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Accounting Information System in Bakery Business

Question:

Describe about the Accounting Information System in Bakery Business .

Answer:

Introduction

This report includes processes for the selection of an accounting information system (AIS) in detail. B Bakers is the case organization for which, AIS is proposed in this report by performing consecutive steps such as definition of business processes, develop business requirements, and determine system requirements, software selection and vendor selection. These would be effective to ensure informed information technology (IT) investment.

1. Business Processes

a) Business Processes in Bakery Firm

The knowledge of business processes is critical to understand an organization in systematic manner.  Business processes can be understood as group of related and structured activities that creates pre-specified goods or services.  B Bakery is a family owned organization that has long history of operations. On the basis of described information, the business processes of this firm can be divided in three categories, which are detailed below:

Core Business Processes: It is also termed as operational processes that form core business activities in a firm. The core business processes of B Bakery include procurement, manufacturing, marketing and distribution. It procures raw material from the different suppliers and produces bread and confectionary products for the wholesale customers such as supermarkets and pub-chains. After production, it offers produced products to the customers to generate sales (Galloway et al., 2012). The below figure shows core business processes of this organization:

B Baker’s core business processes

The above figure depicts that B Baker’s core business processes has cyclic execution of activities. The sales of products allow firms to generate funds for the procurement of raw material and bring continuity in operations.  These business processes are closely connected to each other and due to this performance of one can have significant impact on others (Lehmann, 2012). The continuity in each core business process is critical for successful execution of business activities and operations.

Management Business Processes: From the description for B Bakers, it is identified that this firm also has management processes to operate business activities. Management processes is employed by organization to plan, manage and control business resources effectively. In this way, these processes administrate the operational system of an organization.  Strategic management business processes is identified in B Bakers as it seeks to peruse growth strategy by delivering healthy products range to the customers at the competitive prices. It indicates that firm uses management processes to develop strategy for utilizing the available resources effectively and optimally (Harmon, 2014). Through this, it seeks to implement a relevant management strategy for managing operational systems effectively.  Similarly, management processes of this firm are executed to manage the core business processes in systematic manner. This allows firm to take required actions to ensure efficient utilization of resources in execution of core operations and to contribute in increasing sales (Mahal, 2010). In this way, management processes of B Bakers are also linked to the core business process.

Below figure depicts core business process with some management and support processes of B Bakers:

 business process with some management and support processes

Support Processes: It is identified from business description that B Bakers has support processes to operate and manage operations. These processes include collection of activities that support core and management business process of an organization.  It is mainly concerned with the internal customers mainly employees, which work as “back office” for the operational processes of an organization. These are also termed as administrative activities in the value chain (Jäger, 2013). Accounting, recruitment and technical support are some of the examples of support process in the organization.

In B Bakers, accounting and recruitment support activities exist through which it supports business operations. It maintains books of accounts and records financial transactions on year basis. Additionally, it also recruited an accountant to collect and record accounting data for the development of financial statement on annual basis (Scherling,  2016). It depicts that this firm uses recruitment and accounting processes in business for implementing operations effectively.  But at the same time, technical support processes is not present in this organization due to lack of any information system (Mahal, 2010). Currently, it uses manual accounting processes to manage the financial information and to manage business operations.

Thus, this firm has different processes to conduct business activities and to generate value from them.

2. Develop Business Requirements

b) Indispensable Business Processes 

 In B Bakers, management seeks to offer new and healthy range of bread and confectionary products at the competitive prices and due to this, it is quite critical for firm to perform operational, management and support business processes effectively.  But, support are the most critical processes for this firm to achieve growth objectives as without this it would be difficult to manage other processes. Support processes include recruitment, selection and management of human resources that has great impact on the core business processes. Firm’s failure in recruiting capable employees at the optimal cost can affect the quality of offerings and consequently customer satisfaction (Hua, 2013). This may cause decline in profitability and performance.

Similarly, support processes are critical to ensure collection and availability of right information at the right time for facilitating informed decision-making. Accounting processes’ performance helps a firm to maintain business accounts properly and to access the performance of other business processes. This visualizes operational performance of the different departments of a firm and to ensure optimal utilization of resources accordingly (Kale, 2014). It is critical for firms to produce new range of products in relatively less cost from the competitors. Through this, B Bakers can manage the resources more effectively that ensures reduction in cost and improvement in quality. 

Additionally, it is critical for firm to perform support processes successfully for operating business activities efficiently by using information for decision-making. Accounting activities are critical to provide insightful information regarding operations and to make informed decisions of resource allocation. For example: B Bakers can compare performance of range of products in terms of creating sales. It could help firm to allocate resources to the profitable segments and to make improvements in operations (Harmon, 2014). In this way, the superior performance of support processes is critical for this firm to ensure better functioning of operational activities and to attain success.

c) Required Outcomes from Business Processes

For the achievement of growth objective of B Bakers, value creation outcome is required primarily from the supportive business processes.  Business processes such as accounting, recruitment, support and others are designed to create additional value for customer, employees, suppliers and other major stakeholders of firm. Support business processes of this firm are required to increase effectiveness of firms’ operations for allowing them to deliver better and quality products to the customer in relatively less cost from the competitors (Henderson et al., 2015).

Required Outcomes from Business Processes

The outcomes of supportive activities are needed to improve efficiency of operations for allowing B Bakers to grow business and to increase sales. Supportive processes such as accounting are to be performed for providing more accurate and relevant information regarding the performance of each business unit and facilitating a way to identify under and over utilization of resources. This is quite critical for ensuring optimal utilization of resources in B Bakers and to increase efficiency (Salvendy & Karwowski, 2010). It makes positive impact on the ability of a firm to produce more and quality goods by using few resources.

Similarly, support processes of this firm are required to align the different processes of business seamlessly and to ensure systematic flow of work. It is likely to increase co-ordination among business activities and to reduce conflicts. This outcome makes positive impact on the performance of other business processes that contributes in adding value in offerings of B Bakers (Kramer, 2010). For business growth, it is critical for support processes to provide insightful information to the decision-makers of this firm on real-time basis. It enables to identify any bottlenecks in operations and to remove or limit them effectively. This leads to the quality improvements and waste reduction in the operations that saves cost in turn (Mithas et al., 2012).  Thus, value creation through increase in effectiveness and improve in efficiency is the outcome required from supportive processes.          

3.  System Requirements

a) Analysis of System Requirements for B Bakers

B Baker has decided to make an investment in purchasing and implementing accounting software. For making an informed investment decision, it is critical to analyze system requirements and to ensure required features or functionalities of software. Below are required features or functionalities for system in B Bakers:

Recording and update of accounting transaction: The main feature should be the regular recording and updating of business’s financial transactions. This functionality is critical for B Bakers to ensure collection and availability of accurate financial data regarding the operations of each department of firm. The system should store the data systematically for the purpose of potential uses, which is supplied by the accounting staff (Gelinas et al., 2011). In this way, recording and updating data should be the critical feature of the system.

Data Reporting as Statutory Requirements: The IT system should provide facility to generate financial reports as per the legal requirements and laws. Each country has different laws to regulate financial reporting, which compliance is critical to supply useful accounting information to the investors, suppliers, customers and other stakeholders. The system should allow B Bakers to get financial documents and reports of specific period within a standardized format (Simkin et al., 2014). It will be useful to communicate financial status of the firm with the stakeholders more accurately.

Interoperability and expandability:  In B Bakers, system should include interpretability and expandability features as these help in adding more functionality in the existing system as per the changing business requirements. Interoperability feature is critical to ensure ability of a system to other system or product without any extra efforts. Similarly, expandability feature requires for adding extra capabilities. B Bakers is a growing business that seeks to expand its product range and to take the business other level. It may increase the size of business and consequently its requirements (Gelinas et al., 2011). Interoperability and expandability features of system would be useful for B Bakers to add multiple applications in the existing system and to ensure successful system migration.

Below figure depicts system requirements for B Bakers:

 depicts system requirements for B Bakers

Internet connectivity and security: This feature should also be considered by B Bakers to achieve objectives of investing in IT system. Internet becomes an important way of expanding business. System’s internet connectivity could be critical for B Bakers to grow business and due to this it is a critical feature for this company. System should facilitate e-commerce connectivity that may help this firm to grow business. Similarly, security is key feature for a system as loss of data due to any electric fault, system malfunction and hacking can affect the profitability and position of B Bakers (Hall, 2012). The system should have feature to protect data from unauthorized use and to any system default. Data backup feature may allow firm to restore the data anytime.     

Historical and Predictive Analysis: At B Bakers, historical and predictive features should be considered, while purchasing a system. The system should allow this firm to analyze historical data and to make prediction for better planning and controlling. It is required by firm to develop in-depth understanding about the efficiency of available resources and to estimate their future performance. The system should also have capability to evaluate the economic consequence of any decision based on the analysis of historical data and potential circumstances (Simkin et al., 2014). This functionality of a system can be useful to solve business problems effectively.   

Performance Evaluation and Reporting: B Bakers should also consider performance evaluation functionality in a system as through this it would be able to analyze function of each source including machinery, human resource and any other asset successfully on timely basis. This could be useful for this firm to control the performance of resources and to develop optimal results (Crowther, 2016). Through this, performance of each department can be monitored, measured and controlled in quantitative form.

Thus, B Bakers should consider above discussed features or functionalities to solve their purpose of investing in IT system.

Software selection 

a) Options for Software Vendor

For making informed selection of software vendor, website of three vendors such as SAP, MYOB and Xero are visited to make comparative analysis. This will be effective to select right software vendor.

b)  Category of Accounting Software 

Accounting software can be categorized in three forms such as low, medium and high/end. Low category of accounting software allows firms to perform basic accounting functions such as preparation of accounts, development of financial reports, recording of data and other in context of signal market. Medium category accounting software is more expensive than low category software. It allows firm to make calculation of accounting transactions in context of different markets (Horngren et al., 2012). This software also includes advanced features to develop more in-depth accounting information. On the other hand, high end accounting software is also known as Enterprise Resource Planning or ERP that processes more data than and due to this it perform several other function. It is most suitable for mid and large size organization. The implementation of high end accounting software is more expensive and complex than the other two categories (Masegosa, 2013).

For B Bakers, mid-sized category of accounting software is more suitable than others as it is effective to serve the accounting needs of this business without increasing much cost and complexity. This firm seeks accounting information to produce the new range of healthy bakery goods at the competitive price. Medium level software will provide information regarding the performance of each department and to make required improvement for reducing cost and increasing quality (Kramer, 2011). High end software will increase the cost of the firm significantly, which may affect its ability to reduce cost of offerings and to maintain competency. Similarly, middle category of accounting software generally enables firms to customize features and to convert into high end ERP (Harmon, 2014). This aspect of middle category is also suitable to address current and potential needs of B Bakers.    

Vendor Selection

a) Compare and Contrast Features or Functionality of XERO and MYOB

The features and functionalities of medium category accounting software of MYOB and XERO are compared to determine suitable software for this business. Below table shows comparison between MYOB and Xero:

Features or Functionalities

Software

 

Xero

MYOB

Business size

Small, medium and large

Small and medium

Operating System Support

Windows, Linux and OS X

Windows and OSX

User Interface

Web based

Stand alone (requires installations )

Update

Automatic

Manual

Backup

Within ten days

Any time Availability

Billing and Invoicing 

Automatic billing

Purchase order data

Reporting

Standard format

Facilitate both vertical and horizontal analysis

Budgeting and Forecasting

Available

Available

Security

High measures of data security

Relatively low measures

Customer support

Phone and e-mail (24*7)

Online chat, e-mail, phone (12 hours)

Accounts  management

Possible in multiple currency

Possible in single currency

E-commerce

Available

Not Available (requires add-on programs)

Taxation

Available

Available

Data integration

Automatic

Automatic

Payroll functionality

More features

Less features

Inventory management

Basic feature (Require add-on programs for advanced)

Advanced inventory function

Bank Reconciliation

Available

Available

Multi-browsing

Available

Unavailable

Mobile Accounting App

Available

Available

Price

Relatively low

Relatively High 

On the basis of above table, it can be concluded that MYOB and Xero has some similarities and differences that can influence choice of B Bakers for accounting software. It is identified that Xero is suitable for the medium and large organizations, whereas MYOB is suitable for small and medium sized firms. Both accounting software provides account management and reporting functionalities to the business that facilitates data collection, storage and analysis (McLoughlin, 2014). Similarly, MYOB and Xero have feature to allow firms to consider taxation rate in calculation of different accounts of the firm. Apart from this, budgeting and forecasting functionality available in both Xero and MYOB that also provides an effective platform to firms to take decision. From the above table, it can be assumed that basic accounting functions are common in both accounting software (Graphiq Inc, 2016).

Through above table, several differences can also be identified. Xero has Web-based feature that provides facility to access accounting data anytime and from anywhere. In contrast to this, MYOB requires installation of software to access the files. Customization is possible in both accounting system but the major difference exists in their update process. In MYOB, system upgrade is needed to complete by clients, whereas in Xero, it is completed through an automatic process (McLoughlin, 2014). Due to this, upgrade process in Xero is simpler than the other software.

Similarly, data back-up functionality in MYOB is more effective as it provides facility to recover data anytime as per the requirements of business. In contrast to this, Xero provides time limitations to the client to retain their data. After the cancelation of subscription, it is not possible for client to retain their data for long time. Additionally, both vendor provide customer support service to the clients for helping them in better use of available features. MYOB provides customer service on phone for over 12 hours, whereas Xero support is available in 24*7 (MYOB, 2016). 

Along with this, security measures are more detailed in Xero rather than MYOB that causes differences in the level of data protection. Inventory management functionality is advanced in the MYOB. Xero requires add-on for this that causes increase in price. But at the same time, Xero is cheap than MYOB (Xero, 2016). The above are some common and district features or functionalities of Xero and MYOB accounting software.

b) Most Suitable Accounting Software for Bakery Business

For the Bakery business, it is critical for firm to select accounting software from Xero and MYOB.  B Bakers serves range of goods to the customers and seeks to assign the cost to each order more accurately for improving pricing. Xero can be more suitable accounting software for serving this need of B Bakers in less time (Scot, 2010). For this, it would be critical to identify cost associated with the different business activities including production, packaging, warehousing and shipping. Xero software needs less time and resource for up-gradation. With this, firm can able to integrate the cost information of different departments and determine profit margin on each sales. Activity-based costing system is significant for bakery business as it helps to control cost in the each area of business (Weygandt et al., 2009).

Similarly, inventory is the major concern for bakery business due to perishable nature of the goods. Ineffective inventory management causes stock turnover for business and affects profitability. Xero will be more useful to control stock and to determine monetary value of inventory as it allows firm to customize the inventory management tools (Thomas, 2015). MYOB is less effective to make changes in the inventory tools as per the changing needs of business. B Bakers’ business is expected to grow in future in terms of product range and sales, which may require modification in accounting system. Easy update process in Xero accounting software will also allow this firm to include more features quickly and to respond changing business needs (Xero, 2016).

Additionally, the market requirements become quite wide and complex in terms of speed and quality of bakery products. MYOB is less flexible and due to this it may not suitable to address the accounting information needs of B Bakers. Although both MYOB and Xero provide billing, invoices, budgeting and planning functions and support systematic calculation of goods and resources, but automatic update, web-based interface and multi-browsing features of Xero makes it more suitable for B Bakers than MYOB (Curtis & Averis, 2014). Due to these features, it would be easy for this company to report accounting information of each business processes more effectively and to determine the areas of inefficiencies. This may help firm to make improvements in the business processes and to reduce cost for offering products at the competitive prices (Empower Your Business, 2012).

Customer support in Xero is available 24 hours for clients, whereas it is limited in the MYOB. MYOB provides support services for twelve hours that also makes it less suitable for business requirements of this bakery business. This firm has less experience of installing accounting system software and due to this it may require support on real time basis (MYOB, 2016). It is because Xero is most suitable to cater needs of B Bakers. In addition to this, B Bakers is a medium size organization that employs 70 employees and offers verity of bakery items to the business. Payroll features will allow B Bakers to measure performance of employees and to make informed allocation of human resource in the supply chain (Xero, 2016).   

For expanding market, B Bakers can use online platform to offer and sell products to the customers. In this case, accounting system of this company should facilities e-commerce functionalities. Xero provides e-commerce facility through this bakery firm can accept online payments. It will also allow this firm to integrate and report e-commerce transactions and to attain complete overview of sales and stock (Thomas, 2015). Xero accounting software can serve this need of bakery business.

Conclusion

It can be concluding that B Bakers can invest in Xero to obtain more systematic accounting information about the business processes and to take more informed decisions. This system provides flexibility in update of resources that may satisfy information needs of B Bakers.

References

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