Accounting For Tax Deductible Expense On Cash Flow Statement Taking Control of Your Accounting System With Information Technology

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Taking Control of Your Accounting System With Information Technology

Under-estimated costs, over-spending, financial mismanagement and fraud can lead to disaster. One of the major reasons organizations go out of business is to secure their forecast and/or adequate cash flow. Planning is necessary, but not sufficient, and must be supplemented by skillful control. Information systems play a very important role in supporting organizational control, including: risk analysis, budgetary control, auditing, financial ratio analysis and profitability analysis, and cost control.

Risk analysis – Companies must analyze the risk of doing business with other factors and extending credit to customers. The @RISK for Excel product from palisade.com is an effective tool that performs risk analysis in Microsoft Excel spreadsheets using Monte Carlo simulations. You can answer questions such as, “What is the probability of a profit of more than $1 million?” or “What is the probability of losing money on this venture?”

Budgetary control – The annual budget should be broken down into monthly allocations to ensure that the business has sufficient funds to cover expenses, especially if the business is susceptible to long interruptions between paychecks. Managers at various levels should monitor departmental expenditures and compare them with the organization’s budget and operational progress. Numerous software programs can be used to support budgetary control; Most of them are bundled with budget preparation packages from vendors like outlooksoft.com, clarifysystems.com and capterra.com.

audit – The main purpose of audit is to ensure the accuracy and status of financial health of the organization. The internal audit is performed by the organization’s accounting/finance staff, who also prepare for the external audit by the CPA firm. Internal auditors can use information technology to facilitate auditing. For example, intelligent systems can detect fraud by detecting transactions that deviate significantly from previous balances.

Financial Ratio Analysis – One of the major functions of the accounting/finance department is to monitor the financial health of the company by monitoring and evaluating financial ratios. Data collection for ratio analysis is done through transaction processing system and ratios are calculated through financial analysis model. The interpretation of ratios, especially the prediction of their future behavior, requires professional judgment and skill.

Profitability analysis and cost control – Many companies are concerned with the profitability of individual products or services as well as the financial health of the organization as a whole. Profitability analysis software allows accurate calculation of profitability and allocation of overhead. Oracle Hyperion Profitability and Cost Management provides valuable insight into cost and profitability by uncovering cost and profitability drivers, empowering users with visibility, and improving resource alignment.

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