Finance Infomation Systems
I. Overview of Financial Information Systems 1. Differences between Data and Information:
a) Data: * Are the raw figures relating to the routine activities of a business organization. * These figures alone do not enable decisions of any consequences to be taken. * In order for data to be more useful, they need to be processed to provide information (i.e. the data needs to be converted into usable facts and figures).
Data “distilled” into a smaller amount of information becomes usable for decisions of greater consequences to the firm, e.g. the huge number of transactions of a business may be processed resulting to the balance sheet of the business. b) Information: * Basically the processed data containing usable facts and figures. * There can be three levels of information in a business organization: * Corporate information, such as the company’s balance sheet. * Departmental information, such as the departmental expenditure (Branch Statistics). * Individual information.
2. Characteristics of good information:
a) Brevity: * Every recipient of information should be provided only with information that meets his/her needs. * Too much detail can result in overlooking of vital facts. * A large amount of information should therefore (whenever possible) be split into smaller packets tailored to suit individual recipients. * There is need for being specific, i.e. information should go straight to the point, especially if immediate action(s) are called for. b) Accuracy: * The degree of accuracy of information relates to its usage, i.e. no need for great accuracy if it is of no consequence. * Examples: i. Marketing director not interested in the exact value of sales accurate to the cents. (The nearest hundred/thousand may be sufficient, depending on the overall turnover). ii. The financial accountant needs accuracy to the cent.
*Generally, the degree of accuracy of information is
a) Data: * Are the raw figures relating to the routine activities of a business organization. * These figures alone do not enable decisions of any consequences to be taken. * In order for data to be more useful, they need to be processed to provide information (i.e. the data needs to be converted into usable facts and figures).
Data “distilled” into a smaller amount of information becomes usable for decisions of greater consequences to the firm, e.g. the huge number of transactions of a business may be processed resulting to the balance sheet of the business. b) Information: * Basically the processed data containing usable facts and figures. * There can be three levels of information in a business organization: * Corporate information, such as the company’s balance sheet. * Departmental information, such as the departmental expenditure (Branch Statistics). * Individual information.
2. Characteristics of good information:
a) Brevity: * Every recipient of information should be provided only with information that meets his/her needs. * Too much detail can result in overlooking of vital facts. * A large amount of information should therefore (whenever possible) be split into smaller packets tailored to suit individual recipients. * There is need for being specific, i.e. information should go straight to the point, especially if immediate action(s) are called for. b) Accuracy: * The degree of accuracy of information relates to its usage, i.e. no need for great accuracy if it is of no consequence. * Examples: i. Marketing director not interested in the exact value of sales accurate to the cents. (The nearest hundred/thousand may be sufficient, depending on the overall turnover). ii. The financial accountant needs accuracy to the cent.
*Generally, the degree of accuracy of information is