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Appendix D

Financial Information Systems

MANAGEMENT INFORMATION SYSTEMS 8/E

Raymond McLeod, Jr and Geor!e Sc"e##

Copyright 2001 Prentice-Hall, Inc.D-1


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Users of Financial InformationUsers of Financial Information

Internal usersInternal users

!anagers!anagers

"onmanagers"onmanagers #n$ironmental users#n$ironmental users

%hose &ith 'irect (usiness relationships%hose &ith 'irect (usiness relationships

%hose &ith no 'irect relationships%hose &ith no 'irect relationships

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Financial Information SystemsFinancial Information Systems

C)IS su(system that pro$i'es information toC)IS su(system that pro$i'es information to

persons an' groups (oth insi'e an' outsi'e thepersons an' groups (oth insi'e an' outsi'e the

firm concerning the firm*s financial mattersfirm concerning the firm*s financial matters

Information typeInformation typePerio'ic an' special reportsPerio'ic an' special reports

+esults of mathematical simulations+esults of mathematical simulations

#lectronic communications#lectronic communications'$ice of epert systems'$ice of epert systems

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Database

Accounting

information

system

Internal

audit

subsystem

Financial

intelligence

subsystem

Forecastingsubsystem

Fundsmanagement

subsystem

Control

subsystem

Internal sources

Environmental

sources

Input

subsystems

Output

subsystems

Users

Data Information

A Model of a Financial Information SystemA Model of a Financial Information System

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Prewritten Financial SoftwarePrewritten Financial Software

!ore pre&ritten soft&are eists for the!ore pre&ritten soft&are eists for the

financial area than any otherfinancial area than any other

!ost is accounting in nature!ost is accounting in nature

)oth general (usiness an' personal)oth general (usiness an' personal

pro'ucti$ity soft&arepro'ucti$ity soft&are

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Accounting Information SubsystemAccounting Information Subsystem

%he foun'ation upon &hich all information-%he foun'ation upon &hich all information-

oriente' C)IS are (uiltoriente' C)IS are (uilt

ho 'i' &hatho 'i' &hathenhen

herehere

Ho& muchHo& much

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Internal Audit SubsystemInternal Audit Subsystem

InternalInternal

u'it committeeu'it committee

4 Pro(a(ly inclu'es the CF5Pro(a(ly inclu'es the CF54 Director of internal au'itingDirector of internal au'iting

#ternal au'itors#ternal au'itors

Importance of o(6ecti$ityImportance of o(6ecti$ity

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$"ie%

Exec&'i(e

O%%icer

Direc'or o%

In'erna#

A&di'in!

In'erna#

A&di'in!

Depar'men'

A&di' $ommi''ee

)oard o% Direc'or*

Position of

Internal Auditing

in a Firm

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Types of Auditing ActivityTypes of Auditing Activity

Financial au'itingFinancial au'iting

5perational au'iting5perational au'iting

'e9uacy of controls'e9uacy of controls

#fficiency#fficiency

Compliance &ith company policyCompliance &ith company policy

Concurrent au'itingConcurrent au'iting

Internal control systems 'esignInternal control systems 'esign

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Internal Auditor as a Member ofInternal Auditor as a Member of

the CIS Teamthe CIS Team

+e9uire' ;no&le'ge an' s;ills of au'itors+e9uire' ;no&le'ge an' s;ills of au'itors

"ot al&ays accounting-relate'"ot al&ays accounting-relate' Senior management attitu'e ma;es aSenior management attitu'e ma;es a

'ifference'ifference

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1%1%

10%10%

0%0%

100%100%

!00%!00%

1"00%1"00%

000%000%

#e$uirements#e$uirements

DesignDesign

DevelopmentDevelopment

odule testingodule testing

Integrated testingIntegrated testing

ImplementationImplementation

Operation&maintenanceOperation&maintenance

Conceptuali'ationConceptuali'ation#elativeCost

of

#elativeCost

of

Fi(ingaDefec

t

Fi(ingaDefect

!scalating Cost of Correcting "esign !rrors!scalating Cost of Correcting "esign !rrors

as the S"#C Progressesas the S"#C Progresses

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Financial Intelligence SubsystemFinancial Intelligence Subsystem

+epresents the firm in esta(lishing t&o-&ay+epresents the firm in esta(lishing t&o-&ay

lin;s &ith


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Financial IntelligenceFinancial Intelligence

Subsystem $cont%&Subsystem $cont%&

Financial community-Financial community-

In'irect influence from theIn'irect influence from the

go$ernmentgo$ernmentSources of financial intelligence


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Forecasting SubsystemForecasting Subsystem

5ne of the ol'est mathematical acti$ities in (usiness5ne of the ol'est mathematical acti$ities in (usiness +ely on past 'ata+ely on past 'ata

!a;e semistructure' 'ecisions!a;e semistructure' 'ecisions

Cannot (e perfectCannot (e perfect

Short-term forecastsShort-term forecasts

5ne to three years5ne to three years

!ay (e 'one (y mar;eting!ay (e 'one (y mar;eting

>ong-term forecasts>ong-term forecasts ?sually 'one (y finance, or special planning group?sually 'one (y finance, or special planning group

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Forecasting MethodsForecasting Methods

"on9uantitati$e @9ualitati$eA"on9uantitati$e @9ualitati$eA

Panel consensusPanel consensus

Delphi metho'Delphi metho' #lectronic meeting system @#!SA help#lectronic meeting system @#!SA help

com(ine non9uantitati$e an' 9uantitati$ecom(ine non9uantitati$e an' 9uantitati$e

metho'smetho's

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Forecasting Methods $cont%&Forecasting Methods $cont%&

=uantitati$e forecasting metho's=uantitati$e forecasting metho's

+egression analysis is 'ominant+egression analysis is 'ominant

+elate' metho's are a$aila(le+elate' metho's are a$aila(le!any soft&are pac;ages use'!any soft&are pac;ages use'

4 !inita(!inita(

4 IDID4 SSSS

4 SPSSSPSS

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Sales Forecast Using SAS

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Using the 'umber ofUsing the 'umber of

Salespersons to Pro(ect SalesSalespersons to Pro(ect Sales

0

1

2

34

5 10 15 20 25 30 35

.

. .

.

Sales prediction

S a

l e s

i

n

t h

o u s a n d

s

o f

u n

i t

s

Number of salespersons

Regr

ession

line

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Sales Forecast Produced by SAS

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Sales Forecast "ataSales Forecast "ata

1 " )0

" "* )0

+ +1 ! ,0

", ! 100

! ++ - 100

- +) * 110

* +* ) 1"0

) 0 ) 100

, ! , ,0

10 , 10 100

.ales Advertising /rice #atio.ales Advertising /rice #atio

ear 2 3"2 3+2ear 2 3"2 3+2

4istorical Data4istorical Data

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Funds Management SubsystemFunds Management Subsystem

!anage to achie$e!anage to achie$e+e$enue flo& inflo& ecee's epense outflo&+e$enue flo& inflo& ecee's epense outflo&

!aintain sta(ility!aintain sta(ility

Cash flo& mo'elsCash flo& mo'els

Performs cash flo& analysisPerforms cash flo& analysis

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Unbalanced Cash Flow !)ampleUnbalanced Cash Flow !)ample

Do##ar*+m

i##ion*,

.ales anufacturing e(pensesar5eting and administration

e(penses

0

0.1

0.2

0.

0./

0.

0.3

0.7

0.8

0.:

1

1.1

1.2

Ban Fe( !ar pr !ay Bun Bul ug Sep 5ct "o$ Dec

Mon'"*D-22

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"elaying Supplier Payments !liminates"elaying Supplier Payments !liminates

Months of 'egative Sales *evenueMonths of 'egative Sales *evenue

Do##ar*+mi##ion*,

.ales anufacturing e(penses ar5eting and administratione(penses

0

0.1

0.2

0.

0./

0.0.3

0.7

0.8

0.:

1

1.1

1.2

Ban Fe( !ar pr !ay Bun Bul ug Sep 5ct "o$ Dec

Mon'"*

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Control SubsystemControl Subsystem

5perating (u'get for the fiscal year5perating (u'get for the fiscal year

%hree approaches%hree approaches

1.1.%op-'o&n%op-'o&n

2.2.)ottom-up)ottom-up

..Participati$eParticipati$e

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+%

,%

-%

.%

Final organi'ational

budget

/%

The udgeting

Process

Forecasting model

.ales forecast

6op

management

#esource planning

model

4uman resource

re$uirementsFinance

re$uirements

anufacturing

re$uirements

ar5eting

re$uirements

Finance

manager

4uman

resource

manager

Information

services

manager

anufacturing

manager

ar5eting

manager

#e$uested

finance

budget

#e$uested

7uman

resources

budget

#e$uested

information

services budget

#e$uested

manufacturing

budget

#e$uested

mar5eting

budget

Approved salesforecast

6op

management

Information services

re$uirements

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8UD9E6 #E/O#6

A. OF :A;UA# +1 ID+I#S 2,00 22,000 1,00- :,000 /,20 /,70-

%+#> 8,20 :,000 70E 2,00 28,100 /,300E

#"%#+%I"!#"% 1,/00 1,3 2E /,200 ,100 :00E

%#>#PH5"# 200 8 11E 300 22 7E

+#"% 0 1,30 1,30 0

F?+"I%?+# 0 0 0 /20 0 8E

S?PP>I#S 32 /10 21- 1,87 1,20 -

!ISC. /00 320 220E 1,200 1,:3 73E

%5%> /,:10 /,28 32- :2,/00 :,070 370E

!)ample udget *eport

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Performance *atiosPerformance *atios

current assetsCurrent ratio =

current liabilities

cost of goodsInventory turnover ratio =

average inventor

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Users of Financial Information SystemUsers of Financial Information System

Vice-president of nance X X XOther executives X X X

Controer X X X!ana"er of accountin" X!ana"er of nancia pannin" X X#irector of $ud"ets XOther functiona %ana"ers X X X

Subsystem Funds User Forecasting Management

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SummarySummary Financial information systems pro$i'e a &i'e range ofFinancial information systems pro$i'e a &i'e range of

information for (oth managers an' intereste' eternal peopleinformation for (oth managers an' intereste' eternal people ?ses inclu'e

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