Underestimated spending, overspending, financial mismanagement, and fraud can all lead to disaster. One of the main reasons organizations go out of business is their inability to forecast and/or secure sufficient cash flow. Planning is necessary, but not sufficient, and must be complemented by skillful control. Information systems play an extremely important role in supporting organizational control, including: risk analysis, budget control, auditing, financial index analysis, and profitability analysis and cost control.
Risk analysis – Companies must analyze the risk of doing business with other entities and giving credit to customers. palisade.com’s @RISK for Excel product is a powerful tool that performs risk analysis on Microsoft Excel spreadsheets using Monte Carlo simulation. You can answer questions like “What is the probability that the win will exceed $1 million?” or “What are the chances of losing money in this company?”
Budget Control – The annual budget should be broken down into monthly allotments to ensure the business has sufficient funds to pay expenses, especially if the business is susceptible to long gaps between paychecks. Managers at various levels must monitor departmental expenses and compare them to the budget and operational progress of the organization. Numerous software programs can be used to support budget control; most of them are bundled with quoting packages from vendors like outlooksoft.com,clarisystems.com and capterra.com
Audit: The primary purpose of auditing is to ensure the accuracy and status of an organization’s financial health. Internal auditing is performed by the organization’s accounting/finance staff, who also prepare for external auditing of public accounting firms. Internal auditors can use information technology to facilitate auditing. For example, intelligent systems can uncover fraud by finding transactions that deviate significantly from previous balances.
Analysis of financial ratios: An important task of the accounting/finance CEH Certification Cost
department is to observe the financial health of the company by monitoring and evaluating financial ratios. Data collection for ratio analysis is done by the transaction processing system, and ratio calculation is done by financial analysis models. Interpreting ratios, especially predicting their future behavior, requires professional judgment and expertise.
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 entire organization. Profitability analysis software enables accurate calculation of profitability and allows overhead allocation. Oracle Hyperion Profitability and Cost Management provides valuable cost and profitability insights by uncovering the drivers of cost and profitability, providing visibility to users, and improving resource alignment.