Accounting Systems Technology for the 21st

Century

Presented by

Liv A. WatsonLiv A. WatsonLWatson@GaitherCPA.com

Today’s Agenda

Accounting systems technologies and future

trends

There will be two 10 minutes breaks and a 1

hour lunch

XBRL

Questions and comments are always

welcome

Scalable Architecture Accounting as a Scalable Architecture Accounting as a SystemSystem

Professional Analyst CasualViewer

InternetBrowser

FieldUnit

Functionality

The Traditional Accounting Information Systems

Architecture

Multi-tier Computing

“2-tier,” “3-tier,” and “n-tier” “A Tier” describes how the computing

workload is distributed in a client/server system

When you separate the application logic from the presentation and data storage layers, you create a third layer: the application logic later. So 2-tier becomes 3-tier.

“n-tier” is used describe those architectures in which there is more than one application logic layer

• What is Governments role in the development and operation of the Net?

• Should (and if so, how) states be able to tax activity on the Net passing through their jurisdiction?

• Can we effectively eliminate or limit access to offensive material, especially by young people?

• How can we I improve the security of data traveling on the Net?

Enterprise Resource Planning (ERP) Systems MRP (Material Requirement Planning) MRP-II (Manufacturing Resource Planning). ERP

Human Resources Finance Customer Service Engineering

Institute of Management Accountants (IMA) provides a course, “Benchmarking ERP Systems”

Applying Information Technology to the Accounting Cycle

The operating system (O/S) is the most important program that runs on a computer:

Recognizing input from the keyboard

Sending output to the display screen

Keeping track of files and directories on the disk

Controlling peripheral devices such as disk drives and printers

Operating systems can be classified as follows: Single-tasking 

Generally supports only one a process at a time      Multi-user 

Allows two or more users to run a program at the same time      

Multi-processing Supports running a program on more than one CPU

Multi-tasking     Allows more than one program to run concurrently   

Multi-threading Allows different parts of a single program to run concurrently

Real time Responds to input instantly. General-purpose operating

systems, such as DOS and UNIX, are not real-time.

Introduction and History 1945 -- 1955

Bare machines -- vacuum tubes and plug boards Designed by J.W.Mauchly and J.P.Eckert of the University of

Pennsylvania in 1945 No operating system

1956 -- 1965 Transistors and batch systems Clear distinction between designers, builders, operators,

programmers, and maintenance personnel 1965 -- 1980

Multiprogramming 1980 to present

Personal computers and workstations Network operating systems

Network Operating Systems (NOS)

Single User DOS Applications: Local workstation only: not written to work on

network. Network-Aware Applications

Will work on a network, but only for a single user. Multi-user Applications

Applications specifically written for networks. Email, Scheduling, Groupware

Peer-to-Peer NOS Characteristics

Each machine sends, receives, and processes data files (Client and Server).

Simplistic in design and maintenance. Used for smaller number of users (10 to 50). Used when users are in same area. Used when network growth is not an issue. Less expensive (no dedicated server). Slower and less secure than File Server

Security

Firewalls

Packet Filters

CERTIFICATE AUTHORITIES There are four principal types of

certificates: Certification Authority Server Personal Software Publisher

VIRUSES, BUGS AND WORMS A virus is a program that attaches itself to

other files. Viruses can be funny, irritable or

destructive. A bug is a flaw in a browser that can be used

by a hacker to circumvent a browser’s security functions.

A worm is similar to a virus in that it can be destructive or irritating.

Makes copies of itself and send them to other users

ProtectionVIRUSES, BUGS AND WORMS

There are steps that a user can use to protect themselves from these dangers. They include:

Know your source of files and messages Use a virus monitoring software to scan incoming

files or set the software to continuously monitor activity on your computer or server

Only open files after they have been scanned Maintain frequent backups so that you can recover

from a crash or other problem

THIRD PARTY ASSURANCE SERVICES WebTrust Better Business Bureau

e-Insurance Policies

For example, if your company unwittingly spread a virus that wiped out customers’ database. ACE USA AIG Lloyd’s of London Marsh St. Paul Zurich

Relational Database Management Systems

Relational Database Management Systems (RDBMS) A type of database management system

that stores data in the form of related tables. The data is integrated into a single

conceptual model and a single location The data is independent from the

application programs The data is shared 

Today, most leading accounting software manages data almost exclusively on RDBMS technology

Data Marts Data marts are workgroups or

departmental warehouses, which are small in size, typically less than 10GB

Meta Data 1.      The technical data

contains a description of the operational database and a description of the data warehouse

2.      The business data contains a description of the operational database

and a description of the data warehouse

Relational Accounting and Transaction Triggers A trigger is a piece of code stored in the

database. Row-level triggers can be executed

BEFORE or AFTER each row is modified by the triggering insert, update, or delete operation.

Statement-level triggers execute after the entire operation is performed

Why would accountants benefit from triggers? Recording the name of user who tried to change an

account code Recording the data and time a transaction occurred Ensuring that a transaction is in balance before it is

posted to the ledger Alerting the accountant to a budget overrun by sending

an e-mail Printing out an audit trail Warning a user of unposted transactions before a report is

to be run Checking that codes added to one table exist in other

related code tables Deleting data from an address table when its customer

owner is deleted

Benefits of RDBMS Scalability Transaction integrity Centralized business rules Centralized data allows real-time accuracy in transaction processing

since the single data occurrence is always updated Shared data eliminates inconsistencies when data is stored in

several places and not updated in all locations     Shared data means that all application programs use the same

data    More informed decision making, based on one corporate database Improved cost efficiencies Higher level of customer service Enhanced asset/liability management       

Data Warehousing

Bill Inmon coined the term "data warehouse" in 1990. His definition is:

"A (data) warehouse is a subject-oriented, integrated, time-variant and non-volatile collection of data in support of management's decision making process."

Information is stored in files or tables. The emerging problem is not how to

retrieve data, but how to manage, utilize and optimize the mountains of data our increasingly efficient information systems are collecting. Within this explosion, the challenge of data warehousing has become evident.

Terminology: A file is made up of a number of records. A record is made up of a number of fields, each

of which has a specific identified name.

What, Then, Is a Data Warehouse? Data warehouses assemble the data from

heterogeneous databases so that users query only a single point

Internet and World Wide Web technologies have had a major impact on data management. Many vendors now have interfaced their data warehouses to the Web

Intelligent agent technology will play a major role in locating and integrating various data sources on the Web

A data warehouse brings together the essential data from the heterogeneous databases, so that users need to query only the warehouse

Data warehouse applications include:

Sales and marketing analysis across all industries

Inventory turn and product tracking in manufacturing

Category management, vendor analysis, and marketing program effectiveness analysis in retail

Profitability analysis or risk assessment in banking

Claim analysis or fraud detection in insurance

Business Intelligence Tools

What is Business Intelligence Tools? Business Intelligence Tools is a kind

of software that gives users the ability to access and analyze information that resides in databases throughout an enterprise.

IT Systems that are designed specifically to meet the needs of the knowledge workers.

BIT v. OP Built to enable

exploration analysis, and presentation of information

Relatively few inquires which are often wide in scope

Designed to get data out

Used to automat routine, predictable tasks

Large volume of small transactions that are limited in scope

Designed to get data in

The following are three types of Business Intelligence Tools Multi-Dimensional Analysis Software - Also

known as Multi Software or OLAP (On-Line Analytical Processing) - Software that gives the user the opportunity to look at the data from a variety of different dimensions.  

Query Tools - Software that allows the user to ask questions about patterns or details in the data.

Data Mining Tools - Software that automatically searches for significant patterns or correlations in the data.

Data Query and Reporting Tools Multi-Dimensional Analysis

Software Also known as: OLAP (On-Line

Analytical Processing) Is the process of analysis that

involves organizing and summarizing data in a multiple number of dimensions.

OLAP “Value Added Decision Support”

"Think of an OLAP data structure as a Rubik's Cube of data that users can twist and twirl in different ways to work through what-if and what-happened scenarios."

– Lee, The Editor, Datamation (May 1995)

New Analytical Approach One of the most prominent and

pervasive alternative approaches to managing analytical data lies in the relationship between knowledge management (KM) and decision support.

The ability of any user, anywhere, to ask any questions of any database, at anytime.

Data Mining Concept and Useful Terminology I Data Mining is the process of finding

hidden patterns and relationships in the data

Data Mart is a database that has the same characteristics as a data warehouse, but is usually smaller and is focused on the data for one division or one workgroup within an enterprise.

Data Mining Concept and Useful Terminology II Data Migration is the movement of

data from one environment to another. This happens when data is brought from

a legacy system into a data warehouse. Data Mining is the process of

finding hidden patterns and relationships in the data.

Drill Down and Drill Up

Benefits of BI

Supply chain management

Fraud management

Risk management

Product management

Financial controls

Transaction Processing

Transaction Processing

Transaction processing means that master files are updated as soon as transactions are entered at terminals or received over communication lines.

Batch Processing Versus Transaction Processing

Characteristics of Transaction Processing Systems Provide fast, efficient processing to handle large

amount of input and output Perform rigorous data editing to ensure that records

are accurate and up to date  Are audited to ensure that all input data, processing,

procedures, and output are complete, accurate, and valid

Involves a high potential for security-related problems  Support work processes of large number of people;

loss of the system can cause a severe and negative impact on the organization

Transaction Process Monitors TP Monitor makes sure that groups of

updates take place together or not at all

This also supports the four TP requirements:

1. Atomicity 2. Consistency 3. Isolation 4. Durability

1. Atomicity All transactions are either

performed completely - committed, or are not done at all; a partial transaction that is aborted must be rolled back.

2. Consistency The effects of a transaction must

preserve required system properties. For instance, if funds are transferred between accounts, a deposit and withdrawal must both be committed to the database, so that the accounting system does not fall out of balance.

3. Isolation Intermediate stages must not be

made visible to other transactions. Thus, in the case of a transfer of funds between accounts, both sides of the double-entry bookkeeping system must change together. This means that transactions appear to execute serially (e.g. in order) even if the work is done concurrently.

4. Durability Once a transaction is committed,

the change must persist, except in the face of a catastrophic failure.

Elements of the Transaction Processing Accounting cycle Ledgers Journals Trial balances Coding Reports Source documents

Transaction Processing Cycle

Document Image Processing

Imaging Processing is the automated technology of: Image processing systems automate and

streamline the flow of paper through an

organization. Imaging is the automated technology

of:

Document Storage

Document Management

Document Retrieval

Document Communication.

Processing systems are good for: Scanning large amounts of paper-based

documents into a computer system and indexing them for quick and easy retrieval.

Processing all types of documented information either graphical, full-text of combinations of both.

Converts images into a digital format via the document scanner and then stores these images onto a mass storage device, usually a "write-once" optical mechanism.

Document Image Processing Within the Accounting Office

Application Module Type of Image

General Ledger Cash transfer and deposit slips, wire transfer request

Accounts Receivable Sales invoices, checks paid, expense reports

Accounts Payable Invoices, canceled checks, expense time sheets

Purchasing Purchase orders, price lists and brochures, agreements

Inventory Pictures of items, copies of insurance or title contracts

Fixed assets Pictures of assets, copies of insurance or title contracts

Human resources Pictures of employees/applicants, resumes, and professional/educational certificates.

Benefits Saves time by retrieving documents quickly and

efficiently at your terminal. Saves time by allowing documents to be shared

electronically. Saves money by releasing valuable filing space. Saves money by using electronic forwarding

instead of photocopying. Saves money by increasing staff productivity. Enhances customer service by timely and

accurate retrieval of information.

GroupWare and Workflow

GroupWare and Workflow Components

and Concepts Describe a rapidly evolving collection of

software tools that have been developed to enable more efficient human collaboration.

Groupware aids in the: Creation Sharing And tracking of unstructured

information within and between organizations in support of

collaborative activity

The Major Vendors are:

Lotus Notes/Domino,

Microsoft Exchange,

Novell Groupwise, and

Netscape SuiteSpot/Collabra

Groupware can be said to encompass at

least six core technologies: Multimedia electronic document

management systems (EDMS) Electronic conferencing systems Electronic scheduling systems Electronic mail systems Telephony Workflow systems

Pitfalls in implementing a groupware system

As the system become functionally broader, they become more difficult to implement in an ordered, logical fashion

Expectations of the system Training On-screen graphical flowchart of

the module

Document The basic instrument of storage in a

groupware system is the document. A document is the abstract “box” that

holds all of the unstructured data you will use in the groupware system.

A document is the equivalent of the table in SQL databases, except that it holds unstructured (or “semi-structured”) data instead of highly structured relational data.

Document Databases. Research notes Blueprints Financial statements Vacation photos Videos Voicemails Bulletin boards Faxes E-mails.

Electronic Conferencing Asynchronous Versus Real-time

Text-based

Teleconferencing

Electronic whiteboards

Data conferencing

Internet Relay Chat (IRC) and ‘Usenet’

The tools at the disposal of the viewer/participant will usually include:

A mechanism to create a new topic or a new thread

A mechanism for responding to an existing thread

A user/topic/date search utility.

Real-Time Conferences

Allow team members to collaborate on a

project using near-instantaneously refreshed

document replicas, electronic

whiteboards, and audio/video

communication tools such as

teleconferencing systems

Electronic Scheduling Electronic scheduling is a means of sharing

information about meetings, deadlines, and “To Do” lists between personnel and project members.

A project member wanting to schedule a meeting would simply: View the calendars of the desired participants Choose the best time, date, and location for the meeting Write the meeting information directly to the calendars

of meeting participants Send reminder notifications via e-mail.

E-Mail Features Address Books Automation Document Attachments Group Broadcasting Carbon Copies Security Notification

Ad Hoc and Process-Oriented Workflows Ad hoc (or unstructured) workflows

are those that give workers maximum freedom in completing their work.

Process-oriented workflows (or structured workflows), on the other hand, are used to automate processes that are long-lived, repetitive, and well defined

Benefits for Future Unified messaging systems

Computer-telephony integration (CTI) Interactive voice response (IVR.)

This is a relatively new area of technology convergence, so we will probably see many new and innovative applications within the next few years as new CTI/IVR applications make their way onto the groupware playing field.

Distributing Computing

Introduction to the Distributing Computing Concepts

The trend toward integrated decision support for the extended enterprise .

Use databases on meaning rather than just structure.

A focus on asset management, cellular design, self-managing applications, and collaborative commerce, to take us beyond ERP systems.

Distributing Computing Concept

The Internet and the World Wide Web

Hypertext Markup Language (HTML)

 Hypertext Transfer Protocol (HTTP) Hypertext Transfer Protocol or HTTP is

a set of rules for exchanging files on the WWW.

This represents the application protocol for other protocols (principally TCP/IP) used for the exchange of information on the Internet

Common Gateway Interface (CGI)

Servlets

Advanced Hypertext Markup Specifications The language has three important

functions, to provide direction as to:

1. What markup codes are allowed2. What markup codes are required3. How the codes will be recognized

as not being part of the basic text

Extensible Markup Language (XML)

Cascading Style Sheets (CSS)

E-Commerce and EDI The term E-Commerce (Electronic

Commerce) brings different things to mind depending upon your prospective or the context in which it is used.

EDI (Electronic Data Interchange) is a subset of E-Commerce. EDI forms the basis for information to flow between two organizations without paper (or less of it) using a predefined set of parameters

E-Commerce and EDI Functions Virtual Stores and the Online Gold Rush Customer Relationship Management Self Service Accounting and Human Resource Applications

Customers could check their accounts receivable status. Vendors could check their account payable status. Outside sales people could enter and monitor customer

orders. Employees could review their employee benefit accounts

– and in some cases make changes in their preferences or elections.

Employees could schedule vacation or other time away from the work-site.

Online Banking and Tax Payment Systems Some of the types of transactions that might be

included are:

Transfer of funds between deposit accounts. Transfer of funds between deposit and loan account

(and vice versa). Initiate electronic payment to vendors. Query their accounts for activity and to aid in

reconciliation. Send messages to customer service

representatives and receive replies.

Creating a Technology Plan

Creating a Technology Plan1. Get top management committed to the project2. Do research, make a plan, and create a

budget and timeline3. Need assessment 4. Contact vendors and gather your resources5. Set up the prototype and choose vendor

product6. Establish policies and best practices7. Educate the employees on what is coming8. Roll out the hardware and software9. Install accounting applications10. Establish maintenance system, audit test11. Evaluate and continuous improvement

Projected Goals and Objectives What problem will the new accounting

system solve – Where is the pain? Top management needs to

understand and endorse the project? How will you achieve that?

How technically adept are the participants?

Project Manager – who is that person?

Benefits vs. Coasts Is top management aware of the

hard and soft benefits and costs of the project?

What method will you use to determine the ROI of your project?

Will the pilot project be able to demonstrate ROI clearly?

Budget for Each Implementation Phase

Break project into phases 60 days to 6 months

Construct a budget for each phase of the project

Database and Legacy System Integration Identify all of your company’s

legacy systems and databases. Have legacy security issues been

addressed? Are the candidate legacy system

interfaces clearly defined?

Performance Issues? Have hardware and software

platforms been defined? Have you planned for different

growth scenarios?

Server Locations, Hosting, and Maintenance:

Will you company have a dedicated server to host, or will host the content on a shared server?

Who will maintain the accounting application?

Implementation Time and Milestones. Have reporting requirements been

fully defined by management? Are there meeting scheduled to

review the findings with top management?

Staffing/Resources to Maintain and Support the Project Is there a clear policy in place to resolve

problems? Are there clear maintenance procedures in

place? Are there clear guidelines for

implementing upgrades? Have backup procedures been developed? Does an emergency plan exist for system

failure? How will ongoing training be managed?

The Future of Accounting, Information,

Technology, and Business Solutions

Technology Projections Computer systems will be on-line and virtually

connected. Distributing intelligence to handle screen layouts,

data entry validation and other processing steps Computers sites will harbor intelligent agents.

An intelligent agent is a software that waits in the background and performs an action if a specific event occurs.

Monitoring systems will focus on exception reporting and will place emphasis on fund transfer systems. Often called “audit by exception” as opposed to auditing actual reporting.

Viruses and Hackers will continue to be a growing concern.

Future Benefits of Relational Accounting Systems  Parallel Processing

is an architecture within a single computer that performs more than one operation at the same time.

The advent of parallel processing leads to dramatic performance and improvements in accounting systems.

Distributing Processing Is the distribution of

multiple computers throughout an organization.

This structure lets a single transaction span multiple databases by ensuring that the process completes in either all databases or none.

Replication Functionality The ability to keep

distributed databases synchronized by routinely copying the entire database or subset of the database to other server in the network.

Replication Functionality can be used to publish reports and other accounting data to subscribing servers for dissemination to users via e-mail or the Internet.

Object-Oriented DBMS Provides more flexibility

than systems designed for relational databases.

Object-oriented databases allow for many to many relationships.

The ultimate goal of object accounting systems is that it should not matter which source language they were programmed in or in which computer in the network they are running on.

Other Trends

Graphical Accounting Refers to the use of a Graphical User

Interface (GUI) to present the accounting systems functions and data users. Today practically all major accounting system vendor has released their accounting software with the same standard GUI interfaces.

Other Trends

Spread Sheet Accounting The integration of spreadsheets

software with your accounting system. Most client/server accounting packages

include direct transfer of data to and from spreadsheets without the need for messy data file export and imports.

Other Trends Adaptable Accounting refers to accounting software

that can be easily adapted or customized to fit most business processes. Users often see the need for accounting software to adapt to:

The different computing platforms used throughout the organization

The specific terminology and data capture needs of local business units

A variety of business rules in place by governmental bodies and regulatory entities

Differences in the implementation of specific business processes

The demand for add-on functionality not provided by the software vendor

Other Trends Adaptable Accounting refers to accounting software

that can be easily adapted or customized to fit most business processes. Users often see the need for accounting software to adapt to:

The different computing platforms used throughout the organization

The specific terminology and data capture needs of local business units

A variety of business rules in place by governmental bodies and regulatory entities

Differences in the implementation of specific business processes

The demand for add-on functionality not provided by the software vendor

Internet Accounting (Client/Browser Architecture) Allows the users access

to accounting related information from any Internet connection via platform-independent desktop Web browser.

For example, initiate a transaction, participate in a transaction workflow, run a query, or request a report without having any accounting software on their own PC.

www.netledger.com

Workflow Accounting TrendsThe automatic routing of accounting related

data to the users responsible for working on them.

System setup workflow Message-based workflow Form-based workflow Transaction-based workflow Web workflow Even-driven workflow

Component Accounting Refers to

accounting software that works together and cooperate with each other. Voice Video Images

OLAP Accounting OLAP is fast becoming

another technology and functional differentiator between accounting systems.

The OLAP functionality may be built in to the accounting suite or delivered via integration with third-party products.

??Questions and AnswersQuestions and Answers

Liv Watson – Senior Director of Information TechnologyLiv Watson – Senior Director of Information Technology

Lwatson@GaitherTech.comLwatson@GaitherTech.com

http://www.GaitherTech.com