CHAPTER 10

INFORMATION SYSTEM IN

BUSINESS FUNCTIONS

Learning objectives: Understand how processes in different business

functions relate to each other

Understand how ISs of different business functions can support others

Understand how information technology is used in the most common business functions to make business processes more effective and more efficient

Be able to identify areas in business where information technology can facilitate the work of managers and knowledge workers ( such as engineers, designers, and sales representatives)

In an economy that produces and consumes so much information, managers must know how to use information systems in virtually every business activity. Managers must have an overall understanding of all elements of a system, so that they know what options or available to them to control cost, prices, and the uses of resources. None of this activities or the decision making that underlies management is possible without useful information and the best tool to handle this important resource is information technology , which is used in a broad range of business functions across different industries.

None of this activities or the decision making that underlies management is possible without useful information and the best tool to handle this important resource is information technology , which is used in a broad range of business functions across different industries.

EFFECTIVENESS AND EFFIENCY

Effectiveness is the degree to which a task is accomplished. The better one performs a job, the more effective one is. It is measured as the ratio of the output to input. The more output with the same input, or the less input for the same output used in a process, the more efficient the process. ISs can help companies attain more effective and efficient business process.

Productivity is the measure of efficiency of people. ISs have been integrated in to almost every functional area in business. The earliest business ISs were implemented in accounting and payroll because of the routine and structured nature of accounting task. The systems automatically post transactions in the books and automate the generation of reports for management and for legal requirements.

It is often stated that the use of information technology makes our work more effective, more efficient , or both. Effectiveness defines the degree to which a goal is achieve. A system is more or less effective depending upon:

How much of its goal is achieve and The degree to which it brings about

better outcomes than another system.

Efficiency is determined by the relationship between the resources expanded and the benefits gained in achieving a goal.

 

One system is more efficient than another if the cost to operate it are lower for the same or greater quality of the product, or if the quality of the product is greater for the same lower costs. The productivity is commonly used as a synonym for efficiency. It is specifically the efficiency of human resources.

ISs have proven to contribute both to the effectiveness and efficiency of business, specifically when strategically positioned in specific business foundations, such as accounting, finance and engineering, and especially when used to help companies achieve their goal more quickly by facilitating collaborative work. ISs can be used a wide variety of application:

Accounting manual processes to creating innovative products and services; from shortening processes, to placing an organization a strategic position.

Most business do operate many ISs separately: one for engineering, one for marketing , one for finance and so on. This is usually than because systems developed at different times for different business functions are often in compatible in hardware, software, data sharing, and the like.

System thinking tells us that ideally, ISs supporting different functions would be connected so that the information from one system could flow into another accurately and without delay. For example, information resulting from market research could serve formulation of product requirements on one hand the sales force on the other.

Accounting was among the earliest business functions to embrace ISs technology because the routine manner in which transaction are posted and processed. Virtually all of the business in the western world use IT for accounting. General ledger, Accounts Receivable, Accounts Payable, and Cash Flow books conveniently lend themselves to computerization, and balance sheets and profit and lost statements can easily be generated from the records.

Accounting ISs receive records of routine business transactions such as the purchase or raw materials for services, or the sale of manufactured goods – from transaction processing system ( TPSs). The information is later used to produced checks and a check reconciliation program reconcile against the company’s bank account.

Cost Accounting systems, which are used to accumulate data about the cost involve in producing specific products – including the cost of labor , raw materials, and purchase services – make excellent use of ISs to compile data to establish pricing. ISs are also use to help a locate cost to specific work orders.

Accounting ISs are also use extensively for managerial purposes , assisting in organizing queerly and annual divisional and corporate budgets, and time. Effective budget system can be interface with cash management ISs requiring that payments be allocated to appropriate budgetary line items, and that cash receipts be credited to appropriate income budgetary items.

The wide spread use accounting ISs has place new demands on auditors, creating a new specialty called electronic data processing audit (EDP audit) , which ensures that electronic systems comply with standard regulations and acceptable rules and ensures that the systems cannot be manipulated to circumvent this principle.