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Financial Management Information System

Article in SSRN Electronic Journal · May 2012

DOI: 10.2139/ssrn.2049782

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Financial Management Information system 1

FINANCIAL MANAGEMENT INFORMATION SYSTEM

Dr. A.H. Sequeira,

Professor, Dept. of Humanities, Social sciences and Management,
NITK , Surathkal
Swathi Pai B,
Student -MCA, NITK Surathkal
Surekha V,
Research Asst., Dept. of Humanities,NITK Surathkal

Abstract
The Management Information System is a concept of the last decade or two. The role of
MIS in an organization can be compared to the role of heart in the body. Most of the
organizations be it small or large are using computer based information system with
centralized, decentralized or distributed networks connecting data flow from and to the
various departments/ branches. Hence the MIS is defined as a system based on the
database of the organization evolved for the purpose of providing information to the
people in the organization. The development of MIS in finance can improve the system’s
functions, performance and productivity. This paper includes a study of designing the
Financial Management Information System (FMIS) and to show how FMIS benefits the
organization by aiding the managers to achieve their goals. It facilitates them to see if the
performance is on the right track, based on the existing financial database. The read-
only reports are presented to the executives in Excel by pulling in the data from the Tally
database using the Microsoft Office tool. The automation of watch register is an
application that keeps a watch on all the receipts and payment bills and check with the
budgets allotted. The user- interface developed using Visual Basic is to enter, view and
delete the data. The data is stored in Oracle9i database. In this endeavor, atomizing
different registers and reducing the manual work of calculations aid finance system. Thus
MIS designed throws light on the importance of easy access to useful information to the
executives in improvising the system performance.

Key Words : Information systems , Financial Management

Electronic copy available at: http://ssrn.com/abstract=2049782

Financial Management Information system 2

1. INTRODUCTION
The financial system of an organization, be it small or big has a great influence on its healthy growth
and existence. Due to the increasing complexity in handling the financial activities, the need to use
computer based information systems with centralized, decentralized or distributed networks connecting
data flow from and to the various departments/ branches is greatly felt. Thus an efficient mechanism to
process voluminous data for speedy analysis and output is a need of today, for the decision makers to
make effective and scientific decisions. Management of data provides information needed to serve as an
effective and efficient tool in decision making in every forward-thinking venture. It is worth noting that of
the total number of computers installed in the world today, over 80% is used in organization for
Management Information Systems (MIS). MIS helps the top management in goal setting, strategic
planning and evolving business plans and their implementation. The MIS plays the major role in
information generation, communication, problem identification and helps in the process of decision-
making. It creates an impact on the organization’s functions, performance and productivity. The managers
are informed about the progress, achievements, trends and shortfalls in the activity and the targets. Since
the goals and objectives of the MIS are the products of financial goals and objectives, it helps indirectly to
pull the entire organization in one direction towards the corporate goals and objectives. Since the MIS
works on the basic systems such as transaction processing and databases, the drudgery of the clerical work
is transferred to the computerized system. MIS is therefore a tool for effective execution of management
process.
The objective of this paper is to study the need for a good financial management information system
at an organizational level, and to develop a system to enable an efficient information retrieval. This
also throws light on the problems faced during the implementation of the same.
The following factors influence greatly on successful development and implementation of such a system:
1) The users and developers should have a close interaction in discussing the business goals.
2) The managers should interact with the developers at every phase of the development to see
if the system being developed supports business objectives.
3) The users must be really cooperative in discussing their needs.
4) Degree of reliability of database of an organization.
MIS can at times be a failure, when there is diverse software used in the organization to store the data,
when integrating isn’t possible. MIS aids only formal decisions that can be codified in the form of systems
and procedures. Care must be exercised to note that some decision situations may have far reaching
consequences and yet be out of the reach of MIS. This includes innovative and intuitive decisions,
emotional and personal decisions that may not lend themselves to formal framework of analysis.

Electronic copy available at: http://ssrn.com/abstract=2049782

Financial Management Information system 3

II. METHODOLOGY
a) The Sample:
To examine the above factors a case study on finance system of one of the best technical
institutions This descriptive study, adopted conceptual and analytical approach. After a detailed
study, computerisation of the different registers in the finance section was made using Visual Basic
and Oracle and as per the user requirements, to enable on-line updation of different registers and
automatic report generation. Also Financial Management Information System (FMIS) is designed
using the Critical Success Factor (CSF) approach, though implementation is not possible in the
present scenario. For this purpose there is need for gathering, storing and updating data and
information about the receipts and payments on a continuous manner and also making it easily
retrievable. This requires setting up a computerized information system with network facilities linking
up data producers, providers and users. FMIS aids the decision makers by providing the information
needed by accessing one or more large databases containing financial data leading to improved
performance of the finance system and organization as a whole. And hence decision makers at every
level, be it operational, tactical or strategic level, can have accurate, timely, and up-to-date
information to carry out management functions such as planning, organizing, staffing, leading and
controlling most effectively.
b) Limitations:

After the study of the existing system, several limitations were noticed. Security implications was a
major hindrance in getting important information sometimes when needed. The major problem is
connecting to Tally database through Visual basic or VBAs since there is no connectivity provided.
Though it is possible to pull Tally data either by exporting from Tally to Excel or by using Microsoft
Query through TallyODBC, it is not possible to hardcode this access. And hence fails the
implementation of FMIS due to the usage of Tally package to store financial data. And also all data
pertaining to finance section is not stored in single database. Integrating different software is
cumbersome. Moreover some tasks are still carried out manually. Hence the existing information
system doesn’t aid the development of an effective and efficient FMIS.

There may be bias, errors in the data provided. Also many of the details, which are very
important for the development but confidential, may not have been shared.

III. NEED ANALYSIS

Analysis conducted to study the financial system of NITK, Surathkal consisted of:
a) System Analysis
i) Environment Analysis:
This part of the study showed that, there are a number of forces, have an impact on the
system’s performance. The forces from internal environment are controllable where as from
Financial Management Information system 4

external environment such as the economic, the technological, the social, the political and the
ethical environment is beyond one’s control.
ii) Stakeholders’ Analysis:
In the context of planning of finance there are different stakeholders at different levels, viz
national, state and institutional. Their issues of concern are to be clearly understood and addressed
to make the whole approach to financial planning more relevant and meaningful.
The broad issues of concern of these three segments of decision makers and the information
required is the knowledge about existing facilities like Equipment and machinery, Workshop,
Laboratory, Library, Faculty, Class rooms, Space.

b) Strength Weakness Opportunity Threats (SWOT) Analysis:

Based on the environment and internal analysis, the following points are noted about the finance
system of
NITK:
 Strengths - Committed and inspired leadership, Government support, Established
infrastructure, wide spread network
 Weakness - Piecemeal work, delay in processing.
 Opportunities - Finance system can improve the efficiency by improving the work
scenario, Improvement in information system can bring about improvements in working
of the finance system.

 Threats - Without user training to use the system, the staff will not be able to perform
better, even if system is changed.

c) Decision Analysis
Financial management calls for a number of decisions, based on the analysis of the financial
status of the organization. The decisions are: grant requests, fee structure, other sources of finance,
selection of investment alternatives, carrying out projects, providing facilities etc. The applications,
which support the above decisions, are
 Cash flow analysis
 Sources and uses of funds
 Debtors analysis and aging
 Creditors analysis and aging
 Budget analysis
 Ratio analysis and management norms
 Capital budgeting and ranking of investment alternatives

 Maintenance cost analysis

Financial Management Information system 5

d) Requirements Analysis
In this phase, an initial survey was conducted to know the user group and to learn the present
system, in order to clearly understand the goals, processes, and constraints of the system. A formal
and detailed description of the information domain, function, behavior, performance, interfaces,
design constraints and validation criteria is found to be essential, which can be determined only after
thorough communication between the users and the developers. Since finance section is partially
computerized, several shortcomings in the present system are noticed.

e) Status Quo Report

Development of facilities for education and training of engineers, technicians, architects, town
planners, management personnel and so on comes under the purview of the AICTE, MHRD and State
Government. The grants for a financial year are paid in installments. There are plan and non-plan
grants sanctioned by MHRD. There is also cash-in-flow from students’ admission fees, term fees,
exam fees, canteen rent, guest house rent and many other self financing schemes. Resident
Engineer’s. office, cash section, accounts1 section and accounts2 section were covered in system
analysis.

IV. DESIGN ASPECTS

a) Existing Information System

Currently not all the tasks are computerized. Different departments use different softwares such as
Tally, Foxpro, Dbase, and Excel etc., to carry out the task.

b) Software Requirements’ Specification (SRS)

This document was prepared to learn the user requirements, which specifies the required
behavior of a Watch Register system in terms of input data, required processing, output data,
operational scenarios and interfaces. Also the attributes of a system including performance, security,
maintainability, reliability, auditability, availability and safety requirements and design constraints.
To have an effective FMIS, integration of all the systems having financial data, should be done. At
this stage, only computerisation of the watch register is attempted.
c) Design of the watch register
The different types of accounts, say UG recurring account, PG recurring account, and so on.
have unique heads of account under receipts and payments of that particular account. Each head of
account is allotted a unique code to identify a particular head. Each year, annual budgets are allotted
to these heads. Whenever the bills come to the accounts section for approval, the total amount
received/paid towards a particular head is calculated and matched against the budget for approval. A
constant watch is kept on every bill that comes into the section.
The system developed is capable of storing all the receipt and payment heads under a
particular account type, create new account types and new heads of account, allocate annual budgets,
Financial Management Information system 6

store the information about every bill approved, and calculate the balance. Also, by changing the
financial year, it is possible to enter and view budgets and bills of any year. This system only keeps a
watch on the bills and is not a profit and loss account. It does not carry forward the previous year’s
closing balance to the next year. This system can be used for all such accounts for which annual
budget is allotted.
Kinds of users:
Three kinds of users are created:
1.OWNER: This administrator’s login allows him/her to change password, view all the displays,
create/delete a particular account, delete the unwanted records.
2.DATA ENTRY: This is for data entry operators. He/she can view all the displays, change password
but cannot delete any record.
3.GUEST : This is for the managers such as Director, Dean, Registrar etc They can view the displays
and know about the annual budgets allotted for accounts such as recurring account, annual plan and so
on and also know about the bills approved.
Functions of Watch Register:
The different functions of the watch register module are:
 Watching grants
 Watching payment bills
 Budgeting
Here the System and Database administrator is responsible for proper functioning of the system, the
Head of
Account section will be entering the data, other users of finance section, and managers can view the
reports. Other
functional requirements are, inputs, processing and outputs.
Organizational Levels:
The organization typically can be divided into three levels :
1. Operational: Here people are involved in operational activities and require day-to day
consolidated reports.
2. Tactical: People at this level are usually involved in allocation of resources and they require the
utilization reports.
3. Strategic: The executives are involved in formulating goals and objectives and are interested in
those reports which aid evaluation of performance.
Financial Management Information system 7

V. SYSTEM DESIGN
The design phase focuses on the detailed implementation of the system recommended in the
feasibility study. Stages of design of the system are :
a. Conceptual Design
This is to give a blueprint to show the kind of data used in building the database and the logical
relationship.
b. Dataflow Diagram (DFD) :
This is drawn to represent the data stores, processes used, entities involved in the system and the
information flow. A 0 level DFD giving an overview of the accounting system is shown in the
figure below.
c. User Interface Design
This is designed with simple and elegant input and output forms with validation and also
informative Reports generation facility is provided

Payment
G.O.I. Contractors
Grants Salary
Grants Staff
AICTE
Financial Scholarships
Grants Accounting Students
G.O.K
System Deposits
Fees Bank
Students
Taxes
Grants Government
College

Acceptance & Payments

Management

Data Flow Diagram

d. FMIS Plan
To understand the needs of managers, Critical Success Factors (CSF) method is followed, which
deals with the frustrations of senior managers who receive dozens of computer-generated reports each
month, but find little information of value in these reports.
The first step in CSF method is for the managers to identify his/her goals and the CSFs
underlying these goals. A CSF defines what has to go right to achieve a business goal. For a service
organization, CSF includes cost-effective back-office operations and clerical productivity. Hence
the factors that evaluate the performance is known from the managers.
The Executive committee shall have powers in respect of all matters connected with financial
system including
Financial Management Information system 8

1. The manner in which to carry out the purposes of the financial system.
2. Preparation and sanction of budget estimates.
3. sanctioning of expenditure.
4. Execution of contracts.
5. Staff recruitment.
6. Investment of the funds.
The goals of a finance system of a service organization is not profit making but still availability of
funds make smooth running of the organization. The main task here is to control and co-ordinate the
finance personnel and the activities.
Critical Success Factors (CSFs) and Key Performance Indicators(KPIs):
The critical success factors of the finance system, the key-process indicators of these CSFs and the
information that aids this are
CSF KPI Information needs
1. Grants maximisation Grant position Grants and the grantees for plan
and non-plan funds for the
last 5 years.
2. Cost minimization Operating, maintenance costs P&L A/C, year wise and department
wise details of costs.
3. Providing good facilities Assets, projects and Balance Sheet, Plan fund reports
research work carried out.
4. Maximizing funds Grantees, self-investment schemesSelf-financing report, fund-
position
5. Potential staff Qualification, attendance, Staff records.
Training programmes.

e. Database Design:
The database design also plays an important role in the retrieval of information. Hence this should be
given a major importance.
f. Testing
The product was tested for its reliable functioning.
Financial Management Information system 9

VI. RESULTS
A few of the results obtained are as under :
The Login form The help file to use the system

Main form that user sees after login, containing the Adding a new head of account in any account
menu of operations

Adding annual budgets for the heads Entering the receipt and payments bills approved
Financial Management Information system 10

Displaying the annual budgets Displaying registers

Finding the current balance of any head of account. Menu showing administrators operations.

Adding a new account Form showing receipt and payment status

 Financial Management Information system 11

VII. CONCLUSION

The study showed that major advantage of computerization of a finance system of an

organization is the availability of timely information across the board. The FMIS reports are specially
aimed at improving the overall functioning of any organization which in turn will mean better
utilization of funds.
Tally solutions provide an accounting package which is generic. Though it is a well
developed package and widely used, it is obvious that it will have limitations because the processes
carried out in each organization is different . So to aid the online processing of different tasks in an
organization, it is necessary to know all the processes clearly and build a system according to that. If
the system is specifically built to serve the purposes of this college, the functioning of the finance
system will definitely improve.
It is recommended to have computerized FMIS in any reputed technical institution. However,
piecemeal work in finance system should be avoided. The accounting package should provide a total
database needed to develop an effective and efficient MIS/EIS. FMIS designed based on CSFs can
help managers in setting goals and eases the task of data entry person by balance calculation and can
be implemented when the financial database provides a complete scenario of the finance system.
Automation of different registers provides up-to-date and easy access to the information pertaining to
the bills passed and also the current balance. This module can be integrated later to provide support to
MIS development. The automation of watch register is an important task necessary to provide a
complete information to the executives. The system built can provide all information about the annual
budgets and the bills approved so far. The system could be built to accommodate changes and is
enhancible.

References
Elmashri, Navathe, Fundamentals of Database Systems, Third Edition, Pearson Education, 2000.
Evangelos Petroutsos, Mastering Visual Basic 6, BPB Publication, Edition 2002.
James A O’Brien, Management Information Systems, Tata McGraw-Hill International Edition
Kevin Loney, George Koch, ORACLE9i The Complete Reference, Tata McGraw-Hill Edition 2002
Koontz, Essentials of Management, Tata McGraw-Hill International Edition, Fifth Edition.
Murdick, Ross , Information System and Modern Management, Tata McGraw-Hill International
Edition.
Robert Schultheis, Mary Sumner, Management Information Systems, Tata McGraw-Hill International
Edition
Roger s Pressman, Software Engineering, Fifth Edition, McGraw-Hill International Edition 2001.

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