All You Need to Know about Accounting Information Systems (AIS)?
Let’s start with a question, what is the first thing that pops into your head while running a business? For any business, to run smoothly the first & foremost important thing is proper cash flow and reports. Irrespective of the size of the business appropriate cash flow is extremely important. Here comes into play the accounting information system. An accounting Information system (AIS) is the systematic process of collecting, storing, and processing financial & accounting data which is used by internal accountants to report the information to investors, creditors & tax authorities. The entire process is termed an accounting information system. This system disseminates the company-related information to the stakeholders for faster decision-making.
It is the responsibility of an accountant to work in-depth with the AIS and ensure perfect accuracy in the company’s accounts & books. All financial records should be clean and recorded properly in the books. The information should be stored in a manner that is readily available & accessible to the users as & when required.
What are the Benefits of an Accounting Information System?
The accounting information system provides finance-related information across the organization, it also has several other benefits & advantages that help the business owners to run their business smoothly & effortlessly. Let’s discuss the benefits further:
Improved Interdepartmental Communication
AIS helps in building a proper & concrete flow of information path across various departments within a company. For instance, the sales department uploaded the sales budget, which can be readily accessible to the inventory department which is very important for further process. Now once the inventory is purchased, the sales department can be well informed that the stock is in. This way the information is communicated within all the departments. Having the important information on hand helps in better business planning & decision making.
User-wise Data Access Controls
Unlike the manual method, which is likely to be a risk to outsiders, the business owners can set user-wise data access controls in AIS. It ensures that the data will be available to only responsible users and not to any outsider. AIS also commonly referred to as accounting software helps in disseminating crucial information to a specific user by providing secured data access.
Business Insights
Another very important benefit that accounting software brings in is displaying the actual business insights. Business insights are very important for business owners to know the exact good & worst performing areas of the business. This not only helps in better business planning but also ensures business growth. Having the key performing areas, the business owners can decide where, when & how much money to put in. This will keep the growth stats moving upwards.
What are the Functions of AIS?
There are basic 3 main functions of an AIS (accounting information system) i.e.
- Efficient & effective storage of financial data.
- Manage the data & produce information in form of useful reports.
- Ensure 100% control over data & accurately process it.
What are the Types of AIS?
The accounting information system can be broadly categorized into three types, i.e. manual. Legacy, Integrated system
Manual Systems
These are primarily used by small businesses where the entire system is managed manually. The software is not integrated with hardware & accounting requires the support of documents. This is done because the business size is small, and it doesn’t need a complex system to work upon. However, the manual system must have documents, a general ledger, special journals, general journals, etc.
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Legacy Systems
These were in use before the advent of the high-end technically advanced accounting systems. This system helps in knowing the historic data of the firm but lacks the flexibility & reliability of modern-day software.
Modern Systems
These are windows-based technologies that are more user-friendly than legacy accounting systems. They are cheaper as compared to legacy systems and can be installed quickly with very few bugs.
How is AIS used?
An accounting system is broadly used to collect, store & process the financial & accounting data of an organization. The data stored is accessed by the decision-makers. An accounting information system forms a centralized system where the financial information is stored by authorized persons & disseminated among various departments of the organization. Crucial information like revenues, sales & purchase deeds, tax, employee information, customer data, etc is stored in an accounting information system.
An accounting information system has an inbuilt structure to store the information. Since AIS includes multiple fields that require necessary inputs, it is crucial to maintain high-standard securities to prevent any malicious virus attacks.
Accounting software like Marg ERP empowers the business owner with a complete digital solution. Apart from just storing the data, it helps you in handling multiple verticals of your business. You can easily generate most of the crucial financial reports, manage inventory, file GST return, and more.
Why Using Accounting Information System is Important for Growing Businesses?
AIS ensures a high level of accuracy within the organization, its financial records, and daily business operations. It also allows limiting the access of sensitive data by restricting user-defined roles, protecting the overall security of company data. An accounting system is also important to identify frauds and ensure the smooth running of the finances. An AIS makes the same data available to everyone in the company which reduces the chances of error. Also, the chances of data loss & data theft are almost nil.
For a fast-growing business, manually managing the business and accounting can be a tough job, therefore using an accounting information system simplifies the complexities and ensures the smooth running of the business.
What are the Components of AIS?
An AIS is made up of majorly six parts. These are listed below:
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User
This includes anyone who is using the accounting system. CFOs, accountants, managers, accounting executives, auditors, and so on. It helps in smooth working & coordination of different departments.
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Procedure & instructions
AIS is coded with certain procedures & instructions that regulate how financial information is collected, stored & processed. These are both manual & automated methods and can come from internal or external sources.
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Data
The accounting system has a database structure to store information in one central location to keep it easily accessible by all the departments. The system will save each & every piece of information relevant to the company’s finances. This may include:
- Transaction data
- Tax information
- Inventory data
- General ledger
- Customer data
- Invoices/ bills
- Sales orders
- Purchase requisition
- Sales Analysis
- Payroll information
- Credit / outstanding data
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Software
AIS has a software component that’s essential to store & process the data, analyze it & disseminate the data among the organization. Though AIS comes with an inbuilt software system, some AIS provides the provision of customization.
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IT Infrastructure
This refers to the hardware that is essential to operate the AIS like a computer, server, router, barcode scanner, printer, and other components that are used in daily business operations. To be able to run the AIS smoothly, the IT infrastructure must be compatible with the software.
- Controls
This means the security measures used to store the data safely with the AIS. Internal controls include everything from passwords to biometric verification to encryption methods. It should be able to filter out restricted data to specific users while keeping it accessible to employees with full access. As AIS contains sensitive data, it is important to have safety measures in place.
In the end
Having discussed everything you need to know about accounting information systems, we can clearly say that AIS is very important for growing businesses. Apart from managing just finances, an AIS has much more to offer. It helps to streamline your entire business process and keep your business moving.
