Features of Real-Time Processing
This system is a departure from traditional accounting. A central feature of the system is the use of an events database. Traditional accounting records may not exist per se. For instance, in this example the sales invoice file replaces the sales journal and AR-SUB ledger. Total sales is the sum of all invoices for the period. Summing the open sales invoices (those not closed by cash receipts or credit memos) provides accounts receivable information. In theory, such a system does not even need a general ledger because sales, sales returns, accounts receivable-control, and cost of goods sold can all be derived from the invoices in the events database. Most organizations, however, prefer to maintain a separate general ledger file for efficiency and as a cross check of processing accuracy.
Reengineered sales order processes can significantly reduce operating costs and improve efficiency. Four advantages make this approach an attractive option for many organizations:
1. Real-time processing greatly shortens the cash cycle of the firm. Lags inherent in traditional systems can cause delays of several days between taking an order and billing the customer. A real-time system with remote terminals reduces or eliminates these lags. An order received in the morning may be shipped by early afternoon, thus permitting same-day billing of the customer.
2. Real-time processing can give a firm a competitive advantage in the marketplace. By maintaining current inventory information, sales staff can determine immediately whether inventories are available. In contrast, batch systems do not provide sales people with current information. As a result, a portion of the order must sometimes be back-ordered, causing customer dissatisfaction. Current information provided through real-time processing enhances the firm’s ability to maximize customer service, which translates to increased sales.
3. Manual procedures tend to produce clerical errors, such as incorrect account numbers, invalid inventory numbers, and price–quantity extension miscalculations. These errors may go undetected in batch systems until the source documents reach data processing, by which time the damage may already be done. For example, the firm may find that it has shipped goods to the wrong address, shipped the wrong goods, or promised goods to a customer at the wrong price. Real-time editing permits the identification of many kinds of errors when they occur and greatly improves the efficiency and the effectiveness of operations.
4. Real-time processing reduces the amount of paper documents in a system. Hard copy documents are expensive to produce and clutter the system. The permanent storage of these documents can become a financial and operational burden. Documents in electronic format are efficient, effective, and adequate for most audit trail purposes.