Comprehensive Guide to Data, Information, and AIS Functions in Business Cycles

Data

Facts that are collected, recorded, stored, and processed by an information system.

Information

Data that have been organized and processed to provide meaning and context that can improve the decision-making process.

Input

Data is input.

Output

Information is output.

Value of Information

The benefit produced by the information minus the cost of producing it.

Benefits of Information

Includes reduced uncertainty and improved ability to plan and schedule activities.

Costs of Information

Includes the time and resources spent to produce and distribute the information.

Qualities of Useful Information

Relevant, reliable, complete, verifiable, timely, accurate, etc.

Access restricted

able to limit access to authorized parties

Accurate

correct; free of error; accurately represents events and activities

Available

available to users when needed; in a format that can be easily and quickly used

Complete

does not omit aspects of events or activities; of enough breadth and depth

Concise

clear, succinct; appropriate volume presented briefly but comprehensively

Consistent

presented in same format over time

Current

includes event and activity data to the present date and time

Objective

unbiased; unprejudiced; impartial

Relevant

reduces uncertainty; improves decision making; applicable and helpful

Reputable

received as true and credible due to highly regarded source or content

Timely

provided in time for decision makers to make decisions

Understandable

presented in a useful and intelligible format; easily comprehended and interpreted

Useable

easy to use for different tasks; human and machine readable

Verifiable

same information produced by two independent, knowledgeable people

Revenue cycle

where goods and services are sold for cash or a future promise to receive cash

Expenditure cycle

where companies purchase inventory for resale or raw materials to use in producing products in exchange for cash or a future promise to pay cash

Production cycle

or conversion cycle, where raw materials are transformed into finished goods

Human resources/payroll cycle

where employees are hired, trained, compensated, evaluated, promoted, and terminated

Recruit, hire, and train new employees

The process of finding, selecting, and preparing new staff for their roles.

Evaluate employee performance and promote employees

Assessing how well employees perform their duties and advancing them based on merit.

Discharge employees

The act of terminating an employee's contract with the organization.

Update payroll records

The process of maintaining accurate employee compensation information.

Collect and validate time, attendance, and commission data

Gathering and verifying information related to employee working hours and earnings.

Prepare and disburse payroll

The process of calculating and distributing employee salaries.

Calculate and disburse taxes and benefit payments

Determining and distributing required tax payments and employee benefits.

Prepare employee and management reports

Creating documents that summarize employee performance and organizational metrics.

Send appropriate information to the other cycles

Communicating relevant data to different operational areas within the organization.

Financing cycle

The process where companies sell shares to investors, borrow money, and pay dividends.

Forecast cash needs

Estimating future financial requirements for operational activities.

Sell stock/securities to investors

Offering ownership shares in the company to raise capital.

Borrow money from lenders

Obtaining funds from financial institutions or individuals.

Pay dividends to investors and interest to lenders

Distributing profits to shareholders and compensating creditors.

Retire debt

The process of paying off outstanding loans or financial obligations.

What tasks must an AIS be able to perform?

Collects, enters, processes, stores, and reports data and information.

MUST: Collect and store data

Gather and maintain information about organizational activities and resources.

Transform data into information

Converting raw data into useful insights for management decision-making.

Provide adequate controls

Implementing measures to protect the organization's assets and data.

Know common activities in an AIS?

Includes six components: People, Procedures and instructions, The data, The software, Information technology infrastructure, Internal controls.

How can AIS add value to an organization?

By improving quality, reducing costs, enhancing efficiency, and supporting decision-making.

Data collection and recording

Capturing and documenting financial and operational transactions.

Data storage and management

Securing collected information in databases with protective measures.

Data processing and transformation

Converting raw data into meaningful information through calculations and summaries.

Financial reporting and analysis

Generating financial statements and reports for various stakeholders.

Decision support and business intelligence

Using AI and analytics to enhance strategic and operational decision-making.

AIS

Enforces policies and procedures to safeguard assets, ensure accuracy, and maintain regulatory compliance.

Inbound logistics

Consists of receiving, storing, and distributing materials an organization uses to create services and products it sells.

Operations activities

Transform input into final products.

Outbound logistics

Distribute finished goods to consumers.

Marketing and sales

Activities that help customers buy the organization's products or services.

Service activities

Provide post-sale support to customers.

Support Activities

Include firm infrastructure, human resources, technology, and purchasing.

Factors influencing AIS design

Organizational culture, business strategy, information technology, knowledge sharing and collaboration.

Emerging technologies integration

Modern AIS often integrates blockchain, cloud computing, virtualization, and IoT devices.

Blockchain

Digital records, called blocks, linked together using cryptography in a single list; decentralized database.

Data processing cycle - Step 1

Capture transaction data triggered by a business activity.

Data processing cycle - Step 2

Ensure captured data are accurate and complete, enhanced by data automation and well-designed turnaround documents.

Data processing cycle - Step 3

Ensure company policies are followed, using source documents like sales orders and invoices.

Data storage

Includes ledgers (permanent general and subsidiary ledger) and coding techniques.

Journals

Temporary recording of transactions (sales journal, cash receipts journal) providing an audit trail.

Computer based storage concepts

Data are stored in master files (permanent, cumulative) and transaction files (temporary, for individual transactions).

Coding systems

Techniques like sequence, block, group, and mnemonic help organize and classify data.

Audit trail

A record that allows tracking of transactions through the accounting system.

Just-in-time inventory

An inventory strategy that aligns raw-material orders from suppliers directly with production schedules.

Data automation

The use of technology to perform tasks with reduced human intervention, enhancing accuracy and efficiency.

Validation of data integrity

The process of ensuring that data is accurate and reliable.

Transaction data attributes

Include the activity of interest, resources affected, and people who participate in the activity.

Data processing

Creating new data records such as adding a newly hired employee to the payroll database.

Reading data

Retrieving or viewing existing data.

Updating data

Updating previously stored data.

Deleting data

Purging the vendor master file of all vendors the company no longer does business with.

Batch processing

Updating data in groups.

Real-time processing

Updating data immediately.

Documents

Records of transactions or other company data that is used internally or to external parties.

Reports

Used by employees to control operational activities and by managers to make decisions and formulate business strategies.

External users of reports

Need reports to evaluate company profitability, judge creditworthiness, and comply with regulatory requirements.

APIs (Application Programming Interfaces)

Allow advanced system-to-system integrations and provide a structured interface for data access.

Source documents

Documents used to capture transaction data at its source when translation takes place.

Revenue source documents

Sales order, delivery ticket or bill of lading, remittance advice or remittance list, deposit slip, credit memo.

Expenditure cycle source documents

Purchase requisition, purchase order, receiving report, check or electronic funds transfers.

Human resource cycle source documents

W-4, time cards, job time tickets, or time sheets.

Transaction processing cycle

Includes data input, data storage, data processing, information output.

ERP system

Enterprise resource planning system that integrates all aspects of a company's operations.

Advantage of ERP

Provides integrated, enterprise-wide, single view of the organization's data and financial situation.

Data captured once

Downloading data no longer needed.

Management visibility in ERP

Management gains greater visibility into every area of the enterprise and achieves greater monitoring capabilities.

Access control in ERP

Organization gains better access control.

Standardized procedures and reports

Procedures and reports are standardized across business units.

Customer service improvement

Employees can quickly access orders, availability inventory, shipping information, and details of past customer transactions.

Manufacturing plants in ERP

Receive new orders in real time, leading to increased productivity.

Disadvantages of ERP

Costs, amount of time required, changes to business processes, complexity, and resistance from employees.