Transaction-Processing Systems
Now let’s shift to transaction-processing systems. Remember that these systems help a company complete a process more efficiently, saving time and money. The type of transaction processing system is an Accounting Information System. This system carries out the functions of accounting. For instance, QuickBooks is an Accounting Information System. This system assists accountants in making daily transactions, recording cash receipts, creating invoices, performing bank reconciliations, and outputting information as well.
Accounting systems help generate reports like the balance sheet, income statement, and cash flow statement. This system creates an audit trail, allowing auditors to see the history of different transactions. It also implements preventative controls like edit checks. If someone attempts to enter incorrect information into the system, the system will not allow the input. This describes the functions of the Accounting Information System.
The next type of transaction processing system is called a Customer Relationship Management System, also known as a CRM system.
Probably the best-known CRM system is Salesforce. A CRM system is designed to help a the company manages interactions with customers and potential customers.
Enterprise Resource Planning
The next type of transaction-processing system is called the Enterprise Resource Planning System (ERP). The goal of an ERP system is to centralize and integrate every department of a company to provide quality information. Instead of having every department use its own software and act like a silo, the ERP system integrates all of these different departments. This allows for better tracking because now the departments can communicate with each other in real-time.
Study Tip: The goal of an ERP system is to centralize and integrate every department of a company to provide quality information.
An important point about an ERP system is that it is expensive, complicated, and time-consuming to integrate. A well-known type of ERP system is Oracle.
Consider an example to understand how useful an ERP system could be for a company. Think about what happens when a customer places an online order for a new bed. First, the warehouse needs to be notified of the order so they can locate the bed and place it into the truck. The accounting department needs to be notified of the transaction to ensure that revenue and accounts receivable are being recorded. Then the inventory department needs to be notified that one bed has been taken out of inventory to avoid selling the same bed twice.
As illustrated, this one customer order affects several different processes and departments. An ERP system would help integrate this entire process. Instead of having many separate programs for all these tasks, the ERP system is one platform that helps integrate everything together.
Once the customer places the order, the ERP system notifies the warehouse department of the purchase, informs the inventory department of the change, and alerts accounting of the purchase. It helps integrate everything together.
Supply Chain Management
The next system is the Supply Chain Management system. It organizes the entire process, from acquiring the raw materials for products to producing them, and eventually delivering the product. Think about the supply chain for a car manufacturer. The company first has to purchase car parts from different companies or even different countries. It needs to purchase the correct amount of parts far enough ahead of time to prevent a shortage. Then, after manufacturing the cars, it needs to send the cars to dealerships.
The Supply Chain Management system aids in this entire process. Advantages of using this system includes timely reception of items, correct location delivery, and proper valuation in inventory, and overall improvement in cash flow.