Strategic Information Systems: HI5019 Report on Business Processes

This report provides a comprehensive overview of strategic information systems within a business context. It delves into the intricacies of transaction cycles, including payroll, purchasing, sales, and financing, highlighting their significance in operational efficiency. The report examines financial reporting, detailing its components, objectives, and importance in decision-making. It explores management reporting systems, outlining their role in providing timely information for effective business operations and the fundamentals of an effective system. The report also covers e-commerce, discussing its technologies, advantages, and impact on business. Furthermore, it analyzes internal control weaknesses within various systems, such as purchasing, cash disbursement, and payroll, and identifies associated risks like fraud and misappropriation of resources. The report also discusses the importance of separation of duties, authorization, asset security, and review and reconciliation processes to mitigate these risks. The report concludes by emphasizing the critical role of strategic information systems in business success.

Report
Table of Contents
Report................................................................................................................................1
Executive Summary...........................................................................................................1
Transaction cycles.............................................................................................................3
Types of transaction cycles:...........................................................................................3
Financial Reporting............................................................................................................3
Financial reporting components:....................................................................................3
Objective of Financial Reporting....................................................................................3
Importance of Financial Reporting.................................................................................3
Management Reporting System........................................................................................4
Reasons for acquiring management reporting system..................................................4
Fundamentals of an effective management reporting system.......................................4
E-commerce.......................................................................................................................4
E-commerce technology.................................................................................................5
Data flow diagram of purchases system...........................................................................6
Data flow diagram of cash disbursements system............................................................7
Data flow diagram of payroll system..................................................................................8
System flowchart of purchases system.............................................................................9
System flowchart of cash disbursements system............................................................10
System flowchart of payroll system.................................................................................11
Internal control weakness in each system and risks associated with the identified
weakness.........................................................................................................................12
1. Purchasing system:...............................................................................................12

1. Separation of duties...........................................................................................12
2. Authorization.......................................................................................................12
3. Assets security...................................................................................................12
4. Review and reconciliation...................................................................................13
2. Cash System..........................................................................................................13
1. Accountability.....................................................................................................13
2. Security of assets...............................................................................................14
3. Review and reconciliation...................................................................................14
3. Payroll System.......................................................................................................14
1. Separation of duties...........................................................................................14
2. Authorization.......................................................................................................15
3. Security of assets...............................................................................................15
4. Review and reconciliation...................................................................................16
Conclusion.......................................................................................................................16
References.......................................................................................................................17

Executive Summary
This detailed report contains essential concepts about strategic information system for
business and enterprise. Some of these concepts that are explained include transaction
cycles, financial reporting, management reporting systems, e-commerce, and various
internal controls weaknesses and risks. In every business identifying transaction cycles
and particular tasks within the cycles, are very important to determine the efficiency and
effectiveness of a business and every report of each transaction cycle play a role in
business efficiency. For financial reporting, the department in charge should provide
financial reports and statements accurately and timely thus enabling better decision
making. In the business or an enterprise, there must be a way in which information is
provided to different personnel at various management levels in order to plan, control,
and make decisions which will have a positive effect to the company. Due to the
advancement in technology more so internet, there is increased urge in increasing the
delivery speed in the business where e-commerce that relies on the internet
accessibility has such feature hence the need of e-commerce in businesses. The
Internal Control processes within a business or organization are put in place to make
sure information is accurate reliable, on time, the organization assets are well protected,
laws and regulations are adhered to, and resources are used efficiently and in an
economical way whereby they still have weaknesses and risks. Internal controls basic
intentions are irregularities and errors prevention, problems identification, and ensure
that actions are taken correctively.

Introduction
Strategic information systems implementation in business strategies expose a business
to better opportunities. These strategies may be about financial reporting, e-commerce
or even transaction cycles strategies which affect business growth and also internal
control practices should also be considered and if they are not considered there are
risks associated with them. Some of these strategies and internal control practices are
discussed below:
Transaction cycles
Basically, transaction cycles are the interlacing transaction of a business or businesses.
These cycles may be separated in accordance with particular functions such as
purchases, payments, finances, payroll or sales.
Types of transaction cycles:
1. Payroll cycle. This is whereby a business handles everything about employee
payments. Some of the functions of this cycle are: Issuing payment cheques,
taxes deductions, recording of the time of every employee, overtime worked
hours verification
2. Purchasing cycle. This type of cycle is where the business deals with the order
purchases form different and convenient suppliers. Supplier payment and
receiving of goods.
3. Sales cycle: It handles the orders from the customers, review and corrects it.
4. Financing cycle.
Financial Reporting
Financial reporting is a process of revealing financial information of a business over a
particular period of time to the stakeholders (creditors, investors, government) where
this information is all about financial status and performance of the business/ Mostly,
financial reporting is done quarterly or annually.

In every department f a business or organization records and reports about their
financial state to stakeholders. Most of the departments' functions may be dependent or
interdependent where they are all linked to the finance department. So, Financial
Reporting is the very essential and critical activity of any business or company that is
either making a profit or not. (Elliott and Elliott, 2009)
Financial reporting components:
1. Finance statements which involve loss accounts, such flow statements, balance
sheet, profit accounts
2. Financial statements’ notes
3. Financial reports that are quarterly and annually
4. If it is a public company, management analysis and discussion are done
Objective of Financial Reporting
Financial reporting has a major objective which is providing financial information of a
business which states the financial position, financial performance, and any financial
change to help in making decisions.
Importance of Financial Reporting
1) Assist the business to agree and do according to the regulatory requirements
where quarterly or annual reports should be published in the business or
company is listed.
2) It enhances the auditing of financial statements in a company
3) Enables the stakeholders to easily plan, analyze and make financial decisions
effectively.
4) It enables the business to easily identify means of getting capital.
5) If a company has well-furnished financial statements and reports, it is able to bid,
contract labor, etc.

Management Reporting System
A management reporting system is a phase in the control system under management
that provides information to the business. This information includes various statements
and reports in the business (Antonelli, de Almeida, Colauto, & Longhi, 2014). These
management systems help in making sure that information is timely for the effective
running of activities thus making them very important in any business.
Reasons for acquiring management reporting system
Management reporting systems assist getting data that is required by executive such as
managers to make decisions in a business. The data may be about finance, the number
of employees, salaries customers or clients, products or services, business assets,
performance in investments, etc. Management reporting has a wide scope. Frequent
reports requirement for decision making and analyzing the trends in business. It helps to
eliminate data redundancy while may result in an error (Mancini, Dameri, & Bonollo,
2016).
Fundamentals of an effective management reporting system
An effective management system should generate better reports which are timely,
proper information flow, and format used should be correct and easy to understand
 Flexibility-The management reporting system should be flexible in such a way
that it responds to the requirements set and show some insights when standards
that are predefined are deviated from. If management reporting system is
localized, it simplifies the processes to be carried out.
 Accuracy of the system is expected. In terms of reporting, there shouldn't be any
inconsistency or discrepancy. Due to the way the system is involved in critical
company information or results, it's a must for it to be accurate.
 Cost efficiency. It shouldn't be hard for assembly of reports where they should
also provide acceptable cost justification and with a better cost efficiency

analysis, the business is able to make a decision whether to adopt the
management reporting system or not.
 Reports which are well-detailed help the management to make sound decisions
 The mode of report delivery whether automated of manual also critical matter on
the success of the management reporting system.
 The level of consistency that a management reporting system that should
maintain should be very high. (Bourgeois ,David, 2014).
E-commerce
E-commerce the use of the Internet and the Web to transact business. More formally,
digitally enabled commercial transactions between and among organizations and
individuals. As the internet is becoming more accessible, the growth of e-commerce
increases and businesses and organizations are taking this advantage.
E-commerce technology
 Is ubiquitous—it is available just about everywhere, at all times, making it
possible to shop from your desktop, at home, at work, or even from your car.
 Has global reach, permitting commercial transactions to cross-cultural and
national boundaries far more conveniently and cost-effectively than is true in
traditional commerce (Bernroider & Mitlohner, 2015).
 Operates according to universal standards shared by all nations around the
world. In contrast, most traditional commerce technologies differ from one nation
to the next.
 Provides information richness, which refers to the complexity and content of a
message. It enables an online merchant to deliver marketing messages with text,
video, and audio to an audience of millions, in a way not possible with traditional
commerce technologies such as radio, television, or magazines.

 Is interactive—it allows for two-way communication between merchant and
consumer and enables the merchant to engage a consumer in ways similar to a
face-to-face experience, but on a much more massive, global scale.
 Increases information density (the total amount and quality of information
available to all market participants). Through Internet, there is efficient
information processing where it is timely and accurate. (Alewine, Allport, &Shen,
2016).
 Permits personalization and customization. Merchants can target their marketing
messages to specific individuals by adjusting the message to a person’s name,
interests, and past purchases. Because of the increase in information density, a
great deal of information about the consumer’s past purchases and behavior can
be stored and used by online merchants. The result is a level of personalization
and customization unthinkable with existing commerce technologies. (Dallard,
Yuthas, 2013)

Data flow diagram of purchases system

Data flow diagram of cash disbursements system

Data flow diagram of payroll system

System flowchart of purchases system

System flowchart of cash disbursements system

System flowchart of payroll system

Internal control weakness in each system and risks associated with the identified
weakness (Pathak, 2015)
Purchases system:
In this kind of system, some weaknesses may rise in their internal control
processes differently. The following internal processes may be subject to
different weaknesses:
1. Separation of duties
This is whereby particular employees are given or assigned buying tasks that
are related or that depend on the other employee task. No one controls the
whole buying process.
Weaknesses:
 Less capital
 Lack of many experts in the field and the one available are very
expensive to maintain them
 If there isn't a separation of duty then one person is in charge
Risk:
 When one person has complete control, Unauthorized purchases
are made or purchasing personal goods.
2. Authorization
Authorization is all about who accesses the system, who can approve
certain purchases, who is supposed to review those purchases orders,
etc. and hence accountability.
Weaknesses:
 Takes a lot of time to review and approval if fewer people are set to
be in charge
Risks:

 If there isn’t proper authorization, fraudulent and unnecessary
purchases are made.
 Misappropriation of resources or funds
 Unauthorized employee access system purchasing information that
isn't supposed to access.
3. Assets security
Once purchased goods have been received, the materials should be in a
safe location to ensure there are safe. This ensures that your resources
are can be accounted for, periodically check your inventory and compare
with results shown on control records.
Weaknesses:
 Poor inventory restriction access to appropriate employees
 Failure of periodically monitoring the records of the inventory
 Inadequate resources like safe to secure goods
Risks:
 Goods may be stolen
 More cost while replacing goods
4. Review and reconciliation
This is all about reviewing of packing slips, invoices, and purchase orders on
time. Checking how accurate is information for before payment, the required
quantity is ordered, and the price charged. Reconciliation of ledger in every
month helps you to locate charges which are improper and appropriately
validate financial transactions.
Weaknesses:

 Lack of monthly ledger reconciliations thus less accurate.
 Lack of proper verification of received goods
Risks:
 Paying for goods and services that have not been provided.
 He department encounter improper charges on their budget
Cash disbursement System
1. Accountability
Accountability of cash ensures that cash is can be accounted for, well
documented and secured, and traceable to specific cash handlers. For better
accountability, some policies should be set that entails who access the cash,
what transpired all through cash flow, or reasons for accessing the cash.
Weaknesses:
 Lack of records of cash received receipts
 Sharing of passwords.
Risks:
 Cash receipts get lost or stolen
 Applying inaccurate receipts to the account.

2. Security of assets
In the cash system, the major resource if cash which should be well
protected. So, a safe environment should be identified for crash safety.
Weaknesses:
 Lack of secure places like safe to store the cash.
 Lack of better background checks on likely or expected to become
cash handlers.
Risk:
 Cash may get stolen or lost in the process
3. Review and reconciliation
In the cash system, review and reconciliation are done to confirm whether the
entered transactions are correct. Cash receipts are reviewed and reconciled
on a monthly basis where they are also compared with statements from the
bank to enhance better checks.
Weakness:
 Fail to compare records of deposits to receipts
Risk:
 Some irregularities and errors may not be detected
Payroll System
1. Separation of duties
Payroll involves a lot of activities which can be ensured that they run
efficiently by having many employees performing specific tasks. It deals

majorly with employee payments where it is advisable that no employee
should have any privilege of approving his or her payment.
Weaknesses:
Limited people to perform reviews and reconciles on financial statements or
records every month, review payroll reports monthly, perform online payroll
actions approval, etc.
Risks:
 Processing payroll transactions which are not authorized.
 Funds misappropriation
 Payments to non-employees which are not authorized.
2. Authorization
Personnel actions and any entry to the payroll system should be well
reviewed and authorization is required. So, some policies are set to be
followed to enhance not only accountability but also the confidentiality of
information or data by allowing only authorized personnel to access the
payroll.
Weaknesses:
 Lack of signature authorizations updates and periodic reviews.
 Employees fail to adhere to the set policies.
 Lack of ledgers reconciliation for accuracy in every month of the
transactions recorded.
Risks:
 Entries made by employees in the payroll system may be inaccurate.
 Fraudulent or unnecessary payments.

 Payments to non-employees which are not authorized.
3. Security of assets
Employee resources are very essential, so they should be protected. Any
information (payroll checks, pay statements) from the payroll should be kept
secure in a safe place, and restriction put in place should allow only the
authorized personnel to access that kind of information to maintain
confidentiality and integrity.
Weakness:
 Checks that are unclaimed are never returned to the payroll office.
 Some personnel misuses their privilege of information access by
checking into peoples' private and confidential information.
Risks:
 Privacy laws are violated.
 Privacy breach that is, private or sensitive information about someone
may be an employee or client is accessed.
4. Review and reconciliation
Reviewing and reconciling processes enhance the right payments that if the
right people are paid. So, it is advisable to be performed monthly because it is
very crucial to the department budget.
Weaknesses:
 Lack of comparison of the estimated payroll costs and the actual costs
to identify any variation.
 Lack of monthly audit and reviews on payroll reports
Risks:
 Payments duplications

 Record inaccurate payments which may interfere with the employee
data.
 Charges which are improper are made to department budget
Conclusion
If internal control processes are well implemented accordingly, they may help to prevent
fraud. These internal controls if used in a systematic way they can enable business
improvements mostly in making activities run more effectively and efficiently.
Technology advancement and new data analysis techniques have enabled new and
better tools to be developed that do internal controls evaluation automatically. In most
cases, it is used together with auditing, frequent monitoring of controls acts as an
assurance of better and efficient flow of information through business processes.
Effective control activities enable different departments to know their priorities, achieve
goals set for every department, comply with regulations, and guard business resources.

References
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