We all know the invaluable worth of computers in our daily lives and our work. But did you know computers are also essential to an organization’s decision making? There are computer software and systems that help businesses analyze data in a scientific way to ease the decision-making process. Let us look at two such functions Management Information Systems (MIS) and Accounting Information System.
Management Information Systems (MIS)
Management Information System, more commonly known as MIS is a computer-based system. MIS actually helps the organization, especially the managers, to organize and evaluate information and data, and provide information in a timely and efficient manner. This also helps the managers make decisions based on the information and analysis the MIS provides.
As a business grows in size, the management of information and the decisions based on such data get more complicated. MIS helps organize such information, so decision making becomes easier right from simple low-level decisions to strategic plans made at the top level of management.
Since it is a computer system, it includes elements of the computer system as well. It has software (that help make the decisions), users (managers), databases, all hardware necessary and applications (people and project management applications) as well. MIS generally focuses on accounting and economic aspects of a firm, analyzing problems and providing solutions.
The old management system which was at times random, based on intuition and unscientific approaches has been replaced by MIS. MIS scientifically collects, stores, process and communicates information relating to various activities across the organization. This helps managers evaluate progress and delegate work more efficiently, raising the overall efficiency of the organization.
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Advantages of MIS
- MIS reports allow for evaluation of the performance of employees, machinery, and even money (investment). This allows the management to make decisions about the future.
- Helps in cost control by pointing out turnovers, idle times, wastage of resources etc.
- Compares budgets and plans to actual performances and figures. So MIS can pinpoint variances and help the management in taking appropriate actions to correct the situation.
- MIS also identifies the strengths of the organization, allowing the management to take the opportunity to exploit it more
- Takes away the uncertainty and risks involved with managerial decision making
- Allows for data to flow smoothly along all the various levels of the organization with minimal effort, and allows for more effective communication as well
- And finally, as far as accounting is concerned, MIS is the source for information regarding the companies financial health and current financial situation.
Accounting Information System (AIS)
Like MIS, Accounting Information System (AIS) is also a computer-based system, which an organization uses to take important financial decisions. An AIS will collect, process, analyze and store financial data of a company. And when called upon it will retrieve and report such data to its users, namely accountants, consultants, financial officers CFO, auditors, government tax authorities etc.
There are three basic objectives of an AIS, which are
- It helps an organization fulfill its statutory obligations of preparing and publishing certain accounting statements and information
- It analyses financial data and provides reliable and accurate financial information to the users of the AIS
- Protects a firms accounting data from breach or theft (which can be a significant problem)
Components of Accounting Information System
An AIS, like most computer systems, consists of six basic components. Let us take a look.
- People: These are the users of the AIS. Internal users include accountants and other financial officers o the company. Then there are also users outside the organization, that can be given access to the AIS. Some such external users are auditors, consultants, tax authorities etc.
- Procedures: These are the procedures the system follows to collect and process data. The database for such a process can be internal (like employee names, sales figures) or external databases (like customer orders, tax slabs etc). The feeding of the data can be both manual as well as automated.
- Data: An AIS mainly deals with all kinds of financial and commercial data. Any data that is pertinent to the accounting of the firm will be input data for an AIS. Care must be taken that the data entered is accurate and complete. Examples of such data include invoices, orders, payroll, bills etc.
- Software: AIS software performs all the functions of storing, processing, analyzing, retrieving financial data of a company. The software can be generalized software that is available in the market (Tally, Oracle etc) or can be specialized software created specifically for a particular company and it’s accounting needs. Some of this software has an inbuilt internal control and audit options. They even help in tax management.
- Hardware: Like any other information system, AIS will also require some hardware components. these can include computers, laptops, servers, printers, scanners, secondary storage hardware etc.
Solved Question for You
Q: What are some disadvantages of a Management Information System?
Ans: MIS does have a few disadvantages, some of which are
- It is an expensive system. It is a significant expense for a firm and requires constant upkeep and upgrades
- Also, MIS requires constant maintenance. A firm will have to hire special employees who keep the system maintained and running smoothly
- Sometimes an MIS can gather some unnecessary data and slow down the decision making process. If the programming is not up to the mark, MIS can be ineffective