Strategic Information Systems for Business and Enterprise

This study material provides an in-depth understanding of strategic information systems for business and enterprise. It covers the system flow of expenditure and conversion cycles, analysis of internal control weaknesses, and identification of risks and changes needed to reduce them. The material is relevant for students studying strategic information systems in business and enterprise courses.

Strategic Information
Systems for Business and
Enterprise

Table of Contents
INTRODUCTION...............................................................................................................3
MAIN BODY.......................................................................................................................3
System Flow of Expenditure Cycle................................................................................3
System Flow of Conversion Cycle.................................................................................4
Analysis of physical internal control weaknesses in the expenditure cycle...................5
Analysis of the risks exist in the conversion cycle and the changes needed to reduce
the risks..........................................................................................................................6
CONCLUSION...................................................................................................................8
REFERENCES..................................................................................................................9

INTRODUCTION
Strategic information system which is information system developed for business
initiatives in the organisation. Strategic information system is intended to ensure
competitive advantage for the business organisation. Strategic information system also
ensures that information flow is effective and flow of information system through which
information can be transferred timely. This report will discuss about information system
at Paradise Industries which is based at Adelaide and is a manufacturer of high-
precision machine tools. In context of its information system Paradise Industries
employs a centralised computer system with distributed terminals in the department.
This report will discuss about expenditure cycle of Paradise Industries and Conversion
cycle of Paradise Industries. Expenditure cycle is concerned with inventory and
purchase requisition whereas conversion cycle is concerned with production in the
Paradise Industries.
MAIN BODY
System Flow of Expenditure Cycle
Expenditure cycle is a process which involves placing the order or can be said
ordering required material and goods. Another step in this is receiving the material
which has been ordered and lastly paying for the items which has been order and
received. This is first phase of production as this initiates the production by collecting
and receiving all the required material for the production (Moser and et.al., 2019).
Paradise Industries is a manufacturing industry and this is why this expenditure cycle
plays important role in overall success of the manufacturing process.
Expenditure cycle starts from the time when inventory falls on recorder point.
This automatically generates purchase requisition and prints a copy at the terminal of
purchase department. After selection of supplier purchasing clerk prepare purchase
order and this is sent to supplier and to receiving department. Purchasing clerk then
adds record to the open/close purchase order file through update program in the data
processing centre.
After receiving delivery from supplier clerk reconciles packing slip and purchasing
order. After receiving the order receiving clerk prepares a hard copy of the items which
has been received along with quantity and quality of the goods which has been
received. The report of receiving is then given to warehouse and receiving department.
Later this record is added to digital receiving report file through departmental terminal.
This is followed by automatic closure of purchasing report. Warehouse clerk updates
inventory subsidiary ledger on receiving the order through warehouse terminal.
After arrival of suppliers’ invoice accounts payable clerk adds record to the suppliers
invoice file and this automatically adds liability in the accounts payable subsidiary ledger
based on the financial information in the invoice. This is followed by updating all
affecting ledger accounts.

All the accounts payable are automatically scanned by computer system for
items due to be paid and cheques are printed for them (Kong, Dong and Zhang, 2019).
Cheque is sent to supplier and copy of the cheque is sent to cash disbursement where it
is filled. Record of this is added to cheque register file and this removes the liability in
the accounts payable subsidiary ledger.
Figure 1System Flow Chart of Expenditure Cycle
This is the flow of expenditure cycle in which process starts from purchasing department
and passes through receiving and accounts payable department and finally gets to cash
disbursement where Industry pays to the suppliers from whom supplies has been
ordered and received.
System Flow of Conversion Cycle
Quarterly forecast of sales triggers process of the production and this goes to
production planning and control clerk. Production planning and control clerk updates the
digital production schedule from their terminal to include batches of production to be
produced during next quarter (Narwal and Jindal, 2017). The work centre supervisor
digital work move tickets and material requisition which are prepared by system on
weekly basis.
These are accessed by work centre supervisor and printed hard copy of the work
orders, move tickets and material requisition. These are distributed to each work centre
in the production process. Two copies of the material requisition are sent by staff
members to warehouse in exchange for the material. After completion of the production
move tickets are sent to cost accounting to mark the completion of production in the
batch. In this labour time spent on each batch is recorded in hard copy and sent to cost

accounting. After completion of the production work centre supervisor closes the open
work order file.
One copy of the material requisition is filed by the warehouse clerk and updates
the material inventory from file from the warehouse terminal and second copy of
material requisition is sent to cost accounting. Lastly, a digital journal voucher is
prepared by the clerk and this is posted to general ledger control accounts.
Cost accounting clerk accesses the digital work orders and set up work-in-
progress for the production batch (Karim, Nawawi and Salin, 2018). End of the day
digital general voucher is prepared by cost accounting clerk and this is posted to
general ledger control accounts to reflect status of work-in-progress and records are
transferred from work-in-progress to finished goods inventory.
Figure 2System Flow of Conversion Cycle
This is the complete conversion cycle which is followed at Paradise Industries to
convert material which is ordered by the industries which has been discussed in
expenditure cycle to finished goods. This includes different phases and people involved
in the cycle of turning inventory to finished goods.
Analysis of physical internal control weaknesses in the expenditure cycle
Expenditure cycle though involves every aspect of the cycle at Paradise
industries. But this one of its weakness that it includes and has role of all the
participants of the expenditure even of those who role in the Expenditure cycle is not
required. They extend the cycle and at the same time they also make it more
complicated. Instead of a traditional big expenditure cycle Paradise Industries can
employ a simple and short expenditure cycle which is simple to understand and are
more effective. Paradise Industries’ information flow is based on centre and distributes
to all the department of the industry. This can be kept centralized and at the same time
the process can be simplified.
The complete cycle of expenditure involves four departments which are purchasing
department, receiving department, accounts payable department and cash
disbursement department (Zhou, Chen and Cheng, 2016). These are important are
involved in expenditure cycle because this involves three key functions which are
Ordering goods and material, receiving and storing these items and paying for these
items. Hence all three departments are involved in this but the problem which occurs in
this system is that related to one expenditure cycle recording of the data and accounting

records all are done separately. This can be done in a single attempt by developing a
centralized system which can be operated by the distributed access to the central
system.
This means that instead of doing same function in different manner and by
different people centralized system will require that purchase order gets recorded in
central system. Clerk receiving the supplies can match the supplies with this purchasing
order and record the receiving on the central system. Accounts payable can collect
information from the central system regarding accounts payable and cheques can be
made on this basis and on the basis of information recorded by accounts department
related to cheques cash disbursement department can disburse the cash.
The limitation of this is involvement and repetition of the functions which can be
carried out in single attempt effectively (Silva, 2017). This will also save time and efforts
of the employees and information verification will also not be required when this
approach is followed for Expenditure cycle. This will also develop centralised system of
information which can be utilized for reference and decision making in future and that
time the information required will be easily available. This expenditure cycle involves
several parties and this is one of the weaknesses in its internal control system.
One important consideration in this is that supplies which are received from
suppliers are firstly collected by receiving department clerk and later this is transferred
to warehouse where they will be stored. In this receiving department and warehouse
can work together as supplies are ultimately stored at the warehouse. This will reduce
the time and will also be effective as this will also reduce the collective efforts of the
receiving department and warehouse clerk. The supplies which are received from
suppliers can be directly kept at warehouse and this will also not require creation of the
record for warehouse by receiving department.
Analysis of the risks exist in the conversion cycle and the changes needed to reduce the
risks
Conversion cycle in Paradise Industry starts from determination of quarterly
estimation of sales and ends when material turns from work-in-progress to finished
goods (Doruk and Ergün, 2019). Conversion cycle involves several aspects and
functions of Paradise industry like cost estimation and cost accounting, requisition of the
material and human resource management at the production process of Paradise
Industry. One of the limitations of this cycle is that like Expenditure cycle this also
involves various aspects and these make the complete cycle comparatively long and
also affect the efficiency of the conversion cycle. Some of the risks which are involved in
this conversion cycle are;
 Inclusion of several parties is one of risks associated with the Conversion cycle
these are staff from production facility, staff in the warehouse and other staff
involved in the conversion cycle increases the risk of misappropriation of material
and products.
 Risk regarding quality of the products is another risk in the conversion cycle. The
conversion cycle which was discussed in case did not include any factor
regarding the quality and quality control of the process or the products. Quality is
an important aspect of the manufacturing and production of the goods. Quality is

important to be evaluated at every aspects of the conversion so that overall
quality of the products can be improved.
 Risks involved in conversion cycle are also associated with inventory as this is
one of the important elements of conversion cycle. Input shortage this is
important risk as if the input gets shortage this will affect and stop complete cycle
of conversion and production (Ikechukwu and Nwakaego, 2016). This case
involves that if staff members requires additional material they issue material
requisition and shortage of the material can have higher possibilities to occur in
such time.
 Shortage of material is one of the risk of conversion cycle and similarly excess
inventory is also a risk. This may create difficulty in inventory management and
cost can increase because of inventory management. This also occupies extra
investment which is not even required.
 Excess production is another risk associated with the conversion cycle is also a
risk. This is because Paradise Industries process on their production in the basis
of forecast of sales in case sales reduce than the products might increase the
cost of the company and also engage extra capital and investment in it. Risk also
lies within improper forecast of the sales as this has direct impact on the
conversion cycle of the company.
 Supply Shortfall is another risk. This means possibilities are there that Paradise
Industries do not get adequate supply and this has possibilities of affecting the
whole process of production and conversion (Ubesie and Duru, 2016). This
happens when demand of the product is higher and as a result production is also
carried out in large volume.
 Information reliability is another element having risk in it. Information wrongly
recorded and improperly understood is one of the biggest risk to affect the
conversion. In Paradise industries this has higher chances because information
flows a long way in conversion cycle and at any point of the time information gets
affected whether knowingly unknowingly this has a risk for the conversion cycle.
This can affect material and inventory requisition, this can affect production of the
material and can also affect the cost of the material. In all these situation risk lies
for conversion cycle because all these are its element and information is also
concerned with conversion cycle.
 Lastly one of the risks which is associated with conversion cycle is regarding
labour and people involved in the conversion cycle. Shortage, excess both are
not good for conversion cycle and this is why this is also a risk for it. Though this
is not very important and significant because controlling them is possible for the
Paradise Industry.
Changes needed to reduce the risk lies in changing in the approach of conversion and
its process (Ubesie and Duru, 2016). Paradise Industries can adopt Just in Time
approach for its conversion and production. Just in Time is an approach which means
that conversion of the material is carried out according to the demand of the product.
This reduces and eliminates all the risk which is involved in conversion. Just in Time is
not limited to the conversion of the material into goods but this also involves just in time
inventory. This means that inventory is also collected when inventory is required
(Ganiyu, Henry and Adekunle, 2019). This eliminates all the efforts for the storage and

management of inventory and this is directly used in conversion process. This reduces
cost and along with this the time required in supply, conversion and distribution to the
customers also gets reduced. This reduction in time will also eliminate various type of
cost and also reduces possibility for shortage and excess of the material and shortage
and excess of the goods (Vandina, 2016). This is because goods are converted
according to their demand and important element of this is that customers in this
approach exist before the goods get ready and this is also a benefit associated with this
approach of conversion.
This suggests that changing the approach of conversion Paradise industries can
get various benefits in terms of cost and in terms of time saving. This will also reduce
the efforts which were required in management of inventory and chances of inventory
getting obsolete and damaged also eliminates through this approach of conversion
(Pinto and et.al., 2018). Benefits of this are not only limited to conversion cycle but also
extends to expenditure cycle of Paradise Industries.
CONCLUSION
From the above discussion it can be concluded that information in Paradise
Industries gets extended to several aspects of the cycle. The expenditure cycle which
was discussed in the report is concerned with acquisition of material and inventory in
Paradise Industry and hence the process for this starts from ordering inventory and
ends at paying for the inventory which has been received by the Paradise Industries.
There are some limitations in this and these are concerned with length and involvement
of various people in the cycle. This may affect the quality of expenditure and this also
involves that the cycle gets increased because of elements which can be eliminated
through proper information system. This report also discussed about Conversion cycle
of Paradise Industries and this is concerned with converting the material into goods.
This starts from the forecast of sale and then collection and receiving the requisite
material and ends when material has turned into goods. This can be improved and risk
associated and involved in this can be eliminated by the adoption of Just in time
approach for the conversion.

REFERENCES
Books and Journals
Doruk, Ö.T. and Ergün, B., 2019. The role of macroeconomic constraints on cash
conversion cycle: evidence from the Turkish manufacturing sector. Asia-Pacific
Journal of Accounting & Economics. pp.1-12.
Ganiyu, A.B., Henry, A.W. and Adekunle, A.M., 2019. An assessment of just in time
system on the financial performance of manufacturing firms in Nigeria.
Ikechukwu, O.I. and Nwakaego, D.A., 2016. Cash conversion cycle management on the
financial performance of building materials/chemical and paint manufacturing
companies in Nigeria. Journal of Humanities and Social Science. 21(7). pp.62-
69.
Karim, N.A., Nawawi, A. and Salin, A.S.A.P., 2018. Inventory control weaknesses–a
case study of lubricant manufacturing company. Journal of Financial Crime.
Kong, X., Dong, K. and Zhang, L., 2019. Characteristics and determinants of
asymmetric phase shifts in China’s manufacturing industrial production
cycles. Applied Economics. pp.1-11.
Moser, P and et.al., 2019. Manufacturing Management in Process Industries: The
Impact of Market Conditions and Capital Expenditure on Firm
Performance. IEEE Transactions on Engineering Management.
Moussavi, S.E., Mahdjoub, M. and Grunder, O., 2016. Reducing production cycle time
by ergonomic workforce scheduling. IFAC-PapersOnLine. 49(12). pp.419-424.
Narwal, K.P. and Jindal, S., 2017. Corporate governance mechanism and its impact on
cash conversion cycle: Evidence from Indian manufacturing sector. Asian
Journal of Research in Banking and Finance. 7(10). pp.35-45.
Pinto, J.L.Q and et.al., 2018. Just in Time. In Just in Time Factory (pp. 25-38). Springer,
Cham.
Silva, M., 2017. Cash conversion cycle and firm's profitability; A study on listed
manufacturing companies in Sri Lanka.
Ubesie, M.C. and Duru, A., 2016. Effect of Cash Conversion Cycle Management on the
Profitability of Industrial and Domestic Product Firms in Nigeria. Journal of
Investment and Management. 5(6). pp.99-106.
Vandina, O.G., 2016. “Just in Time” System in Construction Industry and Its
Competitiveness. Journal of Economic & Management Perspectives. 10(4).
pp.401-405.
Zhou, H., Chen, H. and Cheng, Z., 2016. Internal control, corporate life cycle, and firm
performance. The Political Economy of Chinese Finance. 12(3). pp.189-209.