Implementation of Accounting Information System

Barry’s Plumbing – Case Study

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Executive Summary

This report has been prepared to analyse the benefit of Accounting Information System (AIS) to Bary’s Plumbing Company and how it will contribute to the management of knowledge and strategic role of the organisation. Barry’s Plumbing (BP) is a 24 hours emergency plumbing company and provides emergency plumbing repairs to apartments which are managed by strata. It is observed that company is facing following three main challenges which are becoming bottlenecks in the working of BP, they are:

• Problem of under and/ or overstocking of inventory as warehouse managers fails to send the stock report on time
• Improper communication between customers, complaint centre and tradesman
• Inaccurate and incomplete invoices from tradesmen

The company is advised to opt for the AIS software ‘Office Operator’ (O2) developed by ABC International. This software will enable the wide variety of people who are associated with day to day activities of BP in smooth and efficient completion of their tasks. O2 will serve as an absolute service business management software program that can manage almost all prospects of managing the plumbing service company.

Contents

1.      Introduction. 4

2.      The Challenges. 4

2.1.       Improper Warehouse Management 4

2.1.1.        The Challenge. 4

2.1.2.        Implementation of Warehouse Management System.. 5

2.2.       Improper Communication Cycle. 5

2.2.1.        The Challenge. 5

2.3.       Improper Payroll System.. 6

2.3.1.        The Challenge. 6

3.      Accounting Information System.. 6

4.      Office Operator (O2) – An Introduction. 7

5.      Conclusion. 8

6. References. 9

1.     Introduction

The purpose of this report is to find out the challenges that BP is facing and to come out with the solutions to the BP’s problems. This report also explains the importance of Accounting Information Systems (AIS) that BP should use for the smooth running of its business. The report also highlights importance of AIS and the process of developing the AIS in an organisation. The report also elaborates the importance of AIS software ‘Office Operator’ OR ‘O2’ for Barry’s Plumbing Company. This report is broadly divided into four sections. First section talks about the challenges that BP is facing and possible reasons and individual solution to these challenges. Second section explains the concept of Accounting Information Systems and why it is essential for BP. In third section Office Operator software has been discussed in detail and the points which support the importance of installing O2 in BP has also been put forward. The final section concludes the paper and outlines the limitations of the study.

2.     The Challenges

2.1.          Improper Warehouse Management

2.1.1.     The Challenge

An analysis of skills of warehouse managers of BP indicates that managers lack following qualities which is creating the problem of over stocking and/ or under stocking of warehouses:

• Lack of proper direction, co-ordination and planning needed for proper storing and distributing materials
• Warehouse managers are not able to review work orders, invoices and confirm reports and monitor the distribution of materials or products properly
• They lack proper computer skills which are essential for proper collection and reporting of necessary information from relevant sources

The inventory in a warehouse is considered both an asset as well as a liability for an organization. An idle inventory in a warehouse is even worse than a trash. Clearing inventory in the most cost effective and efficient manner is quite essential for a business. Overstocking as well as under stocking, both are equally harmful for a business.

Following are some of the damaging results of overstocking of inventory:

• Inflexible and difficult management of an organization
• Tying up of  dead fund in non-productive goods
• Increasing number of worthless and out of date goods
• Increasing need of expanding storage facilities
• Rising overheads

If we will look at the other side of the coin, under stocking has following damaging results:

• Disablement of meeting the demand resulting in dissatisfaction in levels of services
• Low service standards lead to frustrated customers
• Business loose the opportunities

2.1.2.     Implementation of Warehouse Management System

Warehouse Management System (WMS) is an individual tool that can help a company in improving their productivity and focus on customers. The implementation of a WMS and a system that will enable automatic collection of data will lead to increased accuracy in daily working, reduced cost of labour and increased potential to serve customers as cycle time will get reduced. In addition, WMS results in an organised storage system which ultimately results in added storage capacity.

A WMS required for BP must have following feature:

• Flexible location system
• System that can accept user-defined parameters to complete tasks related to warehouses. It should also be able to execute the tasks which require live documents
• Equipped with built-in level of integration with data collection devices

Implementation of WMS may give birth to an argument that addition of a technology brings in additional overhead with it. This point is not at all reprehensible as every solution has its own dark side. What is more important is the fact that it will help warehouse managers in making more effective and efficient decisions related to BP’s business.

2.2.          Improper Communication Cycle

2.2.1.     The Challenge

Barry’s Plumbing’s head office is located in Sydney. Though there are 1800 phone lines available for customers but still gaps in communication system are creating dissatisfaction among customers. At present, BP is following a system of allocating job to its tradesmen directly from the head office. Under this system, customers register their complaints by calling at head office and from head office jobs are allocated to rostered vehicles using SMS or text messaging. It has been observed that rostered vehicles do not receive these messages on time and even miss it sometime and this lead to delay in services which ultimately lead to frustrated customers.

In an organisation, resources are transformed into goods and services to satisfy needs of customers. Effective communication is very vital for carrying out assignments, building co-operation and team spirit, optimizing performance and satisfaction, and avoiding and solving problems. Formal communication channels flow in downward, upward, and horizontal directions.

2.2.2. Implementation of online collaboration and knowledge management strategy

Instead of relying on SMS and text messaging, BP is advised to use its intranet, extranet and website to enhance the communication and collaboration within its business. Online collaboration and knowledge management strategy seems to be the best option for BP to make information related to customers’ complaints more accessible to its tradesmen. An effective knowledge management strategy will benefit BP in following manner:

• Duplication of information between head office, tradesmen and customer will be resolved through ‘Targeted information sharing’. It will also reduce the time spent on managing the customers’ complaints and forwarding them to rostered vehicles.

• Incorporation of web browser-based productivity tools and workflow automation to employees and authorised external users located anywhere in the world will lead to smooth flow of information

• Use of online document management, archiving, sign off and version control tools to help meet quality, service levels and compliance regulations.

2.3.          Improper Payroll System

2.3.1.     The Challenge

Billing for every customer is done from the head office in Sydney. Tradesman provides details about the problem for which he was called, person who logged the call, the time which he has spent on the site, materials used on the site, cause of the problem, recommendations in case further action is needed etc. Thus everything is in the hands of a tradesman, only those details which he furnishes are available to furnish the bill. Lacking on part of the tradesmen is leading to inaccurate and incomplete details in invoices.

3.     Accounting Information System

Accounting Information System (AIS) is indispensable to all organisations (Borthick and Clark, 1990; Curtis, 1995; Rahman et al., 1988; Wilkinson, 1993; Wilkinson et al., 2000) and whether the organisation is profit making or non profit-making, it should oriented need to exert the AISs (Wilkinson, 2000: 3-4). Accounting Information System comprises of three words: Accounting, Information and System. Lets elaborate these three words separately.

Accounting: Literally accounting means ‘language of business’ and ‘source of financial informations’(Wilkinson, 1993: 6-7). Secondly, information is a precious data processing that lay down the foundation of decisions making process and fulfilment of legal obligation. Finally, system is an unified subsistence. The blend of the three words Accounting Information System manifest an unified structure within an entity that utilises  physical resources like materials,tools, labour etc to convert economic data into financial information with purpose of conducting the firm’s operations and activities, and providing information concerning the entity to a variety of interested users.

Decision makers use various data related to finance and accounting. An effective accounting information system helps in collecting, storing and processing this data. AIS is a computer based technique which is used to keep a track on activities related to accounting and in conjunction with resources related to information technology.

4.     Office Operator (O2) – An Introduction

In order to run the plumbing business effectively and efficiently, BP is advised to implement ‘Office Operator’ or ‘O2’ for the entire organisation. Long working hours, small profits, frustrated customers, stressed-out employees, not so qualified tradesmen are some characteristics of a plumbing business. O2 will help BP in making it more organised and profitable. Following are some points which support implementation of O2 in BP:

Management of Potential customers: O2 will enable the company to manage its customers, moreover it will also help in tracking and attaining potential customers. There is an amazing feature of O2 which enables a company to collect and store data about potential customers. Whenever a company establishes a communication with a prospect, O2 stores the details related to that communication and you can access that information with just a click of mouse. So the information can be utilised for future references.

Customer Management:Through O2, company can store each and every information related to individual customer separately and precisely. For example, personal details of customers, history related to payments, problems and recommendations of the past, location and more.

Job Management:Danger of lost of details related to job is the most critical danger that can take place in an unorganised company. O2 provides tool and techniques in storing every minute detail about employees, tradesmen, tools, material, equipments, transportation vehicle etc. properly. As you begin to schedule jobs, O2 knows which employees, equipment and materials are available so you don’t have to worry about any schedules overlapping.

Employee Management: O2 provides great support in managing schedules of employees, tools and equipments assigned to them, their timesheet, payroll, number of hours worked, leaves taken, overtime and other benefits etc. All these information can be accessed by just entering the employees code. Moreover, punching of few details can automatically calculate other information.

Payroll Management: The Payroll feature of O2 can be used to access the payroll of an employee and his/ her effectiveness.

Equipment Management: Details such as name, brand, model, supplier, date of purchase, buying price, warranty period, date of issue, current status, maintenance and repair details and much more can be entered in O2’s Equipment record feature. The usage of equipment can also be scheduled with the job.

Material Management: Material is needed for the completion of the job. Generally service provider does not charge any amount for the material they use from the customer. But it is quite essential for a company to determine what is the cost of material that is used in a job to formulate its future strategies.

Determining Cost of a Job: In order to compute profitability of a company scheduling each job with respect to number of hours of each tradesmen, material used, equipments used, cost of transportation and other overheads is quite essential.. O2 makes this task very easy and less time consuming as data has been entered on timely basis. This also enables a company to provide accurate quotes to potential customers.

Reports: Some would say, “If you can’t measure it, you can’t manage it.” Well, it may not always be that simple but O2 provide you with reports as another tool of measurement. These reports include past due accounts, payroll, revenue, payments, worksheets, route-sheets and more.

History of Customers: Customer’s history can be easily viewed through O2. In order to find out whether a customer is a value creator or not, details of jobs and payments made by him can be seen and stored in O2.

Multiple Customer Locations: A company serves several customers. They all are located in different locations. Unlimited locations can be virtually in O2.

History of Billing Invoice: Details about jobs, pending payments and invoices can be accessed through O2

Calendar: O2 comes with a feature of a monthly-view calendar. Through this feature tradesmen can have a look at their monthly schedule at a glance.

Email Employees: O2 automatically send emails to tradesmen which contain their worksheets and route-sheets each day.

Managing Promotional Activities: O2 enables a company in sending bulk emails and messages to all the present customers and prospects related to new services, offers, deals etc.

5.     Conclusion

The operations of Barry’s Plumbing is dependent on large number of tradesmen, moreover there are numerous people involved in dealing with customer on telephone and allocation of job, warehouse managers etc. Thus all of them will be benefitted from the implementation of accounting information system software ‘office Operator’. Apart from operating staff, O2 will also help managers in preparing accurate and complete weekly, fortnightly ans monthly reports which will result in effective planning and control measures. This will further result in formulation of optimum strategies for the company, effective and efficient allocation of resources and taking measures to control any kind of shortfalls in day to day working of BP. The automated AIS could speed up information process and overcome traditional human weaknesses. As a result, the system supports the resource management and help BP pursue its projection of continuing business profit. The use of AIS indicate the growth of tacit and explicit knowledge, where personnel were trained intensively and experience and troubleshooting were recorded for future reference and training. Indeed, the successful implementation of an accounting information system can be described as a series of complex, interconnected activities necessitating participants to have technical and managerial skills to sort out prospective problems (Ponemon and Nagoda, 1990: 1). Individual tracking of tradesmen is possible through O2. This will help BP in determining the tradesmen who are just a burden on the company and are not making any kind of contribution in the profitability of the company. Efficient software smoothens the day to day working of a company. As a result, a company can bring down the headcounts in administration department thereby bringing down its overheads. Training new employees will also become very easy as everything will be organised and just a click away.  A company is expected to experience a major fall in its account receivables after implementation of this software as it will enable company to follow the customers whose bills are pending. This software works on real time basis through internet, thus it can be accessed from anywhere in the world.

6. References

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