * Transactions flow through multiple modules * User training is critical and will be required to fully utilize the system. Background Current hardware based on IBM mainframe * Old technology * Expensive to maintain (Maintenance and repair parts) New System is Oracle Based * Very Robust, Modular System * Web based access Enhanced ability to encumber funds * Enhanced capabilities and future growth * Enhanced ad-hoc reporting with access to University Wide data What Are the Benefits of Financial Information Systems? A financial information system (FIS) is charged with monitoring finances within an organization or business. It takes complex data and processes it into specialized reports, saving time and effort in dealing with business accounting. While financial information systems have many benefits, it should be noted that having an FIS in place can be costly and usually requires training for those people operating the system. Accounting The center of a financial information system will be found in accounting. This area looks at the overall financial picture of a project, business or individual, incorporating both accounts payable and accounts receivable. The larger the project, the more beneficial a financial information system becomes. While an advanced system might not be necessary for an individual financial account, an organizations finances can be tracked through a financial information system. Funds Another benefit to having a financial information system in place is seen with funding. The FIS examines where funds are coming in and where funds are going out. Unlike accounting, however, FIS can make use of rigid budget controls. This enables a user to quickly identify whether or not a financial situation is developing. If funding has been designated for Maintenance for $200,000 and several servers go down and require immediate repair in the amount of $215,000, the FIS program will indicate that funding has gone over budget and will require changes to be made to the budget. Reporting Reporting is another benefit to having an FIS in place. By allowing users to examine reports on any aspect of the financial data, it assists in keeping track of past expenses, as well as projecting future expenses. In addition, it helps identify different departments and divisions that consistently go over budget, as well as which departments operate within their budget, and even which departments actually come in under budget. Specialization Specialized financial information systems are available, ranging from those designed for stock brokers and traders to medical institutions. Financial information systems used in stocks and bonds are designed to provide near-instant financial market data, projecting trends, keeping track of stock sales, and generally gathering and disseminating stock market data as quickly as possible. A medical FIS would contain patient information as it relates to payment costs for insurance purposes, as well as an extensive database of insurance claims, insurance payouts and anything else related to a medical offices finances. The Disadvantages of Accounting Information Systems Learning the System Learning an accounting information system can often be difficult and time-consuming. Individuals must be trained on a system, and this can cause a disadvantage to companies in terms of time and manpower. An accounting information system is made up of many different components, and almost all systems are computerized. Because of their complexity, some people may find them hard to use. It can take weeks or months for a person to understand an accounting system, and usually the individual still does not understand completely what the system is capable of. If the employee quits working at the organization, it can take weeks or months, once again, to train another employee. Loss of Information Accounting information systems are usually computerized. Because of this, there is always a risk of losing information through power outages or system crashes. When this happens, there is a chance that all the information in the system could be lost. Companies take precautions for this problem by backing up their files regularly and performing standard maintenance on all computer systems. They also install anti-virus software as another precaution. Still, none of these steps eliminates the potential problem that may occur. Accounting information systems store a companys financial information for years. If a system crash occurs, it causes a major disadvantage to the company. All, or some, information is lost, and theres a chance it may never be recovered. Re-evaluation Companies often change their way of doing business to keep up with the latest trends. To keep up in a demanding business world, these changes may impact an accounting system. An accounting information system is difficult to set up because every company is unique in its own way. In order to keep up with changes, accounting information systems must be re-evaluated often. Changes often need to be made in a system in order to process information efficiently. This can be a disadvantage to companies because it takes time for the re-evaluation, and it costs money.