Accounting information systems development - Essay Example

Accounting Information Systems Development Background The company in this scenario is a small, local CPA firm. The personnel at the organization include three new CPAs and an office manager. Primarily, the company's business consists of tax and write-up work. However, recently the company has required a new client: a homeowner's association with a total of 150 homeowners. The firm has agreed to provide the homeowner's association with several services. Service Areas There are six service areas that the company has agreed to service the homeowner's association with: billing, collection, payments, reporting, tax, and advisory. With billing, each homeowner will be sent an itemized bill each quarter, dues being payable by the month. Late fees accumulate at one percent of the unpaid balance each month that passes. On the first day of the last month of the quarter, bills are mailed out to the homeowners, and payment is expected by the quarter's end. With collection, the accounting firm is responsible for collecting the payments from the post office box that it has rented specially for the homeowner's association. They are also responsible for depositing the checks they collect. As far as payments, about five checks are written per month. These go to the monthly fee, a lawn maintenance company, a refuse removal company, taxes, postage, supplies, etc With regard to reporting, the firm is responsible for reporting on all checks written, collections, outstanding homeowners' balances, and quarterly financial statements. As far as taxes are concerned, the firm must prepare the homeowner's association's federal and state tax returns. This can be accomplished by hand or through tax preparation software. Finally, with advisory, the firm is responsible for advising the board when they deem it is necessary. This is particularly true with regard to budgeting, investment, and purchasing. To Be Computerized With the large, new client, the company is hoping to expand that area of their practice by computerizing the main functions of their system. The goal of the company is to computerized the system's main functions. The main focus of the computerization will be on billing and reporting. Other than the actual interface of the new system, the checking account, financial statements, and tax preparation parts will not be computerized at this time. Instead, the billing and collections portions of the system will be computerized. The System and Manual Functions (Inputs, Outputs, and Controls) BusinessTown (2008) tell us to "Think of the accounting system as a wheel whose hub is the general ledger (G/L). Feeding the hub information are the spokes of the wheel. These include accounts receivable, accounts payable, order entry, inventory control, cost accounting, payroll, and fixed assets accounting." Each of these items is a subledger of the general ledger, and each summarizes the entries and then feeds that information to the general ledger. There are a few differences between manual and automated ledgers. In order to consider this, think of the general ledger as a piece of paper that shows assets, liabilities, income, and expenses where all transactions are recorded by hand in a manual fashion. While some of the entries from the different subledgers flow upwards, others are entered manually through the utilization of a general journal entry. "The same concept of a sheet of paper holds for each subledger that feeds the general ledger. A computerized accounting system works the same way, except that the general ledger and subledgers are computer files instead of sheets of paper. Entries are posted to each and summarized, then the summary is sent up to the G/L for posting" (BusinessTown, 2008). Billing is the first component that will be computerized at the firm. This will be highly beneficial to the organization since "Accounting firms can improve their profitability and relations with clients by automating client billing with computers. Accounting firms can use PCs as an economical means of computerizing the billing process. A computerized billing system allows accounting firms to more effectively manage their employees' productivity and gives them the means to analyze the hours available and hours billed of each employee. A computerized billing system provides more control over accounts receivable and client work-in-process. Factors to consider when selecting a software package include the number of the firm's clients, the number of employees and their experience levels, and the fee structure and types of services offered" (Smith, 1991). The second component that will be computerized at the firm is the collections function. Computerized collections are a "new technology that curtails expenses and valuable time spent on telephone collections" (Butler, 1992). One way in which the collections processed can be fully automated is through the use of a predictive dialing tool. "Using a predictive dialing system creates many operational efficiencies in outbound dialing. Predictive dialing systems not only dial faster and more accurately, they can queue busy and no-answer results for second or third attempts without ever communicating with the counselor. Additionally, most predictive dialers can capture the bad-number information and ship it to a skip-tracing service for updated phone information" (Butler, 1992). With regard to the automated functions, we can look at inputs as the data that will physically be entered into the computer via an input device such as a keyboard or a mouse. This consists of raw numbers and letters. Once the computer processes the data, it becomes information. The type of information the computer processes in this accounting process includes the facts and figures that are inputted into a form that exists in a program such as Peachtree, QuickBooks, Quicken or even Access when set up for accounting functions. Once the forms are complete, reports can be made from the data that was inputted. The accounting software that is designed for inputting data such as this is also capable of performing basic financial and accounting information such as calculating late fees and posting to the general ledger. Building files is an important step of the process. We must ensure that this step is done correctly so that these files will interact properly with inputs when they are entered, as well as the routes of the internal computer system. The system must also be properly implemented by staff, which can take a great deal of training in an attempt to avoid costly mistakes. In order to accomplish this, staff members must follow an order of operations, such as the following: 1. Transaction takes place 2. Paperwork is completed 3. Staff member goes to computer to enter data from paperwork 4. Staff member pulls up customer file stored in master database 5. Staff member updates master file with new transaction information 6. Staff member provides customer with receipt 7. Staff member saves program file 8. When it comes time for reporting, the new information will automatically be included in any generated reports The reports that are generated could include a month-end summary of what accounts are moved to the collections department and the total amount of income. At the end of the fiscal year or of quarters, financial reports can also be generated. These are both examples of outputs. Other examples include reports showing who is late paying their homeowner's association fees, who owes what, when the bill is due, and when to start processing the bills. The system, no matter what software program is chosen, needs to be set up to automatically calculate the amounts due and to whom bills should be mailed out to, including their account numbers and personal information that is confidentially filed away under a master file system. As far as the manual functions are concerned, a nice set of document templates adjusted to meet the needs of the company would be a huge time-saver. Templates are designed to make work easier for the end user by providing the overall layout and formatting of a professional document where all the user has to do is fill in the company or individual specific information. Reports, Documents, & Forms Needed and What They Will Look Like Each area of the accounting system for the homeowner's association will need documents, regardless of whether or not those documents are computerized. For billing and collections, it will be necessary to have computerized invoices and receipts. In addition, these functions will need forms and reports in order to share this valuable data with shareholders. This can be accomplished through an accounting software package such as QuickBooks or Peachtree, or it can be attained through utilizing a software program such as Microsoft Access. Three of these types of documents have been prepared and are listed at the end of this report so that one may see what they will look like. For the checking account, it would be more efficient to use software such as Excel, but the records can be kept by hand using the check book register that is provided by the bank. For the financial statements, either it can be designed in its entirety by the company or they can choose to follow a financial statement template in order to ensure all needed information is included. For tax preparation, the company has several choices. They can obtain the necessary forms from the IRS, fill them in manually, and send them in. They could use tax software such as H & R Block's TaxCut or TurboTax to make the process easier. They could also opt to hire an outside agency to take care of their taxes for them. Possible Problem Areas That May Arise Since the company is focusing on growth and it is likely that they will soon have a great deal more clients, it is predictable that problem areas will likely arise. First of all, they will need to automate the rest of their processes. As they grow, the manual processes will be too time consuming and tedious for them to continue. Furthermore, if a mistake is made in an automated system, it's much easier and quicker to find and fix than it is in a manual system. According to Smith (1991), one should "Organize your small-business accounting system by function. Often there's just one person there to do all the transaction entries. From an internal control standpoint, this isn't desirable. Having too few people doing all the accounting opens the door for fraud and embezzlement. Companies with more people assign functions in such a way that those done by the same person don't pose a control threat." There is also the problem of change itself. People are naturally resistant to change, but they will need to be trained on how to use the new automated system. Conclusion Almost every business desires growth, but along with growth comes necessary changes. In order to grow successfully, companies must meet the changes that come along and be prepared to deal with them. All it takes is careful planning. Automating systems is a good way to make things much less time-consuming and painstaking, but it comes along with the drawbacks that people are adverse to change and that they must be trained thoroughly or the upgrade will do no good. [Your Company Name] [Your Company Slogan] [Street Address] [City, ST ZIP Code] Phone [(509) 555-0190] Fax [(509) 555-0191] INVOICE Invoice #[100] Date: February 15, 2012 To: [Name] [Company Name] [Street Address] [City, ST ZIP Code] [Phone] For: [Project or service description] [P.O. #] DESCRIPTION HOURS RATE AMOUNT TOTAL SALES RECEIPT [Your Company Name] [Your Company Slogan] receipt # [100] Date: February 15, 2012 [Street Address], [City, ST ZIP Code] Phone [000.000.0000] Fax [000.000.0000] [e-mail] sold to [Name] [Company Name] [Street Address] [City, ST ZIP Code] [Phone] Customer ID [ABC12345] payment method check no. job qty item # description unit price discount line total Total discount Subtotal Sales Tax Total Thank you for your business! [Company Name] Statement Date: 2/17/2008 [Company Address] Date Due: [DATE DUE] [City, ST ZIP Code] [Phone] STATEMENT OF ACCOUNT [Customer Name] [Address] [City, State ZIP Code] DATE DESCRIPTION CHARGES CREDITS ACCOUNT BALANCE Balance brought forward References Butler, J. (1992). Computerized collections. Mortgage Banking. Retrieved February 17, 2008, from http://www.allbusiness.com/business-finance/cash-management-collections/299144-1.html Components of the accounting system. (2008). BusinessTown. Retrieved February 17, 2008, from http://www.businesstown.com/accounting/basic-components.asp Smith, L.M. (2001). Computerized billing for time improves client communications and firm profitability (Management of an accounting practice). (1991). The CPA Journal. Retrieved February 17, 2008, from http://www.nysscpa.org/cpajournal/old/10755298.htm Read More