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Financial and Accounting Management Information System

In this tutorial, we will learn about the financial and accounting management information system, its elements, descriptions of elements, etc. By IncludeHelp Last updated : June 01, 2023

An organization's financial structure is small or large and has a great impact on its stable development and long life. The need to use computer-based information systems with centralized, decentralized or distributed networks linking data flows from and to the different departments/branches is greatly felt due to the growing difficulty in the management of financial activities. For decision-makers to make effective and scientific decisions, an efficient mechanism for processing voluminous data for rapid analysis and production is therefore required today. In any organization, data management offers the information required to serve as an efficient and effective decision-making tool. It is worth remembering that most organizations have deployed computerized information systems in organizations. An automated information system’s objective is to frame strategic planning and changing business strategies and their execution by top executives in the company.

Financial and Accounting MIS

As its name implies, financial and accounting MIS is an automated system that process all the financial and accounting-related operations using a computerized system in an organization. A typical Financial and Accounting MIS is used to control the movement of materials and items in the business. In a financial and accounting process, raw materials or parts are turned into finished products and a Financial and Accounting MIS is used at every stage. For managers to make everyday decisions about activities within the organization, a financial MIS offers financial information. These functions are given by the majority of systems:

• Drill down reports
• Integrate financial reports from different sources
• Exception reports
• Provide quick access in a summarized form to financial details
• Enable financial analysis using tools that are easy to use
• Comparison between historical and current financial practices
• Key-indicator reports
• Scheduled reports

In a Financial and Accounting MIS, some of the typical subsystems include design and engineering, financial and accounting planning, inventory management, accounting details, process control, and quality measures.

Fig 1: Financial and Accounting Information System

Financial and Accounting Information System always facilitates business executives to get the automation and incorporation of the computerized processes of public financial management. Its measurable functions are budget formulation, implementation, accounting and reporting, system monitoring, cash/debt management, treasury operations, etc. financial and accounting information system strategies are capable of significantly enhancing the quality and equity of government operations and provide tremendous potential for greater enhancement, openness, and accountability. Whenever financial and accounting information system and other financial management information systems forex - e-procurement, payroll, and debt management are connected to a central data warehouse for tracking and reporting all regular financial transactions, it is possible to refer to integrated financial and accounting information system as providing reliable centralized platforms or financial and accounting information system. The World Bank is the leading provider of financial and accounting information system growth funding and technical assistance.

Elements of a Financial and Accounting Information System

The structure of a Financial and Accounting information system has described below. The key components of the Financial and Accounting information system are as follows -

1. Business Transaction
2. Transaction Processing System
3. Operational database
4. Internal database
5. External Database
6. Database of validation Transactions
7. Financial and Accounting MIS
8. Financial and Accounting Application Database
9. Financial and Accounting
10. Decision Support System
11. Financial and Accounting Executive System

The description of these elements is as follows -

1. Business Transaction - the transaction which occurs at a third party and records in MIS as a historic record so that it can be used for analysis whenever required.
2. Transaction Processing System - A Financial Information System (FIS) is a type of information system called “Financial Processing System (FPS)" that is capable of storing, recording, updating, and retrieving the company’s financial transaction data. Although transaction processing systems must have highly consistent response times, when it comes to trading systems, this is a critical aspect.
3. Operational database - a financial and accounting operational database is a database that is designed to operate or run the day-to-day financial and accounting operations of the business firm. It also has a good potential to serve as an analytic engine, either by dashboards and web-based solutions or by facilitating the integration of analytics into organizational processes.
4. External database - a financial and accounting External database is a database in which internal documents of organizations store. An internal database is a list of one of the company's documents collected from employees by the use of an internet-connected computer. Digital files are made up of decentralized, encrypted data that is not accessible to the public and contains information such as which transactions were made up.
5. Internal Database - a database in which internal records of organizations store. Internal database - a database in which internal records of organizations store. An internal database is a compilation of company financial and accounting data collected by employees using Internet-connected computers.
6. Database of validation transactions - the validations of financial and accounting transaction refers to the accuracy and completeness of the financial and accounting information.
7. Financial and Accounting MIS - the financial information system includes the systematic selection, analysis, interpretation, preservation, and distribution of all of the consumer information that is available to the company.
8. Financial and Accounting DSS - Financial decision support systems is an information system that assists with decision making in the development of a financial strategy.
9. Financial and Accounting ES - Financial executive systems are intended to be used by the senior managers in decisions making.
10. Financial and Accounting Outputs - Financial and Accounting MIS output can be collected in the form of hard copies as well as in computerized form to get fruitful insights.

Overall Financial and Accounting MIS supports Financial and Accounting business activities. These are as follows -

• Design and engineering
• Scheduling Financial and Accounting departments activities
• Quality control
• Financial and Accounting resource planning
• Just-in-time inventory and Financial and Accounting
• Process control
• Computer-integrated Financial and Accounting (CIFA)
• MRP reports
• Quality control and testing