Financial Information System Essays

Financial Information System Essays Financial Information System Essay Financial Information System Essay It is one of the most modern, largest vertically integrated textile company in Pakistan. Insist Mills Ltd. Is amongst Pakistanis oldest and most respected institutions in the field of textile processing. Insist Apparel is a state of the art facility and was incepted in May 2007. Initially Insist Apparel used Data Flex for its operational and informational needs. This system was implemented for several years but, as the business was experiencing phenomenal growth, coupled with several inherent shortcomings of the system, the growing information needs of the company along with the technological advancement in the ERP field necessitated Nights move to a more sophisticated and advanced system. These reasons have been detailed as follows: Issues with initial system (Data flex): Obsolete: The version of Data flex that was being used at Insist Mills was out-dated and no further vendor support was available for it. Insist was expanding in terms of business and complexity. Thus they required greater support from their system which it was unable to provide. As there was no vendor support to modify the system as per their needs, they had no option else than to switch to an alternative with better vendor support. : Incapable of processing high volume of transactions efficiently: The expansion of Insist Mills resulted in a similar increase in transaction volume that needed processing. The Data flex system with its out dated technology was unable to efficiently handle huge volume of transactions. This resulted in operating in-efficiency and higher costs. The old system thus became the weak link that needed to be replaced in order to support the growth of Nights operations while allowing a greater operating efficiency. Non-centralized database: The initial Data Flex system had a non-centralized database thus each department at Insist Apparel had to maintain its own data leading to great deal of data attendance. Since each department had to update its data separately there were several sets of data being maintained and updating data was not an easy Job. Multiple versions of same data developed inconsistencies which resulted in loss of data integrity. Furthermore, it was not possible for departments to share data with each other, thus each department was effectively working in isolation. Batch Processing: Insist Apparel was competing in the international market for clients like Levies and Dockers. One of the compelling requirements of time was to give short lead times amidst its international competitors. This could not be achieved with the initial Data Flex system which was based on batch processing. There was a time lag between occurrence of business event and the correspondent transaction being processed. This means that the only time the master data was up-to-date was right after the processing has been completed. As soon as the next business event occurs, the master data are no longer up-to-date. This led to lack of proper information for decision making Choice of ERP system: While shifting to new ERP system Insist Group had three basic concerns; they wanted to have a centralized data base, real time transaction processing and a yester that could handle large volume of transactional data. They decided to switch to the Oracle ERP System since it could best cater to their informational needs with respect to the large volume of transactions and also provide the other features that were required, as mentioned above. Oracle ERP system could provide the following benefits to Insist: Better integration across departments Up-to-date database No processing lags caused by the system Better internal controls Improve customer service Reduced lead time Better management decisions Better inventory management Cheaper procurement. Lower costs. Transition Phase: Training Sessions: In order to move from Data Flex to Oracle, month long training sessions were conducted for the employees to train them to work on the oracle system. During this period, they were also made to work on dummy data in order to strengthen their command on the new system. After the conclusion of the training period, one-on-one sessions were carried out with the employees to check for any shortcomings and further build upon their learning. The company had to slightly modify their methods of operation in order to align them with the best practices as dictated by the Oracle yester. Modular Approach: A modular approach was undertaken for the implementation of the Oracle system. The system was installed on a department wise basis like Accounts, Purchase, Inventory, Human Resource and more. Within each department, internal controls were developed to ensure that the organization meets its objectives, such as system logins for users to avoid UN-authorized access. Furthermore, system was modified according to the needs of different units of Insist Mills. For example in Insist Apparel, keeping in mind its nature of business, demand gets generated automatically once bill of materials is prepared which is not a requirement for spinning , weaving or dyeing unit of Insist Mills. Running parallel systems: The older system was still operating in parallel to the new system so that business activities would not be affected. A centralized database was developed and data was transferred from the old system to the Oracle database. During the day, employees used to work on Data Flex and at the day end they transferred the whole days data to the Oracle database. Employees were required to put in extra hours for this purpose. Duration of transition phase: The entire changeover from Data Flex to Oracle consumed nearly 1. -2 years and is still undergoing minor development. For instance, the ERP system pertaining to Human Resource is still undergoing modifications to best meet the organizational needs. Problems Faced: Employee trainings: The employees were acquainted with Data Flex and in order to switch them over to the new system, trainings were conducted. This put on additional stress in terms of loss of time, business process efficiency and HRS costs. Downsizing: Dat a Flex required more manpower to operate the system in contrast to Oracle which squired fewer people. The firm had to downsize as there was excess manpower employed within the firm as per required by Oracle. The layoffs resulted in loss of morale with existing employees and many suffered from the survivor syndrome. Resistance from employees: The decision to upgrade to the new system was not warmly received by some of the employees as they had a thorough command on the previous system. Their ease with the existing system made them unreceptive to change and expressed their displeasure. As a result, they had to be motivated and educated to make the change successful. Information sequencing issues: Insist had a great deal of redundancy within its database. There were multiple versions of the same data stored. This has put on additional problems while transferring data into the new centralized database. They were unsure as to how to consolidate the different versions of data in the new database. Setting up wireless communication links: Successful implementation of Oracle required the set up of wireless routers across offices. This resulted in huge costs to establish the infrastructure that complemented the use of Oracle. Explanation of Entries of Control Matrix The purchase cycle is broadly classified into three sub-processes; purchase requisition, receipt of goods and payable. We have identified the following present controls and we will analyze how these controls meet the operational and informational goals: Pl- Automatic Notification of Inventory Falling Below Re-order Level: Effectiveness goal C: The ERP system is designed in a way that it automatically notifies the store dept. Whenever the inventory level falls below the re-order level thus ensuring the effectiveness of goal C which states that the inventory level should not fall below the re-order level. Efficient employment of resources: The ERP system automatically informs for inventory shortfalls thus eliminating the need on part of humans to physically check (count) for inventory levels. This leads to efficient employment of resources since no manpower and time is utilized for this purpose. PA- Pre-Formatted Screens For All Internal Documents: Efficient employment of resources: The internal documents in the purchase cycle are in the form of pre-formatted screens. Structured entry cells allow user to reduce the number of keystrokes and increase efficiency by displaying only the required information in a desired format to he user. Input Accuracy, Update Accuracy: Due to pre-formatted screens, once a particular field is filled, the cursor moves to the next field on the screen automatically, thus preventing the user from omitting any required data set. Incorrectly filled fields are rejected, hence reducing errors. *Wherever input accuracy or completeness is ensured, update accuracy and completeness are automatically ensured in ERP systems because update occurs in real-time as soon as something is input. PA- Compare input with master data and Automatic Population of Data: Efficient employment of resources: The automatic population of fields from the master data leads to lesser key strokes which improve the speed and productivity of data entry personnel. Input Validity: The automatic population of data from master data as the information passes through various stages is a testament to the fact that information is being accessed and added on different documents from existing records and those data establish authorization for the transaction. Input Accuracy Update Accuracy: Fewer key strokes and use of data called up from existing records reduce the possibility of errors. PA- Record Input: Automatic recording of input event data by system increases efficiency PA- Interactive Feedback Checks: Input Update completeness: Interactive feedback checks display to the user that the input has been accepted and hence ensures data completeness. PA- Online Approval by HOOD: Ensure security of resources: The Hoods approval at several stages during the purchase process ensures that the companys resources would not be misappropriated for any invalid purposes. Input validity: Hoods approval is required when a demand requisition/POP is being made and when the payable data is being processed. He only approves an event after verifying its Aladdin. Therefore the Hoods approval is proof of the validity of the event reflected in the document being approved. PA- Display Requisition to Relevant Purchase Person: Effectiveness goal A: They have assigned particular procurement items to specific purchase persons due to which they have developed expertise in purchase of those items. This helps to ensure that a vendor that will provide the best quality at the optimum price by the required delivery date (on favorable terms) will be selected. Efficient employment of resources: Automatic routing of only the relevant purchase requisitions to concerned researchers saves them from the trouble of finding the items that have been assigned to them for procurement from all the raised requisitions. PA- Key Purchase Terms in SSP: The authorized person selects the most favorable mode of purchase (Comparative Statement, LLC or Cash) which meets our effectiveness goal A. PA- Maintaining Approved Vendor Data: This allows the purchase personnel to quickly access the approved vendors in the database that they already dealt with and know their repute so they do not need to search for a vendor every time they need to buy a particular item. This saves time ND leads to efficiency. PA- Prepare Quotation Entry Form (Including Tallest 3 Vendors): Effectiveness goal A: While preparing quotation entry form, three relevant suppliers are shortlist and then they are asked to provide quotations. This short-listing of three suppliers out of many helps ensure effectiveness of goal A which states that finally only the vendor providing the best quality at the lowest price by promised delivery date should be selected. POI- Preparation and Manual approval of Comparative statement: Effectiveness Goal A: After receiving short-listed quotations, the HOOD compares the vendors in the imperative statement and selects the required vendor keeping in mind that the optimum combination of price and quality is being achieved. Pl 1- Preparation, Approval and Dispatch of POP by HOOD: The clerk brings the POP in the name of the selected vendor to the HOOD. The HOOD ensures that the POP is made in the name of the approved supplier by approving POP online. This ensures the selection of a vendor who will provide the best quality at the optimum price. Input Validity: Approval by the HOOD ensures the validity of the purchase order. PEP- Approval of Invoice by comparing with POP: Effectiveness Goal D: The invoice received from supplier is matched with the POP and then approved to ensure that correct payments are made to the relevant supplier. Input validity: By verifying from the master data that the invoice has been received against an actual POP, validity of invoice will be confirmed. By checking the approval on invoice, the possibility of entering invalid event data is reduced. Input Accuracy: By checking the approval on invoice, it is ensured that the amount on the invoice is accurate. As the master data is not being updated at this point, so update accuracy would not apply. PEP- Prepare copy for record keeping: Security of resources: Keeping records for transactions allows user to keep a track of the resources employed and this ensures the security of resources. PEP- Manual Comparison of Delivery Callahan with POP and Entering receiving data in gate office: Effectiveness Goal The gate person compares delivery Callahan with POP to ensure that the goods received are not different from the demanded goods and if that is the case, then he has the authority to reject them right at the gate. Input Validity: The gate person enters the amount of goods received in the system after matching it tit the POP which ensures that the goods being received are against a valid POP. Input Completeness and Update Completeness: After the delivery Callahan is compared with the POP, the gate person enters the quantity received into the system and prepares a gate pass which ensures that against each receipt there is an entry in the system. The master data is updated simultaneously with the input of receipt data. PEP- Counting of goods by receipt room when received and entering data in the system: Effectiveness Goal B: The receiving personnel counts the goods received ensuring that the correct amount f goods are being received. With the goods being in hand, the receiving person in the receipt room in a good position to ensure that the correct goods are received. The counting of goods ensures that the receipt room is aware of actual quantity of goods received and there is a less chance of goods being lost without coming into the knowledge of authorities. Input Validity, Input and Update Accuracy, Input and Update Completeness: After physically counting the goods, the data is being entered into the system so the data will precisely reflect the actual delivery making it accurate ND valid. For every receipt, a GIN and GRIN are prepared which ensures input and update completeness. PEP- Acceptance of goods after signing of GRIN at store: Effectiveness goal B: The signing of GRIN ensures that the right quantities of goods are stored at the store as per the amount stated in the GRIN. Security of resources: Signing of GRIN serves as a final check that the amount stored at the warehouse is the same as the quantity received in receipt room. PEP- Update inventory levels after storage or issuance against relevant demand number: Input Validity: As inventory is being entered after physically receiving goods against relevant demand number, so the input data is valid. Input Accuracy, Update Accuracy: After physical receipt of inventory, entering data in system ensures that there is less chance of error and that the inventory data is accurate. The master data is simultaneously updated. PEP- Attaching approved invoice with D. C, Gate Pass and GRIN: Effectiveness Goal D: The approval of invoice by the purchase department after verifying it with POP from master data and then attaching it with the GRIN ensure that the correct payment is add to the relevant supplier. Efficient Employment of resources: Since approved invoice is attached with the relevant GRIN, so it makes the posting of vouchers more efficient. PEP- Entering payable data in the payable department: The payable personnel with the approved invoice in hand are in a better position to ensure that the payable liability is made against the relevant supplier. Input Validity, Input and Update Accuracy: The comparison between ESP. and GRIN and invoice ensures that that only a valid payable will be approved and become outstanding against the right supplier. The comparison will also ensure that the amount of payable outstanding will be accurate. PEP- Fortnightly printing of payment list and its approval by HOOD: Effectiveness Goal D: The fortnightly listing of payable reveals the suppliers to whom the payment is due along with the payment details. This process ensures that all the requisite payments are made within the credit period. Efficient Employment of Resources: The payable person does not have to physically go through all pending payable and identify those which are due. Automatically generation by the system ensures efficiency. Input validity, Input accuracy, Input completeness: Automatic generation of payment list using existing information from database ensures that it will have only valid (approved) payable and their amounts will be accurate. It will also ensure completeness because system ensures that the list includes all the payments due. PEP- Generation of payment vouchers and printing of checks: Effectiveness goal D: System generation of checks ensures that they are printed against the right vendors bearing the right amounts due. Efficiency of Resources: Automatic printing of check after generation of payment vouchers saves time. Security of Resources: Printing of checks by system ensures that the right amount due is associated with right vendor. This ensures that payments are made against a valid payable hence eliminating any possibility of cash being paid to the wrong recipient. Input validity: The payable list represents the actual, approved amounts due to vendors as a result of past event. Input ; Update accuracy: The rights amounts are appropriated against the right suppliers eliminating the probability of errors. This subsequently leads to accurate update of the payable account. Input ; Update completeness: The system prints checks for every vendor against whom the payment is due and their corresponding payment vouchers are made. This helps to achieve that no due payment is missed and all corresponding vouchers are made. PEP- Preparation of B. O. M against an open sales contract by comparing input with master data: In preparation of B. O. M, the clerk keys in the sales contract number and the system ensures that the demand being generated is against a valid sales contract. Hence, this ensures that the valid goods in the correct amount are ordered. Input Validity: As the sales order number written on the B. O. M. Is matched with the open sales order in the database, this ensures that the B. O. M is made against a valid sales contract. PEP- Automatic Generation of Demand from Bill of materials: Ensure demand validity: As the production planning finalizes the required raw materials in bill of materials, the system automatically generates demand which ensures that the origin of demand is representative of actual requirements. Efficient employment of resources: As the demand is generated automatically by the system, it saves on any human involvement for the purpose leading to efficient employment of resources. Input The information upon which the demand form is based was taken from the bill of material. This verifies that input is more likely to reflect actual demand. Input ; update accuracy: Automatic updating of fields of demand requisition form from bill of materials eliminates the probability of incorrect entry of data and ensures that the requisition form is accurate. PEP- Check inventory level at store and write current inventory level at generated demand: Effectiveness Goal D: Checking goods from the inventory ensures that excess goods are not purchased by mistake and only the required amount of goods is purchased. Efficiency of resources, Input Accuracy, Update Accuracy: As the inventory level is checked from the system instead of going to the store to physically count it so the efficiency is increased and the correct amounts will be entered and updated. PEP- Inspection of goods received by the user: The inspection of goods by the user ensures that the goods received from the supplier are of the required quality and the quantity is in conformance with the demand of the user. PEP- Comparison of Input with Master Data for Generation of SIR: Validity of Input, Input and Update Accuracy: This will ensure that the SIR is being prepared against a valid, approved requisition against which goods have been received. The comparison will identify any erroneous or suspect data and reduce input errors. PEP- Approval of SIR by HOOD: Input Validity, Security of Resources: Approval will ensure that the issue of goods is authorized for a valid use. This will also ensure security of resources. PEP- Comparison of SIR with BOOM to issue goods: The comparison will ensure that the goods are being issued against a valid BOOM and hence prevent misappropriation of resources. Ml- Scrutinizing vendor before addition to approved vendor list :Effectiveness goal A: This will ensure that only the competent vendors who will supply the best goods at the optimum price are entered into the system. MM- Comparison of comparative statement with actual quotations received by HOOD before approval: Effectiveness goal A: This will ensure that the purchase personnel has not included any fake quotation into the comparative statement and only the approved suppliers to which the quotation requests were sent are there on the comparative statement. Input validity: This comparison will ensure that only valid supplier is selected by the HOOD. MM- HOOD accesses inventory data from DEEDS to check inventory status before approval of requisition: Efficiency of resources: This will save time as the HOOD will directly check the inventory status online while approving the requisition and no requisition will be processed for the goods already present in stock. Hence the store department would not be involved in such situations which would lead to efficiency. ANALYSIS Analyzing the ERP system of Insist, we have concluded that they have implemented the system very effectively and are reaping great benefits from this technological advancement.