CHAPTER COMPUTERIZED

OPERATIONS

11
11.1. Chapter Objective
11.2. Meaning of Computerized Operations
11.3 Applications of Computerized Operations in Business
11.3.1 Computerized Accounting
11.3.2 Marketing and Procurement
E- commerce
11.3.3 E- banking
ATM
Sim Banking
E- Statements
Wire Transfer
Credit Card Transactions
11.3.4 Transfer of Business Information
E- Conference
E- Mails
E- Learning
11.4 Challenges Facing Computerized Operations
11.5 Limitations Facing Computerized Operations
11.6 Advantages of Computerized Operations
11.7 Disadvantages of Computerized Operations
11.8 Exercise
11.1 Chapter Objective

a) At the end of this chapter one must to explain the general meaning of computerized
operations.
b) One must understand and be able to explain how computerized accounting is used in
various business operation.
c) Student must understand and explain advantages, disadvantages and challenges facing
computerized operations.

11.2. Meaning of Computerized Operations

Computerized operation is an elementary operation that a computer is designed and built to

perform, these operations are conducted in an electronic and computerized way, that means those
operations cannot be accomplished without the use of computers applications for example the
use of ATM machines in banks, the use of e-mails, e- bookings, e-commerce, etc.

11.3 Application of Computerized Operations in Business

Below is how computerized accounting is applied in business:-

11.3.1 Computerized Accounting

Accounting done with the assist of the computer, Involves accounting software and digital
spreadsheets to keep track of a business or clients financial transactions.

It has arisen as the advantageous use of the existing development in technology. It has removed
man from the use of traditional paper work in preparation of accounting books, also it has
created new types of accounting application for businesses. Businesses now create can create an
accounting system that integrates all business operation in a single system.

Computerized accounting system have replaced the traditional manual accounting system as now
managers, accountants, stakeholders and other employees can access to the important and a lot of
accounting information with one single button touch compared to the old manual accounting
system.
Process of computerized accounting.

The following is the process of computerized accounting system:-

INPUT PROSSESSING OUTPUT

-Debit notes -Electronic processing -Income statement

-Credit notes through computers -Statement of financial

-Invoices position

-Checks/ receipt

Features of Computerized Accounting

Below are the features of computerized accounting:-

Accuracy

As in computerized accounting system transaction are recorded electronically there is a

maximum of accuracy. When transaction were recorded using the traditional paper method of
accounting there was a less degree of accuracy as things went manual involving a lot of man
work which was seen to be sometime accurate as they sometime get tired hence their work
concentration decline.

Speed

When doing different accounting transaction by using the computer the speed of the work
increases. This is due to the fact that the computers can perform different accounting transaction
at once compared to those done manually. Also different accounting information can be traced by
those in need of them very fast and by using a very little time and access plenty of information.

Fast, powerful, simple and integrated

Computerized accounting system has proven to be very fast and powerful as different transaction
can be performed all at once it also not so complicated to operate for those who have trained to
use it. It is also integrated as the companies can create an accounting which combines all
business operation including external suppliers and vendors in the value chain.

Complete reliability

As all the accounting transaction are performed electronically, computerized accounting have
been very reliable in both providing data to the people in need and recording various accounting
transactions whenever there is a need to so. Where there are minimum break down of the systems
this kind of accounting has been very reliable.

Quick decision making

Computerized accounting assists in facilitating quick decision making, as accounting information

are readily available whenever they are required hence managers and other users of those
information who need them in decision making can easily access them hence quick decision.

Improved business performance

As all the accounting transaction of the business are recorded electronically and various business
operations are recorded in the single system hence improved performance of the business.

Advantages of computerized accounting

The following are the advantages of computerized accounting:-

Easy control

When a business operation adopt computerized accounting in recording its accounting

transaction it becomes easy to control and trace various transaction, hence avoids
mismanagement of funds.

Universal application
Computerized accounting is applied in all parts of the world. Softwares used in different parts of
the world are the similar. Hence this enables any accountant with the knowledge of computerized
accounting to work at any part of the world.

Easy to process large amount of data

Through the use of computerized accounting one is able to process a very large amount of data
within a very short period of time compared to those using the manual paper work accounting, as
all the operations are done automatically.

Codification is possible

Through using computerized accounting similar transactions are able to be coded together by
using a single code for each transactions which are similar. This enables the traceability of the
transaction to be easy.

Disadvantages of computerized accounting

Below are the disadvantages of computerized accounting:-

Loss of data

As the all the operation electronically done by using computers its possible data may be lost if
there is system breakdown and data is unsaved. Also if the computer is attacked by strong viruses
all the computer files may collapse and the data might be lost.

Needs heavy investment

Adopting computerized accounting is very costly as all the operation needs t be operated by
computers hence there is a need of acquiring computers and in store various softwares needed in
doing those transaction electronically.

Problem of security
Accounting information stored in computers through computerized accounting may be
unsecured. As there some people who are capable of hacking into the computer system and
access to all the data which might have been confidential.

Not suitable for small firms

Computerized accounting may not be suitable for small firms as first the cost of installation is
very high hence small firms might not afford to adapt to the system. Also small firms have very
little accounting information which can be accurately done manually.

Require training on part of accountants

Accountants cannot just adapt to the computerized accounting without passing through some
training. This results to increase in operational cost. Without being trained accountants cannot
perform transactions under computerized accounting.

Steps in computerized financial accounting

Below are the steps to be followed in computerized financial accounting:-

1. Planning and opening of an accounting system

First a company must plan on what accounting system will be appropriate for the business
operation after the decision have been made the accounting system is developed.

2. Entering data

After the accounting system have been developed, data that is accounting transaction are entered
into the computer.

3. Coding

All similar transaction are coded together.

4. Bank reconciliation

After the data have been coded then they are compared between the data present in the business
and those at the bank.
 5. Posting

Transaction are then processed into specific ledger accounts.

6. Printing of trial balance

After the transactions have been posted into ledger accounts then their processed and the trial
balance is printed.

7. Finalization of accounts

Finally after all the above have been done the accounts are finalized producing income statement
and the statement of financial position.

Components of computerized financial accounting systems

Below are the components of computerized accounting system:-

General ledger programs

This includes sales and purchases ledgers.

Accounts payable programs

Records people or organization which the company has purchased from them on credit.

Account receivable program

Assist in recording people or organization who have acquired goods from the company on credit.

Payroll program

Records salaries and wages of all employees of the company.

Fixed asset accounting program

Records the fixed assets of the company.

 Inventory accounting programs

Records the inflow and the outflow of stock in the business.

Advantages of the computerized financial accounting system

The following are the advantages of computerized financial accounting system:-

Provide accurate information

This is due to the reason that the chances of doing mistakes when preparing the financial
statements are less.

Data are easily recorded and processed

This happens as the result of coding the financial transactions.

Store large amount of data

It can record and store large amount of data in its memory compared to the one in manual
systems.

Its flexible

It is easily changeable according to the demands of the company. When the company expand
more it can also be developed to adopt with those developments in the business operation.

11.3.2 Marketing and Procurement

E-commerce

Means an electronic commerce where by trading of product or services is made using computer
networks such as internets. Electronic commerce based on technologies such as electronic fund
transfer, Supply chain management, Internet marketing, online transaction processing, and
inventory management system and automated data collection systems, this system generally used
in the World Wide Web.

The application of computerized operation in Procurement and Marketing using e-commerce are
as follows:-

In procurement;

E-Procurement system used in purchasing and sell goods or services on websites through
internet as well as other information and networking system , means that e- procurement value
chain consist of indent management, e-tendering ,e- automation, vendor management
,Purchasing order integration, Order status, ship notice, e- invoicing, e- payment and
procurement contract management can be made on line, for example now days such kind of
exchange can be made on line through internet example use business to business buying and
selling, here it means that one company can be able to supply material to another company and
enter into a contract without seeing each other not only that but also e procurement system
manage tenders through web site.

Use electronic data interchange, the business to business exchange of data, means that in
procurement one company can acquire some information from another company by looking on
how that other companies product are demanded through the advertisement made on line, for
example Azania company limited can acquire information from Coca-Cola company limited by
looking the demand of Coca-Cola product and ask themselves why this product is more
demanded it could be either due to price of commodity or quality of the product or quantity of
that product and tend to look on how they can fix it.

In marketing;

Application of computer in marketing activities is made through E- Marketing system in the

worldwide through internet, such as promotions and advertisement, now days many companies
may do advertise their products on web site in order to make them be known by customers in the
world wide, for example marketers do advertise its product using different media such as TV,
Radio and cinema, you can also print your domain name and e mail contract addresses upon all
your corporate material, Offer free products and services, provide free material example fact
sheets or guides that could be posted or be mailed to customers.
11.3.3 E-Banking

Computerization has revolutionized the banking industry. The advent of the usage of computers
has enormously increased the banking capabilities of the banks and they are able to offer better
and wider range of services to their customers. Internet banking, mobile banking, ATM SIM-
Banking and wire transfer, are all the fruits of computerization of the banking industry. Banks are
able to expand at a great rate and offer services to more and more customers because of the use
of computer

Computerised operations which facilitates banking operations are such as:-

ATM

ATM stands for an Automated Teller Machine. Through ATM the bank account holder can have
the access to his/her account by drawing money, depositing, and check for balance without
approaching the banking personnel.

An ATM card (also known as a bank card, client card, key card, or cash card) is any payment
card issued by a financial institution to its customers which enables a customer to access an
automated teller machine (ATM) for transactions such as deposits, cash withdrawals, obtaining
account information, and other types of banking transactions. The payment card may be any card
which has that feature enabled, and may be a debit, credit, a limited-use ATM or other card.
Interbank networks allow the use of ATM cards at ATM of financial institutions other than those
of the issuing institution.

ATM cards can also be used on improvised ATM, such as merchants' card terminals that deliver
ATM features without any cash drawer (commonly referred to as mini ATM). These terminals
can also be used as Cashless scrip ATM by cashing the fund transfer receipt at the merchant's
Cashier.
The first ATM cards were issued by Barclays in London, in 1967, and by Chemical Bank in Long
Island, New York, in 1969. Now days computer technology has grown up that makes ATM to be
applied in the world wide. In Tanzania a first Tanzanian bank to use an ATM is CRDB bank.

SIM-Banking

SIM banking is a service that allows you to carry out banking transactions using a mobile phone.
This system allows intra bank funds transfer to any bank account within a bank network, funds
transfer to any mobile phone in the country, funds transfer to mobile money, bills payments to
utilities, airtime purchase for self and others, ability to send money to people with no bank
accounts or ATM cards, balance enquiry and mini statement as well as alerts (notifications of
bank Cards usage) and on line registration through your own phone.

E-Statement.

Each banks websites differ slightly from bank to bank but managing your finances on line is
simple as logging on to the banks website and entering your user ID and password. The site will
then guide you through the transaction you want to carry out.

Some banks will communicate with customers by E-Mail They will, for example, send you an E-
Mail when your statement is ready. For example; CRDB Bank PLC (T). And if you have an
enquiry or want to order a statement you encouraged to E-Mail them. Bank employees also use
computer to store customer records.

Computer facilitate regularly bank customers information and transactions backups. Where
backup is the process of copying and archiving of computer data so it may be used to restore the
original after a data loss event. Daily banking transactions and user information are backing up
by the computerised in preferred secondary storage. Banks have strong backup system to ensure
that transactions are totally secured so that when are lost could be restored.

Wire transfer

Wire transfer or credit transfer is a method of electronic funds transfer from one person or
institution (entity) to another. A wire transfer can be made from one bank account to another
bank account or through a transfer of cash at a cash office.
Different wire transfer systems and operators provide a variety of options relative to the
immediacy and finality of settlement and the cost, value, and volume of transactions. Central
bank wire transfer systems, such as the Federal Reserve's Fed Wire system in the United States
are more likely to be real time gross settlement (RTGS) systems. RTGS systems provide the
quickest availability of funds because they provide immediate "real-time" and final "irrevocable"
settlement by posting the gross (complete) entry against electronic accounts of the wire transfer
system operator. Other systems such as CHIPS provide net settlement on a periodic basis. More
immediate settlement systems tend to process higher monetary value time-critical transactions,
have higher transaction costs, and a smaller volume of payments. A faster settlement process
allows less time for currency fluctuations while money is in transit.

Credit card transactions.

A credit card is a payment card issued to users as a system of payment. It allows the card holder
to pay for goods and services based on the holder's promise to pay for them. he issuer of the card
creates a revolving account and grants a line of credit to the consumer (or the user) from which
the user can borrow money for payment to a merchant or as a cash advance to the user. A credit
card is different from a charge card: a charge card requires the balance to be paid in full each
month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to
interest being charged. A credit card also differs from a cash card, which can be used like
currency by the owner of the card. A credit card differs from a charge card also in that a credit
card typically involves a third-party entity that pays the seller and is reimbursed by the buyer,
whereas a charge card simply defers payment by the buyer until a later date.

11.3.4 Transfer of Business Information

Computerized operations facilitate transferring information in business activities, example
information can be transferred from one organization to another, also information can be put
online so targeted users of that information can access that information any time. Through
computerized operations business information can be transferred in terms of e-mails, e-learning
also e-conference.
E-conference
A meeting (conference) that takes place over an electronic medium rather than in the traditional
face-to-face fashion. The most common form of an e-meeting is done through web-based
software which allows individuals and groups from around the globe to facilitate meetings
without physically travelling to an agreed upon location. People participate in e-conferencing
using a variety of software applications. Some types of Internet chat applications, such as Yahoo
Messenger, MSN Messenger, Skype or Google Chat. This system now days is mostly applied in
developed organization in setting business meetings and also as means of communicating at a
distance.

To facilitate communication on a particular topic

To encourage conversation among geographically dispersed people
To collect ideas to improve existing programs or create new ones
To promote a new idea, topic or approach (e g, finding new opportunities in business)

E-mails

E-mails, is a method of exchanging digital messages from an author to one or more recipients.
Modern email operates across the Internet or other computer networks. Some early email
systems required that the author and the recipient both be online at the same time, in common
with instant messaging. Today's email systems are based on a store-and-forward model. Email
servers accept, forward, deliver, and store messages. Neither the users nor their computers are
required to be online simultaneously, therefore e-mail facilitate transfer of information from one
organization to another or within an organization from one person to another.

Also some of advantages of using e-mails as means of transferring information in business

activities are;-

Immediacy

Email is sent and received almost instantaneously, whether the recipient is a few doors down or
thousands of miles away. Because of this, using email streamlines both internal and external
communication, making it faster and easier to transmit and disseminate important information
and allowing for almost real time status updates. In turn, the continuous flow of relevant
information makes employees and executives alike more efficient and productive, enabling quick
responses to any issue that may arise.

Record Keeping

Email messages remain in an user's inbox unless deliberately deleted, and both stand-alone email
software and webmail services offer a search function and filters that make tracking down a
specific message only take a matter of seconds. This creates a virtual paper trail that is far more
efficient than printed documents filed away in a drawer, making it extremely easy to extract
important information from email communication.

Low Costs

Email is one of the cheapest ways a business can use to communicate, both internally and
externally. Small businesses can simply sign up for free email with providers such as Gmail,
Yahoo or Hotmail; even for larger companies, the overhead cost of maintaining a dedicated email
server is relatively low. The cost difference is especially striking when considering mass
communication. For example, the cost of printing and delivering a set of marketing fliers or letter
is many times that required to send the information through email.

Marketing

Email allows companies to efficiently and effectively spread information about their products
and services, both to existing customers and potential ones. For example, a clothing company
could set up an email list to which anybody can subscribe, then send weekly emails to everybody
on the list detailing new additions to the catalogue. Similarly, a company specializing in business
software might contact other companies directly by email to inquire whether they may find their
services useful.

E-learning
E-learning is electronic learning, and typically this means using a computer to deliver part, or all
of a course whether it's in a school, part of your mandatory business training or a full distance
learning course.

In the early days it received a bad press, as many people thought bringing computers into the
classroom would remove that human element that some learners need, but as time has progressed
technology has developed, and now we embrace smartphones and tablets in the classroom and
office, as well as using a wealth of interactive designs that makes distance learning not only
engaging for the users, but valuable as a lesson delivery medium.

Building partnerships with quality training providers, and combining this with a dedicated
experienced technical team and support staff, Virtual College provides the perfect blended
learning environment, offering anyone the chance to take their online training to the next level,
therefore e-learning facilitate organisation employees to access material and study for further
development also through e-learning organisation can do recruitment online regardless of the
distance between people.

Among of the benefits of E-learning in business activities involve bringing people close to access
material online in any place around the world.

Its cost effective and saves time

By reducing the time taken away from the office, removing travel costs and doing away with
printed materials, online learning helps you to save money and increase workplace productivity.
It also means your staff will be happier and focused.

Learning anytime and anywhere

Many face to face courses only operate within normal office hours. By allowing staff to complete
the course when and where they like you can make sure disruptions to your busy working
schedule are minimized. This also means that your staff will be happier because they don't need
to travel to specific training centers, and if they have important work to catch up on mandatory
training can be done outside of office hours in exchange for lieu time.
 It's discreet
Not everybody feels comfortable learning in a large group, especially if they find something hard
to understand that co-workers have no problem with. E-learning allows each individual to tackle
the subject at their own pace, with interactive tasks being set in place to ensure a thorough
understanding throughout each module

Its a source of learning materials and researches

Through the use of e-learning it enables users to have access with different learning materials
and researches which usually helps in the learning process regardless of the distance from the
given centers of education like schools, universities etc.

Its doesnt interfere/distort personal schedule

Since people can access materials or information through e-learning in any place at any time
through internet access therefore their time tables and working schedules will not be interfered as
this system of e-learning enabling them to learn, access and use different materials regardless of
the place they are.

11.4 Challenges Facing Computerized Operations

High cost of installation, maintenance and running these operations

When these operations are established, firms can incur installation costs of some machines, also
often they incur maintenance costs of machines used in running computer operations, in which in
most cases they tend to be very high, so this becomes the challenge in the use of these
operations. Moreover computer hardware and software needs to be updated from time to time
with availability of new versions, as a results high cost is incurred to purchase new hardware and
software from time to time.
 Cost of training to ensure efficient use of computerized operations

Generally these computerized operations require high knowledge in terms of their use, as a result
it forces business companies to train their staff so as to cope with the current use and changes in
these operations, in which it leads to the increase in costs for example in accounting new
versions of software are introduced, this requires training and hence cost is incurred to train staff
personnel.

Insufficient fund

Often computerized operations require enough fund so as to cover the various costs as discussed
above, but most of firms fail to adapt these computerized operations since they are not sufficient
in terms of funds, hence this also challenging most of business companies in adapting these
computerized operations

Lack of skilled personnel

Most of these computerized operations require high skills in terms of use, but in most of
organizations the number skilled personnel fail to match with the actual number of experts
demanded due to the shortage of expertise who will operate that operation activities, therefore
due to this case many organization may fail to adopt computerized operations.

Network breakdown during operation activities

Generally these operations require massive use of network connections, hence in some areas
where the network is always down, some production can be delayed hence this also challenges
the use of these operations

11.4 Limitations Facing Computerized Operations

The following are limitations facing computerized operations:-

 Human errors

Human errors can occur at all levels within a system from programming to user errors. A system
can be set up incorrectly a user can also enter erroneous numbers or employ wrong account.
Through computer is programmed to work efficiently, fast and accurately but it is programmed
by human being to do so. Without a program, computer is nothing. A program is a set of
instructions. Computer only follows these instructions; if the instructions are not accurate the
working of computer will not accurate.

Costs

Computerized systems costs have decreased substantially, but they still can be costly not only to
purchase but to maintain them as well, extra cost for training new employees in the system,
charge for customizing reports and other processes can pose limitations.

Security

System security concerns can pose limitations on accounting software. Besides worrying about
viruses and worms. Computer operations may results into fraud of money where for non-
trustworthy transactions may result into theft of money when transacting. E.g. online transactions
to buy cars from japan, some have resulted into loss of money due to hacking systems.

Access to technology

In some countries especially in rural areas the use of computerized operations is limited in its
adaptation due to low level of technology in those areas for example in Tanzania, people who
live in rural areas find difficult to use these operations like ATM machine since the access to
these services is limited in those areas, Also some applications requires high level of technology
to operate like the use of high speed internet connection.

Illiteracy

Level of education in most places limits adaptation of computerized system, due to the fact that
the use requires literate people and some degree of understanding, therefore those peoples who
lack these capabilities became limited to the access of this system, example the use of
computerized system require understanding of English language because the common language
of computer is presented in English.

11.6 Advantages of Computerized Operations

The following are advantages of computerized operations;

Time saving

Time is an important aspect in daily life, computerized systems save time for small business
owners because calculations for many functions like payroll and billing can be performed
quickly and effectively by software programs designed for performing different works. For
example one can access accounting records quickly without having to sift through stacks of
paper. This will therefore allow you to spend more time working with clients or doing other
marketing functions to help your business grow.

Automation

A computerized operation eliminates ordinary and time consuming processes associated with
manual systems. For example in accounting, once issued, invoices are processed automatically
and all calculations are handled by the software, also in warehouses there is a special software
which helps to manage inventory.

Data access

Using computerized programs it becomes much easier for different individuals to access data
outside the office. Example with a computerized inventory management system, the management
team can pull a report and instantly see how many units are on the floor, how many have sold
and which products are selling the fastest.

Speed
The entire process of preparing different works becomes faster .Furthermore, statements and
reports. The system allows faster data entry than manual system and allows documents such as
invoices, purchase order and payroll to be collated and printed quickly and accurately.

Efficiency

Better use of resources is made also time and cash flow will improve through better debt
collection and inventory control. The use of computers allows works to be done faster and more
efficiently.

Cost effective

Computerized programs reduce staff as it reduces audit expenses and records are neat, up-to-date
and accurate. It is possible for a company to hire fewer staff because a lot of works are
performed by computers. Costs are reduced since amount which will be used to pay a large
number of staffs will be saved as many work are operated by using computers.

Security

Information can be saved and stored in offside locations so it is safe from natural and manmade
disasters example floods and earthquake. Whereas if it was in paper form there is no maximum
security as information can be lost easily.

Management of information.

Through the use of computerized operations data is instantly available and can be made available
to different users in different locations at the same time. Reports can be produced which will help
the management to monitor and control the business.

Accuracy

Less room for errors exist when there is the use of computerized systems. It reduce calculation
errors that can result in inaccurate information. Having accurate information can help to avoid
issues like tax errors that could lead to problems in running your activities as keeping accurate
information is critical to lowering costs and providing a more streamlined operation.
11.7 Disadvantages of Computerized Operations

Reduces the employment opportunities

In computerized operations most of its operations are conducted in an electronic way, moreover
it does not requires the large number of people as these operations are technological based hence
this situation has narrowed the number of employments in an economy

Difficult to operate
Generally these operations require high level of knowledge, and continuous training so as to
cope with its changes, and often require complex techniques in its operations, hence this causes
the computerized operations to be difficult to operate since most of personnel have low level of
knowledge.
Theft has become common
In some cases these operations are not highly secured, which creates some loopholes to thefts
and this in common in financial institutions especially in banks in recent years there has been
some reports about theft in banks through ATM machines, hence computerized operations is
risky to some extent in banks due to theft.

Costly
In many organizations which uses computerized operations, it has led to an increase in operating
costs of those organizations, and in most cases these costs tend to be very high, therefore these
operations are disadvantageous since are too costly to establish and maintain in an organizations
Endanger human health
In the health point of view the use of computers has some effects to human health, and since
most of the computerized operations involve massive use of computer, therefore this situation
may lead to many health problems such as muscular pain, eye strain and backache and this has
adversely effects in the working efficiency and increasing medical expenditure

11.8 Exercise

Answer the following questions:-

1. Explain the meaning of computerized operation.

2. With examples explain how computerized operations are applied in;
 -accounting

-marketing and procurement

3. With examples explain the concept of E-Banking.

4. Explain how computerized operation can be used and helps in transferring business
information.
5. With examples explain the challenges and limitations of computerized operation.
6. Explain in details the advantages and disadvantages of computerized operation.
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Kulkarni.P, Chande,P.K, IT Strategy for Business (2012)

Romney, M.B, Steinbart, P.J, Accounting Information Systems 8th edition

D. Chaffey, Digital Business and E-commerce management: Strategy, Implementation and

Practice 6th edition

Webber, R.H, M. Burri Classification of Services in the Digital economy