Accounting information systems (AIS) are effective tools to address internal and external changes by processing transactions and data to generate useful information to control, plan, and operate corporate activities and facilitate and boost organizational and employee productivity. The system collects, analyses and processes transaction data and disseminates the accounting information in a company’s financial statements to interested users, including the employees, management, suppliers, and customers. This accounting information is a crucial part of today’s life and vital to understanding the accurate financial situation of firms and organizations. It is the basis for making a wide range of decisions affecting the organization’s long-term and short-term plans. Whereas the AIS may vary depending on the nature of the business and the transactions they execute, they all aim to ensure that reliable and relevant information is reported in the financial statements. This research paper explores the contribution and role of accounting information systems as financial and strategic tools influencing critical decisions, including short and long-term investment, company resource allocations and operational efficiency.
First, the AIS is a critical element of cash flow management, revenue analysis, cost control, and risk management for short-term decision-making. Management and organization employees may need the AIS to process and execute cash payments and receipts, with cash receipts entailing all the activities that relate to entering, receiving and adding cash transactions, such as supplier payments, loan repayments and utility payments, while cash receipts entail those tractions that originate from various sources such as sale transactions both cash and credit including assets sales, loan receipts and others (Reinamah et al., 2021). Using these transaction reports and summaries, the management and concerned staff can get a clearer picture of the finer elements of the cashflows for the day and even week, helping to plan what cash may be expected in the short term. Similarly, the systems that entail cash receipts and payments can help the organizational managers ascertain the expected revenue at the end of the day. The end-of-day reports help the departmental managers devise optimal approaches to maximize cashflows from least performing activities. Additionally, through the reports that the systems generate at the end of a shorter period, departmental heads can determine the revenue generated within a given short period, thus allowing them to plan on how to meet their short-term obligation such as salaries, departmental bills and other utility bills.
Additionally, strategic and long-term decisions significantly impact business, and thus, it is important to analyze accounting information generated by the AIS for making strategic decisions (Kyeremeh et al., 2022). specifically, an organization’s AIS is built to gather, execute, process and generate data from multiple sources into accounting information, creating comprehensive reports for the management to execute various actions. Managers use the reports and information to understand their tasks more clearly and redefine tasks, significantly lessening any uncertainties and risks before making decisions. For instance, AIS can generate information regarding sales, purchases, cash receipts and credit payments in a new market for a highly risky and competitive retail store. Such information can act as a means to an end for the manager to make critical decisions regarding expanding new stores in the new market. Similarly, the AIS can generate all the accounting information related to all the organizational departments. Management can then use such information to make critical decisions regarding the number of departmental staff to hold to reduce costs and the marketing expenditure to ensure each department’s profitability.
Moreover, companies adopt the AIS extensively to optimize and simplify business activities, operations and processes. The fundamental goal of these companies is to implement methods that increase the firm’s operating performance, reduce expenses, and boost productivity without disrupting services and incurring more costs (Ali & Abu-AlSondos, 2020). AIS adoption may also be intended to boost the quality of service delivery and customer satisfaction and enhance operational efficiency. Specifically, AIS empowers managers and organizational employees with a comprehensive and simplified knowledge base regarding expenditures, costs, purchases, credit and cash sales. When the parties have such information, they reduce the wastage of time in making essential decisions regarding the daily running of the organization, such as the customer group to extend credit sales, thus lessening the time required to make such decisions. In addition, the AIS is critical in reducing the errors associated in the processing and interpreting data. This represents significant cost savings for the organization in terms of time spent processing, interpreting and disseminating data, significantly attaining operational efficiency.
Additionally, in regard to operational efficiency, AIS is key in the automation of repetitive activities, real-time data processing and inventory management. Efficient utilization of technology resources such as AIS has improved business competencies in automating repetitive and routine transaction that has been key in creating more potential for the organizational staff to attend to other organization matters (Saad, 2023). The end result is an optimal utilization of the organization’s manpower while lending improved services to the customers. additionally, AIS targets to exploit real time evaluation, information and analysis of functional data so that it could achieve the best outcomes and goals in iptimal business performance and decision making. Such use adds to the effective and efficient information flow, easy objectives and goals achievement and effective decision-making processes. In inventory management, the AIS can generate real-time information with regard to the inventory levels, reorder levels and holding costs. From the data organizations can minimize stock outs, over or understocking enhancing smooth organizational operations.
Finally, the accounting information system has a significant impact on the the planning process of organization that helps in resource allocation. Specifically, the AIS system reliability plays a significant role and is crucial for the company management to strengthen its controls and plans processes (Alathamneh, 2020). Most resource-constrained organizations can use the data generated by the AIS to focus their attention on the future, identify the problem areas, and make good decisions on time to attain given goals. For instance, the information can help management gather information on the departmental expenditure and track given costs to given costs centers and devise ways to reduces the costs in the long term. Similarly, the AIS can help management to draft the planning budget to put and allocate resources to given key project areas depending on the insights generated by the AIS systems. based on the data, the management can allocate more resources to less costly and highly productive areas and fewer resources to cost-intensive and low-production areas helping to generate maximum returns from the sectors. For the organizational departments, the systems may facilitate the budgeting process by organizing and collecting the financial data. Subsequently, the information may be used to draw budgets, allocating resources to different subjections, aligning them to the organizational goals.
To sum it up, AIS plays a significant role in the making effective investment decision, efficient resource allocation and attaining a firm’s operational efficient. The systems can generate insightful information and data that helps managers make important organizational short-term and strategic decisions regarding cash receipts, payments, capital investment, business expansion and organizational process management. Additionally, the AIS can be a great source of information that organization can leverage to optimize and simplify the business activities. They can help minimize routine and repetitive activities, generate real time information leading to timely decision making and cost savings for staff and management. The systems can empower managers and employees with extensive knowledge that helps budget planning, helping give key insights on key decisions such as resource allocation and daily running of the organization, thus maximizing operational efficiency. Overall, the AIS can be a great technological tool that can present significant advantages in decision-making, resource planning and allocation, and operational efficiency.
References
Alathamneh, M. S. (2020). The impact of accounting information systems reliability on enhancing the requirements of planning process at Jordanian commercial banks. Management Science Letters, 1043-1050. https://doi.org/10.5267/j.msl.2019.11.005
Reinamah, C. M., Siahaan, M. Y., & Samadara, S. (2021, April). Design of Accounting Information Systems of Cash Receiving and Expenditure in Improving Internal Control of Income of Weaving Tie MSME in the District South Central Timor. In International Conference on Applied Science and Technology on Social Science (ICAST-SS 2020) (pp. 527-530). Atlantis Press. https://www.atlantis-press.com/article/125955962.pdf
Kyeremeh, K., Kyeremeh, B. B., & Forson, M. A. (2022). Role of accounting information systems in organizational decision making: Evidence from banking sector in Ghana. Journal of Accounting and Taxation, 2(3), 123-144. https://doi.org/10.47747/jat.v2i3.912
Ali, B.J.A & Abu-AlSondos, A.I. (2020). Operational efficiency and the adoption of accounting information system (ais): a comprehensive review of the banking sectors. International Journal of Management (IJM). 11 (6), 221-234. DOI: 10.34218/IJM.11.6.2020.021
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