Financial Information

Systems
CONCEPTS AND OVERVIEW
Financial Information System
▪As the organization goes live, several transactions will take place. People invest money
in marketing, supply chain etc. funds go out of the organization and come into the
organization by doing business transactions. Several fund related activates will be going
on frequently in the organization. The information about all the transaction are kept
properly to know the situation of fund and information about any transaction.
✔Manual record keeping of the transaction is time-consuming, and searching for the
required data timely is even more time consuming and tedious.
✔ The poorly managed software program will not be able to satisfy all the information
requirements of the organization; it will not be able to give a clear picture of the
organization in terms of finance.
 Financial Information System
▪ To keep abreast with the finance of the organization, information system is required
which not only keeps record of all the activities related with funds, but also provides
facility to calculate several financial ratios, financial measures etc.
▪ This type of information system that processes data related to fund and produces
information related to fund is financial information system (FIS).
▪ Financial information system (FIS) takes data related to the fund like budget, expenses,
incomes; stores and manages those data properly; processes those data and generate
several information required to make financial decisions. FIS provides all the information
related to investments, loans, taxes of the organization.
 Financial Information System
▪ A financial information system is an organized approach to collecting and
interpreting information, which is usually computerized. A well-run financial
information system is essential to a business, since managers need the resulting
information to make decisions about how to run the organization.
▪ An ERP financial module is a software program that gathers financial data and then
generates reports. It allows you to communicate financial information more clearly to
external partners such as vendors and your customers when needed.
Financial Information Systems
Financial management information system is:
▪Information system that tracks financial events and summarizes information.
▪ Supports adequate management reporting, policy decisions, fiduciary
responsibilities, and preparation of auditable financial statements
▪ Should be designed with good relationships between software, hardware,
personnel, procedures, controls and data.
▪ Generally, financial management information system refers to automating
financial operations.
Objectives
❖The basic objective of the financial information system is to meet the firm's
financial obligations as they come due, using the minimal amount of financial
resources consistent with an established margin of safety.
❖Outputs generated by the system include accounting reports, operating and
capital budgets, working capital reports, cash flow forecast, and various What-If
Analysis reports.
❖The evaluation of financial data may be performed through ratio analysis, trend
evaluation, and financial planning modeling. Financial planning and forecasting are
facilitated if used in conjunction with a Decision Support System (DSS).
The Ideal FIS Systems
An ideal or well-designed system should:
⮚Collect accurate, timely, complete, reliable, consistent information
⮚Provide adequate management reporting
⮚Support government-wide and agency policy decisions
⮚Support budget preparation and execution
⮚Facilitate financial statement preparation
⮚Provide information for central agency budgeting, analysis and government-wide reporting
⮚Provide complete audit trail to facilitate audits.
 Features of FIS
It is difficult to specify features of FIS. Different organizations or users will have their own requirements. In case
of organization, some may require FIS for their performance measurement, some may require FIS for decision-
making process, and some may require both with additional features.

FIS is an information system that takes data as input and generates reports containing information. For FIS,
financial statement is one of the major sources of data. Financial statements show a firm’s position at a point in
time and its operations over some past period. The financial statements can also be used to predict future
earnings and dividends. Current assets, current liabilities, sales, inventory, receivables, total assets etc. and
many more are found in financial statements. These data are used as input by FIS to generate report concerning
performance of company, use of resources of the company, evaluate managerial performance etc.
Features of FIS
▪FIS uses several financial analysis tools like financial ratios for evaluating the performance of company. Liquidity
ratio, asset management ratios, debt management ratios, profitability ratios, and market value ratios are some
of the financial ratios used to know the position of firm at a point in time and its operations over some past
period. In addition, using financial statement, performance of a firm can be analyzed.
▪ FIS can also be used to make decision regarding investments. Investors invest in business expecting good
return from their investment; they do not like risk. People will invest in riskier assets only if they can receive
higher returns. However, there is a question how to know which business in more safe or riskier compared to
others. Several financial tools exist to compare different business options for investment in terms of riskiness.
▪ FIS can also have feature for analyzing time value of money. “A dollar today is worth more than a dollar in
distant future.” It is necessary for financial managers to have a clear understanding of the time value of money
and its implications on different aspects. The principle of time value analysis have many applications: setting up
schedules for paying off loans, decisions about how to acquire new equipment.
Functions of Financial Information System
1. Collection of Data:

2. Monitoring and Controlling the funds:

3. Analyze Past and Current Activities:

4. Helps in Decision Making:

5. Generating Financial Statement:

6. Recording of Data:

7. Integration
Functions of Financial Information
System
1. Collection of Data:
Under the financial information system, the first main element is the collection of data. On the
basis of data, the best decision is to be taken. Under this, various activities are performed like
collection, analyzing, maintaining the information.
2. Monitoring and Controlling the funds:
Financial information system helps in controlling the funds. It tracks the revenue and expenditure
of the organization. As FIS is computer based system which keeps record of the whole activities in it
3. Analyze Past and Current Activities:
Financial information system analyse whole activities. It checks the current as well as past activities
so that future decisions can be easily taken. The main aim of the FIS a to maintain record of all the
finance related operations in the organization.
Functions of Financial Information
System
4. Helps in Decision Making:
As we know, the DSS supports FIS with the help of financial information the optimal decision is to be taken.
All the financial related decision, budgeting, investment are taken with the help of financial information
system.
5. Generating Financial Statement:
Financial information system, collects whole finance related information and after proper analysing the
financial statement is to be generated which is useful for the management for decision making.
6. Recording of Data:
Financial information system records whole data in the system which can be retrieved at any time when
required. So whole data is saved or maintained under it which can be used at anytime.
7. Integration:
FIS integrates financial information from different levels and functions of organization.
Components of Financial Information
System:
1. Financial 2. Fund
3. Controlling
Accounting Management

Financial accounting Under the financial

records all the information system, Controlling
financial transactions fund management component is useful
in accounts. It plays an active role in for the maintenance
records all assets, the organization. of whole activities in
liabilities , revenue the organization.
and expenditure.
It is a crucial aspect
of financial
Financial accounting management, the It records the
is useful for the main aim of fund revenue and
maintenance of the management is to expenditure of all the
statements maximize the profits departments and
from its investment. lead desirable
change by controlling
the activities.
 Example of Financial Information
Systems
Let’s consider a fictional manufacturing company, “WidgetCo,” and how it might use a Financial
Information System (FIS) in its operations.
⮚Accounting: WidgetCo uses the FIS for its basic accounting operations. The system automatically
records every sales transaction, updates the general ledger, and maintains up-to-date balances for
accounts receivable and payable. Payroll is also managed through the FIS, ensuring employees are paid
accurately and on time.
⮚Financial Reporting: At the end of each quarter, WidgetCo’s finance team uses the FIS to generate
financial reports. These reports include the income statement, balance sheet, and statement of cash
flows. They give a detailed picture of WidgetCo’s financial health and are essential for regulatory
reporting and for informing decisions by company management.
⮚Budgeting and Forecasting: Each year, WidgetCo’s finance team uses the FIS to help create the
company’s budget. The system allows the team to analyze past revenue and expenses in detail, helping
them forecast future financial trends. As the year progresses, they can compare actual results with the
budgeted figures and adjust plans as necessary.
Example of Financial Information
Systems
⮚Risk Management: The FIS helps WidgetCo manage financial risks. It provides real-time
visibility into the company’s financial status, highlighting potential issues such as cash flow
shortages or high levels of debt. The system can also generate alerts when key financial metrics
fall outside of predefined ranges.
⮚Investment and Portfolio Management: WidgetCo uses the FIS to manage its investment
portfolio. The system provides detailed information on the performance of each investment,
enabling the finance team to make informed decisions about buying or selling assets.
⮚Billing and Invoicing: The FIS manages WidgetCo’s billing and invoicing. It automatically
generates invoices for each sale and tracks when payment is received. If a customer is late with a
payment, the system can automatically send reminders.
 How FIS can help organization to make
decisions related to finance
Almost all activities of organization need funds for execution. It is necessary for
different functional units of the organization to have knowledge about the
availability funds.
❖Let us consider a scenario of an organization, which produces certain product.
Suppose sales and marketing manger is able to forecast demand for its product
using Marketing Information System (MkIS). S/he came to know that “n” number
of products is in demand by the customers.
❖S/he sends this information to the manufacturing and production department.
The manufacturing and production department calculates all the expenses
required to produce required number of products.
 How FIS can help organization to make
decisions related to finance
❖Production and manufacturing department needs raw materials, machinery,
human resources etc. It has to acquire raw materials from supplier. If the
manager of the manufacturing and production department gets information
about fund s/he can manage resources accordingly and decide whether the
demand can be addressed in time or not.
❖If the information about the fund is available to the manufacturing and
production department then only it can decide whether products in the required
number can be made in time. If the organization has good FIS, then this situation
can be handled quite easily as FIS enables to know the status of funds
immediately.
How FIS can help organization to make
decisions related to finance
FIS helps organization in all fund related tasks and activities. Organizations have
several tasks and activates that are related with funds like:
❖Distributing salary of employees
❖Producing finished products
❖Marketing and advertising products and services etc.
Managers make decision related to
❖ budget
❖ investment of fund
❖ collection or borrowing fund for investment
Business value of Financial information System
Financial information system is basically concerned with the money matters of the
organizations. It helps to keeps up-to-date information about the transactions;
availability of the funds, budget information etc. Therefore, FIS helps firms to make
decision related with money:

✔ purchasing decisions can be made easily because the information about the fund
is accessible easily
✔ decision related to the investment is also easy
✔ information about the payments like interest, loans, rents, bills are all available
Business value of Financial information System
✔ Improving relationship with suppliers: by paying immediately to suppliers’ confidence of
the suppliers can be won. This can be done by having information about the funds. If
suppliers can be paid immediately, they may provide better service in future.
✔ FIS helps to determine whether the firm is getting good return on its investments or not,
what is the situation of investments.
✔ FIS helps to keep track of a firm’s financial assets and fund flows.
✔ FIS helps of get answers to questions like: What is the current status of financial assets?
How much assets available for disbursements, receipts, payroll etc.?
FIS in different levels of management
FIS plays important role in different level of management hierarchy.
Strategic
❖The components or modules of FIS used in the strategic-level systems level
helps to establish long-term investment goals of the firm and helps to
forecast long-range fund requirements to achieve long-term goals and
objectives. Management
level
❖At the management level, modules of financial information systems help
managers manage and control the firm’s financial resources and provide
insights to invest firm’s funds in cost effective and efficient manner.
Operational Level
❖At the operational systems, financial information system helps to keep
track of accounts, the flow of funds into the firm and out of the firm such as
paychecks, payments to vendors, securities reports, and receipts.
Advantages of FIS
There are many advantages of implementing an FMIS. A few of
them are listed below:
▪Integrated financial information
▪ Flexibility of reporting and additional control over expenditure
▪ Less administration required within the business
▪ Tighter views of budgets versus actuals.
FIS Module Overview
Different Modules for different financial Other software interfaces with FIS
functions Modules
▪Projects / Awards (Grants) ▪ CASHNet – Receipts
▪ HRIS (PeopleSoft) Payroll
▪ General Ledger (GL)
▪ Budgets (PeopleSoft)
▪ Accounts Payable (AP) ▪ BRS
▪ Accounts Receivable (AR) ▪ eForms
▪ Labor Distribution (LD)
▪ Purchasing (Purch)
▪ Fixed Assets (FA)
FIS Modules
General Ledger (GL)
◦ core module of the system
◦ all reporting (except grants) is based on information contained in the GL

Projects/Grants Accounting
◦ Provides activity-based accounting with additional functionality to meet grant
accounting needs
◦ Initial focus will be Grant accounting

Accounts Payable (AP)

◦ Processor for vendor and inter-departmental payments
FIS Modules
Accounts Receivable (AR)
◦ Initial focus will be Grants Billing

Labor Distribution (LD)

◦ Detailed payroll transactions will be interfaced to FIS through this module
◦ Includes functionality for Effort Reporting (Grants)

Fixed Assets (FA)

◦ Manage the University’s capital asset records