10-06-2017, 06:55 AM
conventional and modern system of accounting
Times change. While Accounting technology, application, rulings and methods have constantly evolved with the change of times, the principles of traditional marketing of Accounting services have remained the same for decades.
New applications of the traditional marketing principle are constantly being evolved. Many of these are very innovative indeed.
But it is the BASIC PRINCIPLE of traditional marketing that the change of times has rendered inefficient and nonfunctional.
That basic principle of traditional marketing is OFFERING SERVICES FOR SALE.
This principle derives from the middle of last century. After the war, there was a scarcity about everything. Informing that you HAD something to sell was often all it took to get clients.
Once products were abundantly available, pricing became the main message. After that, the quality. After that.. nothing new.
Since then, we've had all kinds of utterly clever employments of the traditional marketing approach. In fact, entire industries have been born just to develop new tricks and messages of the traditional marketing approach.
Unfortunately, it doesn't really matter how innovative these applications are. They still won't work well. No matter how interesting or clever they sound they won't bring you RESULTS in a profitable way.
In fact, the lifespan of those applications has become very short. Today, it is widely accepted that any approach, any message, any company image "wears out" within a very short period of time. An image may only last six months. An ad campaign only six weeks.
Fifty years ago, a marketing strategy and message would last for several years. It worked and kept on bringing results.
Once the trick is known, it loses its effect
It's no use trying to hide the intention to sell. That is precisely the thing that gives away ANY traditional marketing approach and renders it ineffective.
There's just too much of the traditional type of marketing push.
Your average business owner is hit by hundreds of innovative messages doing their best to override his own power of choice, to TELL HIM what he should do.
All those cleverly planned attempts to manipulate his decision are met with ever increasing disapproval. Let's face it. It's just TOO obvious what every vendor wants from you, isn't it?
What do all these cleverly worded messages attempt to hammer into your mind?
"Just sign here and everything will be OK.."
"Trust me, I'm the best there is.."
"If you don't want to be considered stupid, you should think this way.."
..and so on.
See the common denominator? It is always, always and always TELLING THE CLIENT WHAT HE SHOULD THINK AND DO.
DECADES of this, hundreds of times EVERY DAY. TV, radio, direct mailing, newspapers, flyers, magazines, visits to retail outlets, salesmen, (and nowadays, also the Internet and your e-mail)..
How is this NOT going to turn every person off traditional marketing? How is it NOT going to create an instant rejection mechanism that just makes you want to get RID of whatever it is?
And above all - how could it produce RESULTS in any meaningful ratio?
For decades, we've been subjected to this sales-oriented marketing. Can you imagine how good we've become to smell a rat in ANY approach?
One whiff of that "you need this and you'd be silly not to take it" -type of message and we know what it is all about. The thing to do is to get rid of it and fast.
If it's a passive form of approach - a letter, an ad.. something that doesn't talk back - we just IGNORE it within 0.3 seconds.
If the contact is human, we have other means of handling it. Sometimes we just let the person have a piece of our mind - especially those that really rub us the wrong way - and close the phone.
But more often than not, we let the person speak for a while - without ANY intention of listening in on what he actually SAYS - and then get rid of him in a polite way.
When offered Accounting services the traditional way, business owners use all kinds of polite methods to get rid of you.
"We are fully satisfied with our current Accounting firm" is one. Only.. survey shows the majority aren't satisfied!
"We're not currently planning to change Accountants" is another. Only.. more than 50% ARE.
"It isn't possible to change right now, call me next year.." is one more common explanation. But.. by survey, we know that business owners think ANY time is fine to change Accountants!
It's always LATER, some other time.. anything but NOW.
See, they know all the tricks and they don't LIKE the traditional approach. And in marketing, what the target group thinks is ALL that counts. So, does the traditional marketing approach work if you "spice" it up with new, clever concepts and wordings?
No? And right you are. Only.. it is the principle of TRADITIONAL marketing techniques that is the culprit, not the applications of it. It's not YOU that's at fault but the PRINCIPLE of the system that you apply in marketing.
And, by the way, just because it doesn't produce DESIRED results, don't think it doesn't do ANYTHING.
For it does - and you're not going to like it!
What traditional marketing approach has done for you
The main problem caused by traditional marketing principles is that the money you invest in marketing doesn't bring results with any certainty.
You're paying for services, such as design, postage, printing, ad space in a media - and none of this guarantees you new clients.
Traditional marketing always tries to SELF assert superiority. If you use the principles of traditional marketing, you cannot but say "I'm the best" in one way or another.
Go ahead, check out any message of an Accounting firm and you'll find those self-asserted superlatives there. Sometimes they're hidden well.. but the problem is there's no way to hide it.
It's the approach that gives you away.
Thus, those artful presentations designed to create TRUST and INTEREST end up causing a totally opposite image than intended.
And that's where the traditional marketing approach "betrays" you, rendering perfectly viable and competitive service concepts apparently inefficient and undesirable.
You've seen how it seems like almost NOBODY is interested in Accounting services. Yet, it's not the truth.
It isn't you.
I've yet to see an Accounting Professional that doesn't have some great service and marketing ideas. The fact that you're READING this already puts you in the top five percentiles of your industry - the 5 percent that are still trying to FIND a way to get those ideas and concepts understood and wanted.
The culprit of this story is the basic principle of traditional marketing.
It's the traditional marketing that appears to drain out all the desirability and value out of your hard work and good ideas.
It is the traditional means of marketing that make it APPEAR like no one is interested, nobody cares.. well, you know what I mean.
That's why it appears as if marketing doesn't WORK at all. That's why it is apparently impossible to actively find potential clients with reasonable cost and style.
And that's the reason why the vast majority of Accounting Professionals KNOW marketing is a waste of money!
See - you try it over and over again and don't get the response and results you expect.. and somewhere along the line, you're bound to get somewhat.. eh, well, SCEPTICAL, right?
I mean, it's a FACT that marketing doesn't work, isn't it?
Or - is it?
Well, if you survey Accounting Professionals in public practice, then about 95 percent firmly believe that any investment in marketing has no direct influence on the number of new prospects or clients that the firm obtains.
The same number also believe that it is impossible to influence the number of new clients ACTIVELY at all. Additionally, we don't even believe that any investment in marketing could really be returned at all, let alone in any reasonable schedule.
Well, what is that if not "marketing doesn't work?"
And that's the worst part of it - because anyone who believes it's impossible to actively influence the future of his own firm, won't bother even to try, see?
Why would he? Time and time again he has tried and not received results, so why throw good money after bad?
But that's the wrong lesson to learn. For it isn't YOUR service, YOUR ideas, YOUR concepts that are at fault. It is the principle of traditional marketing that sucks the life force out of them!
The traditional marketing doctrine has been formed by those who make lots of money creating INDIVIDUAL CAMPAIGN ELEMENTS for Accounting firms and other companies.
Obviously, they'll want you to believe it works. And - when it invariably doesn't - they want you to believe that it takes a bit of LUCK to hit just the right button.. and THEN it'll work.
Only it won't. The principle of traditional marketing is DEAD - it has long since reached its apex and it's five to midnight for it.
ACCOUNTING INFORMATION SYSTEMS
An accounting information system (AIS) combines the study and practice of accounting with the design, implementation, and monitoring of an information system. Such a system involves applying modern information technology resources to traditional accounting controls and methods to provide users the financial information necessary to manage their organizations. This system is often a component of an entity's management information system.
TECHNOLOGY
Contemporary technological capabilities permit a range of possible designs for an AIS. Yet, the basic structure of a system continues to include essentially the same three components: input, processing, and output.
Input
The input devices commonly associated with an AIS include standard personal computers (PCs) or workstations running applications, scanning devices for standardized data entry, and electronic communication devices for electronic data interchange (EDI) and electronic commerce (e-commerce). In addition, many financial systems come "Web enabled" to allow devices that connect to the World Wide Web AIS access.
Processing
Basic processing is achieved through computer systems ranging from individual PCs to large-scale enterprise servers. Conceptually, however, the underlying processing model is still the double-entry accounting system invented many centuries ago.
Output
The output devices used include computer displays, impact and nonimpact printers, and electronic communication devices for EDI and e-commerce. The output content may encompass almost any type of financial report, from budgets and tax reports to multinational financial statements and sustainability reports.
MANAGEMENT INFORMATION SYSTEMS
Management information systems (MISs) are interactive human/machine systems that support decision making for users both in and out of traditional organizational boundaries. These systems are used to support an organization's daily operational activities, current and future tactical decisions, and overall strategic direction. MISs are made up of several major applications, including the financial information and human resources systems.
Financial Information Applications
Financial information applications make up the heart of AIS in practice. Modules commonly implemented include: general ledger, payables, procurement/purchasing, receivables, billing, inventory, assets, projects, and budgeting.
Human Resource Applications
Human resource applications make up another major part of modern information systems. Modules commonly integrated with the AIS include: human resources, benefits administration, pension administration, payroll, and time and labor reporting.
INFORMATION SYSTEMS IN CONTEXT
AISs cover all business functions from backbone accounting transaction processing systems to sophisticated financial management planning and processing systems.
Financial Reporting
Financial reporting starts at the operational levels of the organization where the transaction processing systems capture important business events such as normal production, purchasing, and selling activities. These events (transactions) are classified and summarized for internal decision making and for external financial reporting.
Cost Accounting Systems
Cost accounting systems such as activity-based costing (ABC) systems are used primarily in manufacturing environments, but increasingly are being applied to service companies, such as banks, real estate firms, and insurance companies. These allow organizations to track the costs associated with production of goods and performance of services.
Management Accounting Systems
Management accounting systems such as master budgets are used to facilitate organizational planning, monitoring, and control for a variety of activities. Such systems allow all managerial levels to have access to prompt reporting and statistical analysis. The systems are used to gather information to consider alternative scenarios, and to identify an optimal answer among the hypothetical scenarios.
DEVELOPMENT OF AN AIS
The development of all AISs includes the basic phrases of planning, analysis, design, reporting, implementation, and support. The time associated with each of these phrases can be as short as a few weeks or as long as several years.
Planning
The first phase of systems development is the planning of the project. This entails determination of the scope and objectives of the project, the definition of project responsibilities, control requirements, project phases, project budgets, and project deliverables.
Analysis
The analysis phase requires a thorough evaluation and documentation of the accounting and business processes in use by the organization. This phase may include reengineering to take advantage of modern best practices and the operating characteristics of modern system solutions.
Data analysis involves a thorough review of the accounting information that is being collected by an organization. Such data are often compared to budgeted data prepared for financial management and for external financial reporting.
Decision analysis is a through review of the decisions a manager is responsible for making. The primary decisions that managers are responsible for are identified on an individual basis. Then models are created to support the manager in gathering financial and related information, developing and designing alternatives, and making actionable choices. This method is used when decision support is the system's primary objective.
Process analysis is a thorough review of the organization's business processes. Organizational processes often are identified and segmented into a series of events that either add or change data. These processes can then be modified or reengineered to improve the organization's operations in terms of lowering cost, improving service, improving quality, and improving management information.
Design
The design phase takes the results of the analysis phase and turns them into detailed specific designs that can be implemented in a subsequent phase. It involves the detailed design of all inputs, processing, storage, and outputs of the proposed accounting system. Inputs may be defined using screen layout tools and application generators. Processing can be shown through the use of flowcharts or business process maps that define the system logic, operations, and work flow. Logical data storage designs are shown by modeling the relationships between the organization's resources, events, and agents in diagrams. Also, entity relationship diagram modeling is used to document large-scale database relationships. Output designs are documented through the use of a variety of reporting tools such as report writers, data extractions tools, query tools, and online analytical processing tools.
Data capture and storage
Screen designs and system interfaces are the primary data capture devices of AISs and are developed through a variety of tools. Storage is achieved through the use of normalized databases that increase functionality and flexibility.
Processing
Business process maps and flowcharts are used to document the operations of the systems. Modern AISs use specialized databases and processing designed specifically for accounting operations. This means that much of the base processing capabilities come delivered with the accounting or enterprise software.
Reporting
Reporting is the driving force behind AIS development. If the system analysis and design are successful, the reporting process provides the information that helps drive management decision making and external financial reporting. Accounting systems make use of a variety of scheduled and on-demand reports. The reports can be tabular, showing data in a table or tables; graphic, using images to convey information in a picture format; or matrices, to show complex relationships in multiple dimensions.
There are numerous characteristics to consider when defining reporting requirements: The reports must be accessible through the system's interface. They should convey information in a proactive manner. They must be relevant. Accuracy and reliability must be considered. Lastly, reports must meet the information processing (cognitive) style of the audience they were meant to inform and meet applicable reporting standards.
Management reports come in three basic types:
Filter reports separate selected data from a database, such as a monthly check register
Responsibility reports such as a weekly sales report for a regional sales manager
Comparative reports created to show period differences, percentage breakdowns and differences (variances) between actual and budgeted expenditures, such as a report showing the expenses from the current year and the prior year as a percentage of sales
Implementation
The implementation phase consists of two primary parts, construction and delivery. Construction includes the selection of hardware, software, and vendors for the implementation; building and testing the network communication systems; building and testing the databases; writing and testing the new program modifications; and installing and testing the total system from a technical standpoint. Delivery is the process of conducting final system and user acceptance testing, preparing the conversion plan, installing the production database, training the users, and converting all operations to the new system.
Tool sets
Tool sets are a variety of application development aids that are vendor specific and used for customization of delivered systems. They allow the addition of fields and tables to the database along with ability to create screen and other interfaces for data capture. In addition, they help set accessibility and security levels for adequate internal control within the accounting applications.
Security
Security exists in several forms, including physical security. In typical AISs the equipment is located in a locked room with access granted only to technicians. Software access controls are set at several levels, depending on the size of AIS. The first level of security occurs at the network level, which protects the organization's communication systems. Next is the operating system level security, which protects the computing environment. Then database security is enabled to protect the organizational data from theft, corruption, and other threats. Lastly, application security is used to keep unauthorized persons from performing operations within the AIS.
Testing
Testing is performed at four levels. Stub or unit testing is used to ensure the proper operation of individual modifications. Program testing involves the interaction between the individual modification and the program it enhances. System testing is used to determine that the program modifications work within the AIS as a whole. Acceptance testing ensures that the modifications meet user expectations and that the entire AIS performs as designed.
Conversion
Conversion entails the method used to change from an old to a new AIS. Several methods are available to achieve this goal. One is to run the new and old systems in parallel for a specified period. A second method is to directly cut over to the new system at a specified time. A third method is to phase in the system, either by location or system function. A fourth method is to pilot the new system at a specific site before converting the rest of the organization.
Support
The support phase has two objectives. The first is to update and maintain the AIS. This includes fixing problems and updating the system for business and environmental changes. For example, changes in generally accepted accounting principles (GAAP) or new regulations such as the Sarbanes-Oxley Act of 2002 might necessitate changes to the AIS. The second objective of support is to continue development by continuously improving the business through adjustments to business and environmental changes. These changes might result in future problems, new opportunities, or management or governmental directives requiring additional system modifications.
ASSURANCE, AUDIT, AND ATTESTATION
Quality control of AISs involves many activities, including the services of both external auditors (public accountants) and internal auditors. External auditors can provide a variety of services, including providing assurance that the controls over external financial reporting are adequate and attestations that the external financial statement are "fairly presented" in accordance with GAAP. Internal auditors focus on providing assurance that AISs are effective and efficient in providing information to assist managerial decision making.
Continuous improvement of AISs change the way internal controls are implemented and the types of audit trails that exist within a modern organization. The lack of traditional forensic evidence, such as paper, necessitates the involvement of accounting and auditing professionals in the design of such systems. Periodic involvement of public auditing firms can be used to make sure the AIS is in compliance with current internal control requirements, such as the Section 404 requirements of the Sarbanes-Oxley Act and revised financial reporting standards.
After the implementation, the focus of attestation is the review and verification of system operation. This requires adherence to such standards as ISO 9000 for software design and development, as well as standards for control of information technology.
Periodic functional business reviews should be conducted to make sure the AIS remains in compliance with the intended business functions. Quality standards dictate this review should be done according to a periodic schedule.
TRADITIONAL AIS AND MODERN ENTERPRISE RESOURCE PLANNING SYSTEMS
Enterprise resource planning (ERP) systems are large-scale information systems that affect an organization's AIS. These systems permeate all aspects of the organization and require such technologies as client/server and relational databases. Other system types that affect AISs are supply chain management and customer relationship management.
Traditional AISs recorded financial information and produced financial statements on a periodic basis according to GAAP pronouncements. Modern ERP systems provide a broader view of organizational information, enabling the use of advanced accounting techniques such as ABC and improved managerial and financial reporting using a variety of analytical techniques.