What is Accounting
Information Management?
Accountable for accounting information management and want some practical suggestions to reduce information management costs?
Every company is required to track income and expenses and compare actual
expenditures with budget projections.
Effective accounting management requires answers to questions such as:
- What is the current financial situation?
- How does the current situation compare with budget
planning;
- What is the status of accounts receivable?
- Is accounts payable incurring late payment charges?
- Are accounts receivables being paid on time?
What are accounts?
Accounting
systems use a chart of accounts as the basic accounting structure. This
structure lists all of the accounts that will be used by the entire
company. A typical chart of accounts includes:
- Balance sheet
accounts, which include accounts for all assets, e.g. buildings,
inventory and accounts receivable, and liabilities e.g. payroll
due, accounts payable, taxes payable; and
- Revenue and expense accounts, which include accounts
for all income and expenditures e.g. sales, raw materials purchased.
Appropriate accounts are usually assigned to various departments or
divisions within a company e.g.
- A sales
department might have revenue and expense accounts but would not
necessarily have any expense accounts related to manufacturing or
inventory control because they are not involved in those activities; or
- Some balance sheet accounts are only allocated to
corporate wide administration.
What are accounting
transactions?
Accounting transactions are usually classified as:
- Internal, and include transactions for things like:
- Depreciation;
- Amortization;
- Inventory shrinkage;
- External, and include transactions for things like:
- Disbursements; and
- Receipts.
What are budgets?
Budgets
may be created by any of the company departments or divisions. Key
information that is required to manage budgeting include:
- Who made the budget;
- When was it made;
- What review process was followed;
- What accounts are included in the budget; and
- What is the budget status?
Where do accounting
transactions come from?
Transactions occur daily in each of the company management information
systems and need to be posted to the general ledger e.g.
- Shipments will replenish or deplete product inventory
accounts;
- Invoice billing will increase accounts receivable
accounts; and
- Invoice payments will decrease these accounts.
What are some accounting
information challenges?
Companies
need to ensure that all transactions are recorded precisely in the
general ledger so that accurate financial statements can be produced
for the board of directors and other stakeholders.
This requires
that transactions, which occur in source systems, be transferred to the
general ledger system in a manner that ensures:
- No data loss e.g. all transactions are sent to the
general ledgers; and
- No data change, e.g. the exact quantities and amounts
are sent to the general ledger.
How can we maintain
accounting information integrity?
Maintaining
accounting data in a variety of individual databases is less efficient
than storing it in one database and having all applications access the
data as needed. Alternate options to individual systems include:
- Enterprise resource
planning (ERP),
many companies have invested in ERP systems, which handle most of the
time and material reporting functions and other business functions such
as inventory management and billing management.
ERP should be evaluated to
ensure that they meet business information management requirements.
- Redesign,
some companies have made investments in an enterprise data model and
new management information systems to access common data. This option
is not as costly as it might appear since much of the analysis work
will be required even if an ERP option is selected. Companies should
complete a cost benefit analysis to compare the cost of re-design with
the cost of ERP.
- Master data
management (MDM) is becoming a common, but expensive, means of
ensuring synchronization of key data among applications.
Companies should complete a
cost benefit analysis to compare the cost of MDM with the cost of
re-design or ERP.
Summary…
Accounting information management uses data from many corporate management
information systems and needs to be managed to avoid storing redundant
data.
There are several options for ensuring efficient
information management and these options should be explored to
determine cost benefits on a case-by-case basis.
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