LESSON 5

Business Information Systems

5.1 Transaction Processing System (TPS)

5.1.1 Overview of TPS

Transaction Processing Systems (TPS) are cross functional systems that process data
resulting from the daily routine transactions necessary for business functions.
Transactions are events that occur as part of doing business, such as sales, purchases,
deposits, payments etc. Automated TPSs consist of all the components of a computer
based information system (CBIS), including databases, telecommunications, people,
procedures, software and hardware devices used to process transactions.
TPSs are considered as operational level systems as they keep track of the elementary
activities and transactions of the organization. The principal purpose of systems at this
level is to answer routine questions and track the flow of transactions through the
organization. These systems are used mainly by operational level employees of an
organization.

Input to a TPS: Basic business transactions such as customer orders, purchase
orders, receipts and invoices are inputs to a TPS.

Processing: In order to produce the required output processing is carried out on
input data. The processing activities include data collection, data editing,
data correction, data manipulation and data storage and document
production.

Output of a TPS: Updated records after the last transaction.
For example withdrawing money from a savings account will cause a
change in the balance of the savings account. The relevant record of the
customer in the database will be updated to reflect this change.
An output of a TPS can also take the form of reports and documents. For
example, the customer’s savings book will be updated with the latest
transaction.





As TPSs often perform activities related to customer contacts - such as order
processing and invoicing- these information systems play a critical role in
providing value to the customer. Apart from external customers, internal
stakeholders also heavily rely on TPSs to carry out routine operations of the
organization (as shown on table 5.1). Therefore, if TPSs fail to operate correctly,
the impact on the organization can be high.

5.1.2 Types of Transaction methods

5.1.2.1 Batch Processing

When computerized transaction processing system first developed, only one method, i.e.
batch processing was available. With batch processing systems, business transactions
are collected over a period of time and prepared for processing as a single unit or batch.
Batch jobs can be stored up during working hours and then executed during the evening
or whenever the computer is idle. The time period during which transaction are
accumulated is whatever length of time is needed to meet the needs of the users of that
system.

For example, it may be important to process invoices and customer payments for the
accounts receivable system daily, whereas, the payroll system may receive time cards
and process them biweekly or monthly to create checks and update employee earning
records. Another example of batch processing is the way that credit card companies
process billing. The customer does not receive a bill for each separate credit card
purchase but one monthly bill for all of that month’s purchases. The bill is created
through batch processing, where all of the data are collected and held until the bill is
processed as a batch at the end of the billing cycle. This is depicted in figure 5.1.2.



The essential characteristics of a batch processing system is that there is some delay
between the occurrence of the event and the final processing of the related transaction
to update the organization’s records.

5.1.2.2 Online Processing

Today’s computer technology allows another processing method called online
transaction processing (OLTP). In OLTP, each transaction is processed immediately,
without the delay of collecting transactions into a batch. As soon as the input is available,
a computer program performs the necessary processing and updates the records
affected by that single transaction. Consequently, at any time the data in an online
system always reflects the current status.

When you make an airline reservation, for instance, the transaction is processed, and all
databases, such as seat occupancy and accounts receivable, are updated immediately.
This type of processing is absolutely essential for businesses that require quick access
to up-to-date information such as airlines, travel agencies, and stock investment firms.
Many firms are using the Internet, extranets and other networks that tie them
electronically to their customers or suppliers for online transaction processing. Such realtime
systems, which capture and process transactions immediately, can help firms
provide a superior service to customers and other trading partners. This capability adds
value to their products and services, and thus gives them an important way to
differentiate themselves from their competitors.

Example of OLTP - When travel agent A confirms a reservation, the central database
needs to be updated quickly before travel agent B makes a reservation. If the database
is not updated online, a situation may arise where a travel agent may confirm a seat for a
passenger without knowing the aircraft is fully booked.



Online entry with delayed processing

A third type of transaction processing, called online entry with delayed processing is a
compromise between batch processing and online processing. With this type of system,
transactions are entered into the computer system when they occur, but they are not
processed immediately.

Example: Ordering over the telephone

Although the technology exists to carry out OLTP, it is not used for all transactions. For
many applications, batch processing is considered to be more appropriate and costeffective.
Batch processing is particularly useful for operations that require the computer
or a peripheral device for an extended period of time. Once a batch job begins, it
continues until it is done or until an error occurs.

Typical batch processing applications include payroll transactions and billing.
Furthermore, specific organizational goals also define the method of transaction
processing best suited for the various applications of the company.

5.1.3 Organizational Objectives of a TPS

Because of the importance of transaction processing, organizations expect their TPSs to
achieve a number of specific objectives, including the following.

Capture, Process, Store Transactions and Produce Outputs

The primary objective of any TPS is to capture large volumes of data, process data,
store transactions and to produce a variety of documents related to routine business
activities. These business activities can be directly or indirectly related to selling products
and services to customers.

Processing orders, purchasing materials, controlling inventory, billing customers, and
paying suppliers and employees are all business activities that result from customer
orders.

These activities result in transactions that are processed by the TPS.
Many businesses including telecommunications companies, financial-services
organizations are under enormous pressure to process ever-larger volumes of
transactions in near-real time.

Ensure Accuracy and Integrity of Data and Information
Another objective of any TPS is error-free data input and processing.
Example An editing program should have the ability to determine that an entry that
should read “60 hours” is not entered as “600 hours” or “6000 hours” due to a
data entry error.

An important component of data integrity is to avoid fraudulent transactions.
Example E-commerce companies face this problem when accepting credit or debit card
information over the Internet. It is important to make sure that the customer is
using a valid credit or debit card. One approach is to use a digital certificate. A
digital certificate is a small computer file that serves as both an ID card and a
signature. Some believe that digital certificates, which use complex
mathematical codes, are almost fraud proof.

As the volume of data being processed and stored increases, it becomes more difficult
for individuals and machines to review all input data.

A company must ensure both data integrity and data accuracy because data and
information generated by the TPS are often used by other information systems in an
organization.

Produce Timely Reports and Documents

The ability to conduct business transactions quickly can be very important for an
organization’s bottom line.

Although manual transaction processing systems can take days to produce routine
documents, the use of computerized TPSs significantly reduces this response time.
Improvements in information technology, especially hardware and telecommunications
links, allow transactions to be processed in a matter of seconds.
Example: If bills are sent out to customers a few days earlier than usual, payment may be received earlier.

A number of transactions processing systems can monitor how timely a company is
when processing transactions and producing reports and documents. Some monitoring
software packages can compare actual performance with corporate goals and
objectives.

Timing is also crucial for related applications such as order processing, invoicing,
accounts receivable, inventory control, and accounts payable. Because of electronic
recording and transmission of sales information, transactions can be processed in
seconds rather than overnight. This leads to improving the cash flow of the companies.

Increase Labor Efficiency

Manual business processes requires significant number of employees and equipments to
process the necessary business transactions. By automating these manual processes,
organizations are able to substantially reduce the number of employees and equipment
required to carry out a specific transaction. For example, a small minicomputer linked to
a company’s cash registers has replaced a room full of clerks, typewriters, and filling
cabinets.

Organizations are interested in gaining even greater labour efficiency by further
streamlining business processes.

Provide Increased and Enhanced Customer Service

One objective of TPSs is to assist an organization to provide a fast, efficient service.
Electronic Data Interchange (EDI) systems of some companies allow customers to place
orders electronically, thus bypassing slower and more error-prone methods of written or
oral communication. Another example would be utilizing technologies such as the
Internet to improve customer service. Through the Internet customers are able to browse
a catalogue of products and order an item, purchase the air tickets etc. by accessing the
relevant databases of the organization. Among other benefits, this reduces the need for
the customer to physically be present at the supplier’s premises, thus improving
customer service.

Increase Customer Loyalty

Transaction processing systems of a firm are often the means of communicating with the
customer. Therefore, it is important that the customer interaction with these systems
keep customers satisfied and returning.

For example the use of store cards. Store cards can be used to collect points whenever
a transaction takes place. A TPS will capture information about the purchasing details of
a customer. These points are usually equivalent to money (100 points equals Rs. 10
etc.). The collected points may be redeemed against gift vouchers or money.

Achieve Competitive Advantage

Another objective of a TPS can be achieving competitive advantage. The following table
5.2 provides a list factors that may contribute to achieving competitive advantage by
using a TPS.



Depending on the specific nature and goals of the organization, any of the objectives
discussed may be more important than others.

By meeting these objectives, TPSs can support corporate goals such as cost reduction,
increased production, improved quality and customer satisfaction and more efficient and
effective operations.

5.1.4 Activities in a TPS

All TPS s perform a common set of basic data processing activities. TPSs capture and
process data that describes fundamental business transactions. This data is used to
update databases and to produce a variety of reports which are used by people both
within and outside the enterprise. These can be considered as the activities of a typical
TPS. Apart from these activities some TPSs can include inquiry processing capabilities.


The business data goes through a transaction processing cycle that includes data
collection, data editing, data correction, data manipulation, data storage and document
production.

Data Collection

Data collection is the process of capturing and gathering all data necessary to complete
a transaction. In some cases it can be done manually by collecting hand written sales
orders or changes to inventory.

It can also be automated via special input devices such as scanners, point-of-sale
devices.

Data collection begins with a transaction (e.g., taking a customer order) and results in
the origination of data that is input to the transaction processing system. Data should be
captured at its source, and recorded accurately, in a timely fashion, with minimal manual
effort, and in a form that can be directly entered into the computer rather than keying the
data from a document.

This approach is called source data automation. Improved efficiency can be achieved
by automating data collection.

An example of source data automation is collection of transaction data by point-of-sale
terminals using optical scanning of bar codes and credit card readers at a retail store or
any other business.

Once the item is scanned at a retail store, the product ID for each item is determined
automatically, and its price is found in the item database. It is more quicker and more
accurate than having a clerk enter codes manually at the cash register. This eventually
leads to better customer satisfaction due to reduced queing times.

Data Editing

An important step in processing transaction data is to perform data editing for validity
and completeness to detect any problems.

For example, quantity and cost data must be numeric and name should be characters.
Often the codes associated with an individual transaction are edited against a database
containing valid codes. If any code entered (or scanned) is not present in the database,
the transaction is rejected.

Data Correction

It is not enough simply to reject invalid data. The system should also provide error
messages that alert those responsible for the data editing function. Error messages must
specify the problem and corrective action required.
Data correction involves reentering miskeyed or misscanned data that was found during
data editing.

Data Manipulation

Data manipulation is the process of performing calculations and other data
transformations related to business transactions.

Data manipulation can include classifying data, sorting data, moving data in the
organization’s database for further processing.

Example: In a Sales TPS, data manipulation includes adding total monthly sales for a
particular year, to calculate total sales for that year.

Database Maintenance

An organisation’s database must be maintained by its TPSs so that they are always
correct and up-to-date. Therefore, transaction processing systems update the corporate
databases of an organization to reflect changes resulting from daily business
transactions. For example, when a customer withdraws money from a savings account,
customer account will be updated with the new account balance.

Although transaction databases can be considered a by-product of transaction
processing, they have a pronounced effect on nearly all other information systems and
decision-making processes in an organization.

Production of Document / Reports

Document production involves generating output records and reports. These documents
may be hard-copy paper reports or displays on computer screens (sometimes referred to
as soft copy).

Examples:
Hard-copy documents – monthly bank statement, invoices, paycheck, sales receipts
Soft-copy report - outstanding balance report for invoices displayed by an accounts receivable TPS.

Often, results from one TPS are passed downstream as input to other systems. For
example when an item is sold in a supermarket, this would result in reduction of a stock
item. Therefore, the sales TPS will pass data (quantity of the item sold) and update the
inventory TPS with the current available stock of that particular item.
TPSs provide other useful management information and decision support, such as
printed or on-screen reports that help managers and employees perform various
activities.

Example: A report showing current inventory levels allows management to decide whether new stock is required.

Inquiry processing

Many transaction processing systems allow the use of the Internet, intranets, extranets
and Web browsers or database`e management query languages to make inquiries and
receive responses concerning the results of transaction processing activity. Example:
Most Banks provide a facility to check transactions of a bank account through the
Internet.

5.1.5 Control and Management of a TPS

Transaction processing systems are the backbone of any organization’s information
systems. They capture facts about the fundamental business operations of the
organization. Without these facts in a typical organization, customers cannot be invoiced,
and employees and suppliers cannot be paid.

In addition to this, the data captured by one TPS is interconnected to other systems in
the organization. For example, as mentioned in section 5.1.4, the Sales TPS will be
connected to the Inventory TPS.

Like any structure, an organization’s information systems are only as good as the
foundation on which they are built.

In fact, most organizations would grind to a searching halt if their TPSs failed.

Business Continuity Planning

Any business organization must be aware of disasters and be prepared to deal with such
situations. Disasters can be natural emergencies such as a flood, a fire, or an
earthquake, hacker attack or erasure of an important file.

Business continuity planning identifies the processes that must be restored first in the
event of a disaster to operations of the business restarted with minimum disruption.
It also specifies the actions that must be taken and by whom to restore operations.
Some of the key actions include safe evacuation of all employees, assessment of the
impact of the disaster, relocation to alternate work places, backup and recovery of
important electronic and manual business records, and use of alternate equipment.
One of the first steps of business continuity planning is to identify potential threats or
problems, such as natural disasters, employee misuse of personal computers, and poor
internal control procedures.

Business continuity planning also involves disaster preparedness. Business managers
should occasionally hold an unannounced “test disaster”-similar to a fire drill-to ensure
that the disaster plan is effective.

Disaster Recovery

Disaster recovery focuses on the actions that must be taken to restore computer
operations and services in the event of a disaster.

It includes providing for alternate computing and network facilities; the transfer of key
personnel, data, and software to a backup site; and the rapid resumption of data
processing and communications.

Transaction Processing System Audit

Chief Information Officers (CIOs) must act to prevent the accounting irregularities or loss
of data privacy that can get their companies into trouble and erase investor confidence.
In some cases organizations have filed for bankruptcy and put the blame on faulty
transaction processing systems.

In order to avoid such issues organizations should conduct a transaction processing
system audit. Such an audit would typically attempt to answer four basic questions:
• Does the system meet the business need for which it was implemented? • What procedures and controls have been established? • Are these procedures and controls being used properly? • Do the information systems and procedures produce accurate and honest reports?
In addition to these four basic auditing questions, other areas that are typically
investigated during an audit include the distribution of output documents and reports, the
training and education associated with existing and new systems, and the time
necessary to perform various tasks and to resolve problems and blocks in the system.
General areas of improvement are also investigated and reported during the audit.

Types of Audits: Internal and External

An internal audit is conducted by employees of the organization.
An external audit is performed by accounting firms or companies and individuals not
associated with the organization.

In both internal and external audits, the auditor inspect all programs, documentation,
control techniques, the disaster plan, insurance protection, fire protection, and other
systems management concerns such as efficiency and effectiveness of the disk or tape
library.

This check is accomplished by interviewing IS personnel and performing a number of
tests on the computer system.

In addition to managers and employees inside the company, external audits are
important for stakeholders and others outside the company.

Example (usefulness of a external audit) : A number of internet startup companies overstate their income, which has resulted in high stock evaluations in some cases. An external audit by a reputable audit company can help uncover these reporting problems. Audit Trail: An audit trial allows the auditor to trace any output from the computer system back to the source documents, enabling the integrity of the computer programs and software, However, with the use of real-time systems, it is difficult to find inputs to a system and therefore, the auditor has to investigate the processing activity as well as inputs and outputs to various programs. Audit trail can be especially useful where privacy of information should be maintained, as in patient records in a healthcare TPS.

5.1.6 TPS Applications

In this section we provide an overview of several common transaction processing
systems, that support the order processing, purchasing and accounting business
processes. Although each organization may have unique business processes, only a
generalized view is presented.



Order Processing Systems

Order processing system includes order entry, sales configuration, shipment
planning, shipment execution, inventory control and invoicing. Based on the
requirements of the organization, the systems and the information flow of an Order
Processing System may change from one organization to another.
Here we discuss input, process and output activities related to the order processing
system.

The business processes supported by these systems are so critical to the operation
of an enterprise that the order processing systems are sometimes referred to as the
lifeblood of the organization.

[Following figure is a system-level flowchart that shows the various systems and the
information that flows between them. a rectangle represent a system, a line
represents the flow of information from one system to another, and a circle
represents any entity outside the system-in this case, the customer



Order Entry and Sales Configuration

The order entry system captures the basic data needed to process a customer order.
Orders may come through the mail, telephone ordering system and be gathered by a
staff of sales representatives. Alternatively it may arrive via EDI transactions directly from
a customer’s computer over a wide area network, or be entered directly over the Internet
by the customer using a data entry form on the firm’s web site.

Inputs to such a system will include customer details, product, and the quantity required.
This will lead to an entry in the daily sales journal.

The sales configuration system ensures that the products and services ordered are
sufficient to accomplish the customer’s objectives and will work well together.

For example, using a sales configuration program, a sales representative knows that a
computer printer needs a certain cable and a LAN so that it can be connected to the
LAN.

Without a sales configuration program, a sales representative might sell a customer the
wrong cable or forget the LAN card.

Sales configuration programs also suggest optional equipments. If a customer orders a
handheld computer, the sales configuration program will suggest an AC adapter, backup
software and communications cards to enable the user to connect wirelessly to printers,
LAN, and the Internet.

Sales configuration software can also solve customer problems and answer their
questions.

Example: A sales configuration program can determine whether a factory robot made by one manufacturer can be controlled by a customer system developed by another manufacturer. Sales configuration programs can eliminate mistakes, reduce costs, and increase revenues.

Shipment Planning

New orders received and any other orders not yet shipped (open orders) are passed
from the order entry system to the shipment planning system.
The shipment planning system determines which open orders will be filled and from
which location they will be shipped.

While this may be a simple task for a small organization with local customers, it can be
an extremely complicated task for a global operation.

However, a key objective of this process should be to minimize shipping and
warehousing costs while still meeting customer delivery dates.

The output of the shipping planning system is a plan that shows where each order is to
be filled and precise schedule for shipping with a specific carrier on a specific date and
time.

Another output generated by this system is a picking list that warehouse operators use to
select the ordered goods from the warehouse. These outputs may be in paper form, or
they may be computer records that are transmitted electronically.

Shipment Execution

The shipment execution system provides coordination for the outflow of all products from
an organization. The objective of this system is to deliver quality products on time to
customers.

The shipping department is usually responsible for physically packaging and delivering
quality products to customers and suppliers.

The system receives the picking list from the shipment planning system.
As items are picked and loaded for shipment, warehouse operators must enter data
about the exact items and quantity of each that are loaded for each order (input). When
the shipment execution is completed, “shipped orders” transaction is sent downstream
to the invoicing system.

This transaction specify exact name of company, name of person involved, item names
and quantities. This data is used to generate a customer invoice.
Another output of this system would be packing documents. This is usually enclosed with
the item and sent to the customer and gives information about items that are being
shipped, what is back ordered etc.

Soft-copy data-such as that provided by advanced shipment notices and shipment
tracking systems-is also made available to other business functions.

Inventory Control

For each item picked during the shipment execution process, a transaction providing the
stock number and quantity picked is passed to the inventory-control system. In this way,
the computerized inventory records are updated to reflect the exact quantity on hand of
each stock-keeping unit.

Once product has been picked out of inventory, other documents and reports are
initiated by the inventory-control application (output). One important report is the
inventory status report which lists inventory items shipped over a specific time period.
The information on this report may include stock numbers, description, number of units
on hand, number of units ordered and costs etc.

Inventory control is essential for industries in the service sector, too. Such organizations
as hotels, air lines, rental car agencies, and universities which primarily provide services
can use inventory applications to help them monitor use of rooms, airline seats, car
rentals and classroom capacity.

Similarly organizations in the manufacturing sector also need to manage the inventory
levels efficiently, in order to produce goods on time to meet the delivery dates and to
avoid cash tied up on raw materials. This will be discussed under purchasing systems.

Invoicing

Customer invoices are generated based on records receiving from the shipment
execution TPS. This application encourages follow-up on existing sales activities,
increases profitability, and improves customer service.

Most invoicing programs automatically compute discounts, applicable taxes, and other
miscellaneous charges.

Most computerized operations contain elaborate databases on customers and inventory,
and many invoicing applications require only information on the items ordered and the
client identification number; the invoicing application does the rest.

Purchasing transaction processing systems

These are the systems that include inventory control, purchase order processing,
receiving, and accounts payable.



Inventory Control

Types of inventory owned by an organization depend on the type of organization.
Typically a manufacturing firm would have an inventory of raw material, finished goods,
packing materials etc. On the other hand, the inventory of an airline which is a service
industry firm includes number of seats in a specific aircraft.

Effective Inventory controlling allows an organization to deliver finished goods to
customers on time (applies to manufacturing firms) and to reduce cash tied up with idle
inventory. A mistake in tracking current raw material inventory can cost millions of
dollars, causing the manufacturer to miss prof targets.

In order to make effective purchasing decisions the inventory control system must
identify the correct stock levels and inform the management when stocks are low.
An output of this system would be a report which provides the status of the raw material
and other related inventories to the purchase order processing system. For this purpose
the quantity available (stock items) should be updated whenever a stock item is used in
manufacturing.

Purchase Order Processing

An organization’s purchasing department is responsible for all its purchasing activities.
The purchase order processing system helps purchasing departments complete their
transactions quickly and efficiently. The purchasing function begins when the purchasing
department receives a purchase order request or when the inventory control status
report suggests the need to order.

Every organization has its own policies, practices, and procedures for purchasing
supplies and equipment.

The purchasing department facilitates the purchasing process by keeping data on
suppliers goods and services. The increased use of telecommunications has given many
purchasing departments easier access to this information.

The technological developments allow organizations to compare prices of different
suppliers and order on-line. Once a supplier is selected the computer systems of the
supplier can be linked with the customer’s computer systems using technologies such as
Electronic Data Interchange (EDI), which enables to reduce purchasing costs and time
and provide the ability to maintain adequate inventory levels.

Based on the requirements of the order, a purchase order is developed and sent to the
supplier.

Receiving

Many organizations have a department responsible for inspecting incoming items and
routing them to the relevant department which made the initial purchase order request.
In addition, the receiving department notifies the purchasing department when items
have been received. This notification may be done using a paper form called a receiving
report or electronically through a business transaction created by entering data into the
receiving TPS (output).

An important function of many receiving departments is quality control by inspection.
Inspection procedures and practices are set up to monitor the quality of incoming items.
Any items that fail inspection are sent back to the supplier, or adjustments are made to
compensate for faulty or defective products.

Accounts Payable

The accounts payable system attempts to increase an organization’s control over
purchasing, improve cash flow, increase profitability, and provide more effective
management of current liabilities.

The major output of this system is payments to suppliers for materials and services.
Most accounts payable applications attempt to manage cash flow and minimize manual
data entry.

Input from the purchase order processing system provides an electronic record to the
accounts payable application that updates the accounts payable database to create a
liability record showing the firm has made a commitment to purchase a specific good or
service. Once the accounts payable department receives an invoice from a supplier, the
invoice is verified and checked for accuracy.

Upon receiving notice that the goods and services have been delivered in a satisfactory
manner from the receiving department, the data is entered in to the accounts payable
application. Accounts payable application records purchases from, amounts owed to,
and payments to suppliers. It produces cash management reports.

Accounting Systems

Accounting information systems are the oldest and most widely used IS in business.
They record and report business transactions and other economic events. A typical
accounting system may include the budget, accounts receivable, payroll, asset
management, and general ledger applications.



Budget

In an organization, a budget is a financial plan that identifies items and dollar amounts
that the organization estimates it will spend. In some organizations, budgeting can be an
expensive and time-consuming process of manually distributing and consolidating
information. The budget transaction processing system automates many of the tasks
required to amass budget data, distribute it to users, and consolidate the prepared
budgets.

Automating the budget process allows financial analysts more time to manage it to meet
organizational goals by setting enterprise-wide budgeting targets, ensuring a consistent
budget model and assumptions across the organization, and monitoring the status of
each department’s spending.

Budget transaction processing system

System that automates many of the tasks required to collect budget data, distribute it to
users, and consolidate the prepared budgets.

Accounts receivable

The accounts receivable system keeps track of the money owed the company on
charges for goods sold and services performed.

When goods are shipped to a customer, the customer’s accounts payable system
receives a business transaction from the invoicing system, and the customer’s account is
updated in the accounts receivable system of the supplier.

A statement reflecting the balance due is sent to active customers. Upon receipt of
payment, the amount due from that customer is reduced by the amount of payment
A major output of accounts receivable application is the monthly bills and statements
sent to customers..

The accounts receivable system is vital to managing the cash flow of a firm. One major
way to increase the cash flow is by identifying overdue accounts. Reports are generated
to identify customers whose accounts are overdue by more than a particular number of
days (depending on the policies of the company this may change).

Another important function of the accounts receivable application is to identify bad credit
risks.

Many companies routinely check a customer’s payment history before accepting a new
order. With the advances in telecommunications companies can search huge national
databases for the names of firms and individuals with records of bad credit.

However, when using external data like this in a TPS application, companies must be
extremely cautious regarding the accuracy of the data.

Payroll

The two primary outputs of the payroll system are the payroll checks and stub, which are
distributed to the employees, and the payroll register, which is a summary report of all
payroll transactions.

The number of hours worked by each employee is collected using a variety of data entry
devices, including time clocks, time cards, and industrial data-collection devices in a
subsystem called time and attendance.

Once collected, payroll data is used to prepare weekly, biweekly, or monthly employee
paychecks.

Like many other transaction processing applications, the payroll application interfaces
with other applications. For example, all payroll entries are entered into the general
ledger systems.

Packaged software applications are commonly used to automate the payroll process.
Many of these applications could be customized to suite the needs of the organization.

Asset Management

Capital assets represent major investments for the organization. These values appear
on the balance sheet under fixed assets. Examples of capital assets include buildings,
vehicles, machinery etc. These assets have a useful life of several years or more, over
which their value is depreciated, resulting in a tax reduction. The asset management
transaction processing system controls investments in capital equipment and manages
depreciation for maximum tax benefits. Key features of this application include efficient
handling of a wide range of depreciation methods, country-specific tax reporting and
depreciation structures for the various countries in which the firm does business, and
workflow-managed processes to easily add, transfer, and retire assets.

General ledger

Every monetary transaction that occurs within an organization must be properly
recorded. Examples of monetary transactions are payment of a supplier’s invoice, receipt
of payment from a customer, and payment to an employee. A computerized general
ledger system is designed to allow automated financial reporting and data entry.
The general ledger application produces a detailed list of all business transactions and
activities. The outputs include reports such as profit and loss (P&L) statements, balance
sheets, and general ledger statements.

Furthermore, historical data can be kept and used to generate trend analyses and
reports for various accounts and groups of accounts used in the general ledger package.
Various income and expense accounts can also be generated for the current period,
year to date, and month to date as required. These reports are useful to accounting and
financial managers to monitor the profitability of the organization and to control cash
flows.

In recent years, online service providers such as Net Ledger has entered the SME
market by offering a general ledger software application as a networked service on a
monthly subscription basis. This reduces the capital costs (software license, labour,
equipment etc.) associated with implementing such a system internally.

As the Web-based system is fully hosted and offered via a monthly subscription fee, no
infrastructure, maintenance, or upgrade work needs to be carried out.