REAL TIME ACCOUNTING SYSTEM Essay Example

REAL TIME ACCOUNTING SYSTEMS 8

REAL TIME ACCOUNTING SYSTEM

Real-time reporting in accounting

Conventional periodic reporting is quickly being replaced by real time accounting since the rapid changes in the market is demanding for more updated information. High competition levels among companies requires the management to rapidly adapt to business opportunities and address problems and therefore the companies can not rely on the traditional periodic reporting based on annual or quarterly periods (Burstein, Brezillon & Zaslavsky, 2011: p 619). Real time accounting rescues information that is stored in different accounting system by reducing the time lag between when transactions are entered in to the systems and when they are accessible to add value to the decision-support processes by the management (Deshmukh, 2006: p 289). As the demands for different views of management information and pace of the business increase, many conventional accounting systems are left behind therefore blocking the way for corporate information consumers (Mitchell, 2015: p 99). Accounting soft ware vendors are developing real time accounting systems to address these problems.

Real time accounting is supported by technologies such as business process management, business intelligence, mobile devices, enterprise application integration, cloud computing, and enterprise architecture (Ross, 2015: p 817). Mobile phones and devices allow users to instantly send and receive reports at any given time or place. Business process management facilitates real time monitoring of business processes that relay financial or non-financial information from the operations of the business to the management. Cloud computing allows immediate sharing of information among users within and outside the company that require the information to make informed business decisions. Business intelligence facilitates generation and delivery of relevant and more focused information of the business operations the managerial team to help in making long term plans as well optimization of event driven, daily business operations. enterprise architecture and application integration structures and integrates different systems and their data to facilitate real time reporting with added value to internal and external users (Hugos & Hulitzky, 2011: p 111).

Real time accounting helps to provide exceptional reporting with event driven notifications even before certain business conditions take place. Real time accounting makes sure that useful information is available to the users as soon as possible to help in supporting high quality and fast decision making to wide range of users (Gelinas, Dull & Wheeler, 2012: p 329).

Roles played by data in developing real-time reporting in accounting

Data collection is an important reason why companies collect data in the real time accounting software in order to prepare financial report used to make budgets, forecast as well as aid in other decision making processes. Financial statements and reports are crucial for communication with investors and banks that play a vital role in the growth of capital through equity or debt financing. Accounting software has financial controls such as dividing responsibilities, reconciliations, and following the GAAP standards of accounting principles that are implemented to prevent fraud and theft as well as work towards compliance (Advances in Applied Economics, Business and Development: International Symposium, ISAEBD, 2011: p 159). The system ensures that procedures to financial controls are set up and managed to prevent errors.

A company is keen to maintain great working relationships with vendors in order to ensure that the suppliers are paid on time. The accounting department also pinpoints opportunities to save many in order to accrue as much savings as it can by determining if there are any incentives or discounts available for making payments to particular vendors more quickly. A real time accounting system schedules account payable to ensure that the least amount of funds makes its way out of the company and ensure timely payments to prevent incurring late payment charges. The accounting department also tracks and accounts for account receivable which includes any necessary collection actions and outstanding invoices (Augusta da Conceiçô et.al., 2016: p 315). The real time processing systems creates and tracks invoices and has a friendly system of reminders to ensure that the customers pay their invoices on time.

A real time accounting system has pay roll function, which ensures that all employees of the company on a regular salary are accurately paid and that they are paid in time. This accounting system has a tax function that assesses tax and makes sure that the company pays tax on time to federal and state government agencies to prevent the firm from incurring tax penalties (Gelinas, 2014: p 8).

Data plays a critical role in developing a real time accounting system. The system generates a new purchase order for inventory replenishment and sends the order acknowledgement to the customers through electronic mail. In addition, the system sends a notification of the credit limit update to the client via email. The accounting system has provision where the authorized users within the company can insert, update, and delete triggers that act as information that is used to generate notifications or initiate workflows (Hall, 2013: p 539). When a person inserts a new order, the systems sends an email message to alert the credit control personnel if the order causes the client to come within 10 percent of the credit limit, the order causes inventory balance to decline within 10 percent of the re order level, or the customer records is flagged for further email communication. If the person wants to update his credit limit, orders on hold are released because of the previous credit restriction if the customer has an order on hold when the credit limit was updated, or the customer was flagged for email communication. A GL account is deleted is the system records an attempt by the user to delete an account in the special audit table and informs the system manager by email that attempt to delete the account was made if delete fails integrity checks and is prevented (Heagy & Lehmann, 2011: p 175).

The real time accounting system has a scheduled stored procedure for every two hours, day, fiscal period, and fiscal year. The system checks inventory balances for goods within the 10 percent of reorder level, creates new unapproved purchase orders for replenishment, and informs the procurement manager by email of new orders that require approval after every two hours. At the end of a business day, the scheduled processes prevents operators from entering new transactions and creates daily balances for all accounts (Simkin, Rose & Norman, 2015: p 411). The system also distributes accounting daily reports to all managers through emails.

At the end of a fiscal period, the system changes the current system period to the next fiscal period, creates balances for all accounts, distributes financial statements to selected managers through emails, and replicates data from the fiscal period to the headquarters database. At the end of the fiscal year, the real time accounting system calculates the company’s retained earnings, copies actual from that year into the next year’s budget and includes a 10 percent uplift, sends an email to selected managers that brings to light expense and income accounts that went up or down by 50 percent (Hall, 2013: p 580).

Roles played by Business Process Management (BPM) in establishing internal controls

A BPMS improves internal controls by determining a company’s business process rules to establish the appropriate person to perform a specific task and authorizes that individual to carry out the task. Real time accounting is process-based system where access is granted to a user only to specific activity types. When access is granted to a user using parameters such as amount of money, the system developer includes expensive and complex authorization restrictions (FGIT & Kim, 2010: p 192).

BPMS improves separation of duties by reducing costs and delays by automatically transferring items that require approval to a manager. Event based systems have lengthy procedures for obtaining approval of the management which also adds to the cost structure of the firm (Information Systems Audit and Control Association, 2010: p 9). A BPMS allows a manager to scrutinize and authorize an electronic form and forward it to the next step in the process. A BPMS has many innovative authorization mechanisms such as delegation of authority to other managers as well as creation of a group of managers to reduce problems when the responsible managers are unavailable or overburdened with work (Markovic, 2009: p 20).

A BPMS strengthens application controls through a proactive process management approach that eliminates problems likely to arise in event-based systems such as when an action is not taken, duplication of an action, or when the wrong action is taken. An event-based system allows users to identify what actions to be performed such as billing a client when goods are delivered. However, in a BPMS, users do not establish which action is correct or whether or not to take an action (Biegelman & Bartow, 2012: p 23). Instead, the BPMS uses the rules of the company to decide what action takes place, forwards the task to the right person on the task list who receives an email notification, and he executes the task. this approach prevents users from performing a different action, prevents circumvention of procedures, prevents removal of tasks on the task list before they are performed, and sends reminders to the assigned person on the task list until the task is completed.

BPMS has a built in trail of process tracking and monitoring systems which records and links all process steps and actions in the order in which they take place in a process log. Process monitoring and tracking systems makes it easier to keep track of everything that takes place in the company and helps an auditor to continually audit business process when they are active and there after (Gupta & Sharman, 2012: p 387).

References

Advances in Applied Economics, Business and Development: International Symposium, ISAEBD 2011, Dalian, China, August 6-7, 2011, Proceedings, Part II. (2011). Berlin, Heidelberg: Springer-Verlag GmbH Berlin Heidelberg. 159

Augusta da Conceiçô Santos Ferreira,, Oliveira, J. S., Marques, R. P. F., & Graça Maria do Carmo Azevedo,. (2016). Global perspectives on risk management and accounting in the public sector. 315

Biegelman, M. T., & Bartow, J. T. (2012). Executive roadmap to fraud prevention and internal control: Creating a culture of compliance. Hoboken, N.J: Wiley. 23

Burstein, F., Brezillon, P., & Zaslavsky, A. (2011). Supporting real time decision-making: The role of context in decision support on the move. New York: Springer. 619

Deshmukh, A. (2006). Digital accounting: The effects of the Internet and ERP on accounting. Hershey, PA: IRM Press. 289

FGIT (Conference), & Kim, T. (2010). Future generation information technology: Second international conference, FGIT 2010, Jeju Island, Korea, December 13-15, 2010 : proceedings. Berlin: Springer. 192

Gelinas, U. J. (2014). Accounting information systems. 8

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Gelinas, U. J., Dull, R. B., & Wheeler, P. R. (2012). Accounting information systems. Mason, OH: South-Western/Cengage Learning. 329

Gupta, M., Walp, J., & Sharman, R. (2012). Strategic and practical approaches for information security governance: Technologies and applied solutions. Hershey, PA: Information Science Reference. 387

Hall, J. A. (2013). Accounting information systems. Mason, OH: South-Western Cengage Learning. 539

Heagy, C. D., & Lehmann, C. M. (2011). Accounting information systems: A practitioner emphasis. Australia: Cengage Learning. 175

Hugos, M. H., & Hulitzky, D. (2011). Business in the cloud: What every business needs to know about cloud computing. Hoboken, N.J: Wiley. 111

Information Systems Audit and Control Association. (2010). Monitoring internal control systems and IT: A primer for business executives, managers and auditors on how to embrace and advance best practices. Rolling Meadows, IL: ISACA. 9

Markovic, I. (2009). Semantic business process modeling. Karlsruhe: KIT Scientific Publ.

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Mitchell, J. S. (2015). Operational excellence: Journey to creating sustainable value. 99

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Ross, D. F. (2015). Distribution planning and control: Managing in the era of supply chain management. 817

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Simkin, M. G., Rose, J. M., & Norman, C. S. (2015). Core concepts of accounting information systems. 411

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