Do Not Forget about Your Accounting Information System

Accounting information system is one of the first things a business must think about. Without an adequate information system, the company would soon find themselves in chaos.

Many fail to realize that they need an accounting information system and the importance it plays in the success of their ventures. An information system is the same as an accounting information system.

We usually do not make a distinction between the two. So what is it? It is a way to organize and bring order to data that would otherwise be useless to the users.

In other words, you transform raw data into information that can then be used to make important decisions that impact the company and all the stakeholders. How would you know which merchandise has the highest profits if you cannot compare the data?

What about knowing what models to carry on-hand and which ones to get rid of? All these decisions require information vital to cutting costs and improving profits.

Little more detail on information systems

Imagine that you are trying to get your business started. You have to somehow keep track of inventory, accounts receivables, liabilities, and almost an endless amount of things. Without having an adequate accounting information system, you are surely likely to fail.

If you are a manager or the owner, you will want to know how to acquire capital, equipment, inventory, etc. On top of that, each one of these processes is going to require multiple key decisions.

These decisions would include knowing how much capital to acquire, how to find investors, what the best terms of borrowing are, etc. And to make these decisions, you will need to have the correct information.

You will need to effectively plan, manage, and control your business. The AIS (Accounting Information System) you use must be able to process data about sales and cash receipts, purchasing and paying for merchandise and services, payroll and tax-related transactions, and acquiring and paying for fixed assets.

These are the general activities a business engages in, and I assume you will require this information at the very least.

Long gone are the days when an accountant could do everything manually. We no longer keep hand written ledgers of accounts or general journals. In today’s fast moving world, we require technology to handle everything to minimize mistakes and improve efficiency, relevance and reliability.

Data Input > Data Processing > Information Output

This is the main idea behind an AIS. Data are fed into the system from different sources, and about different activities the business engages in. This data is then processed by the system and converts it into useful information that can then be used to make important decisions such as what geographic locations are lacking in sales, or how much inventory is left in the warehouse.

A good information system can save you money

Did you know that a good information system can make or break your business? Toyota, the world’s largest and most profitable automaker, has used technological advances to get there.

They can produce a higher-quality car at a lower cost than their competitors. Much of this can be contributed to their continuous investments in information technology.

For example, performance monitoring software warns assembly line workers of equipment problems. Workers can stop production to fix those problems right away. This warning system saves the hassle of having to recall vehicles after faulty ones have been already sold.

Information systems can be used to make decisions not only by the management, but also by employees to become more efficient.

So if you are thinking about starting a new business or have an existing one that is slumping, you should start by giving your AIS another look.