1 California State University, Fullerton Chapter 10 Business Operations

2 California State University, Fullerton Increasing Business Operations Efficiency To be competitive today, most businesses require some form of computer information system for their basic operations.

3 California State University, Fullerton Transaction Processing Systems The main type of information system used for operational support in a business is the transaction processing system (TPS).

4 California State University, Fullerton Transaction Processing System Structure Three elements of a Transaction Processing System (TPS): 1.Process transactions that affect these records. 2.Keep records about the state of the organization. 3.Produce outputs that report on transactions that have occurred, that report on the state of the organization, and that cause other transactions to occur.

5 California State University, Fullerton Transaction Processing System Functions TPS consist of four main functions to accomplish their purposes. They are: 1.Input function 2.Storage function 3.Processing function 4.Output function

6 California State University, Fullerton Input Function Before transaction data can be brought into a transaction processing system, it must be acquired from its source – a step called data capture. Data is often captured from a source document. Data once captured, it is put into the system – a step called data entry.

7 California State University, Fullerton Input Function (cont’d.) As data is entered into the system, a program must check it for errors, a step called data validation.

8 California State University, Fullerton Storage Function Data in a transaction processing system is stored in data files and databases. Two types of data commonly found in transaction processing systems: 1.Master data – is the data that is maintained by the system. 2.Transaction data – is data about the transactions that have occurred. Transaction data is used to update master data.

9 California State University, Fullerton Processing Function Processing involves manipulating data within the system. Two operations in the processing function: Computation – doing calculations with data. Decision making (logical operations) – checking a condition that causes processing to continue in different ways depending on the result of the decision.

10 California State University, Fullerton Output Function Output from a transaction processing system can be displayed on a screen or printed on paper. Two types of reports 1.Periodical report – is produced periodically 1.Detail report – lists detailed information 2.Summary report – contains summarized information 2.Exception report – is produced when an exception to nom occurs

11 California State University, Fullerton Controlling Transaction Processing Systems Procedures to ensure the completeness of the data processing and to minimize the chance of error are called controls. They include: Control Totals Batch Totals Hash Totals Audit Trails Backup and Recovery Procedures

12 California State University, Fullerton Control Totals A control total is a number that is computed when data enters a system and then computed again after the system has processed the data.

13 California State University, Fullerton Audit Trails An audit trail is a way of tracing the origin of data through a system. A good audit trail is one in which someone can start with the output and go back through the system to the source document, or vice versa.

14 California State University, Fullerton Backup and Recovery Procedures Backing up means that the data is copied periodically to another storage media. Recovery means that the backup copy of the data can be used to re-create the original data stored on the system. Without adequate backup and recovery procedures, there is a great risk of losing data permanently.

15 California State University, Fullerton Processing Data in Transaction Processing Systems Two basic approaches to processing data in a transaction processing system: 1.Batch Processing (BP) – transactions to be processed are prepared in a form understandable by the computer before actual processing begins. 2.On-Line Transaction Processing (OLTP) – transactions are processed and the related master files are update immediately as the transaction data is entered.

16 California State University, Fullerton Basic Business Information Systems Eight basic information processing activities: 1.Entering customer orders 2.Billing customers 3.Collecting customer payments 4.Keeping track of inventory 5.Purchasing stock and materials 6.Paying bills 7.Paying employees 8.Reporting financial information

17 California State University, Fullerton Entering Customer Orders An order entry system permits entry of customer orders for goods and services and prepares the orders in a form that can be used by the business.

18 California State University, Fullerton Entering Customer Orders (cont’d.) Once orders are entered, the following questions must be answered: Does the business have sufficient inventory to fill the order? Should the business extend credit to this customer or require that the customer pay in advance?

19 California State University, Fullerton Billing Customers The purpose of a billing system is to prepare the customer’s bill or invoice. To prepare the invoice from the sales order data, two types of master data are required: 1.Customer master data 2.Inventory master data

20 California State University, Fullerton Collecting Customer Payments The accounts receivable system is used: To keep track of money owed To the business by its customers To record customer payments for invoices. To produce the outputs, two types of stored data are used: 1.Accounts receivable data 2.Customer master data

21 California State University, Fullerton Keeping Track of Inventory The inventory control system is used: To keep track of the business’s inventory To indicate when inventory should be reordered To compute the value of the inventory. The stored data needed in this system is the inventory master data.

22 California State University, Fullerton Purchasing Stock and Materials The purchasing system is used: To determine the best suppliers (also called vendors) from which to purchase items. To Prepare documents, called purchase orders, which indicate to the supplier what items are wanted.

23 California State University, Fullerton Purchasing Stock and Materials (cont’d.) To prepare the purchase order, two types of information are required: 1.Inventory master data 2.Supplier master data

24 California State University, Fullerton Paying Bills The accounts payable system is used: To keep track of money owed by the business for purchases To pay suppliers for items purchased To provide reports of accounts payable to other functions of the business.

25 California State University, Fullerton Paying Bills (cont’d.) To produce the outputs, two types of stored data are used: 1.Accounts payable data 2.Supplier master data

26 California State University, Fullerton Paying Employees The payroll system is used: To prepare paychecks for employees To provide reports of payroll To produce the outputs two types of data are required: 1.Employee work data 2.Employee master data

27 California State University, Fullerton Reporting Financial Information The general ledger system is used: To maintain the business’s financial accounts To prepare financial statements To produce the financial statements, the general ledger system uses: General ledger data

28 California State University, Fullerton Accounting Information Systems Accounting Information Systems (AIS) support the accounting function. Several commonly used AIS systems are: Fixed asset accounting Budgeting Tax accounting

29 California State University, Fullerton Financial Information Systems Financial information systems provide necessary support for the finance function. Some common financial information systems include: Cash management Capital expenditure analysis Financial forecasting Portfolio (investment) management Credit analysis

30 California State University, Fullerton Marketing Information Systems Marketing information systems assist in the marketing function. Common marketing information systems include: Sales analysis Sales forecasting Marketing research Direct mail advertising Electronic commerce Sales force automation or Customer Relationship Management (CRM).

31 California State University, Fullerton Manufacturing Information Systems Manufacturing information systems provide services to support the manufacturing function. Some common manufacturing information systems include: Production scheduling Materials Requirements Planning (MRP) Manufacturing Resource Planning (MRPII)

32 California State University, Fullerton Manufacturing Information Systems (cont’d.) Just-In-Time (JIT) Computer-Aided Design (CAD) Computer-Aided Manufacturing (CAM) Robotics Computer-Integrated Manufacturing (CIM)

33 California State University, Fullerton Human Resource Information Systems Human Resource Information Systems (HRIS) support the human resource function. Common HRIS include: Performance appraisal Skills inventory Benefits administration Job applicant tracking

34 California State University, Fullerton Enterprise Resource Planning An information system that supports several areas of a business by combining a number of applications with a single database that stores all the data used by the applications.