Financial Information System

In this article, we learn the financial Information system in detail.

What is Financial Information System?

A Financial Information System is a computer-based information system, that gathers, stores, and analyses the financial information which is further useful for the decision making. Financial is also useful for the financial planning. It helps in the decision making and it is also work in conjunction with the decision support system. It also reduces the paperwork and maintains all the records up to date.

There are various activities under the financial management are:

• Cash management
• Investment Management
• Financial Planning
• Capital budgeting

All these activities require decisions which are taken with the help of financial information systems. FIS analyses whole finance related activities in the business and takes optimum decision which is helpful in achieving the goals of the organization.

A financial information system provides information to all the parties of the firm either internal or external in the form of reports and any other documents. It is useful system in the organization. As we all know finance plays most important role in the organization without finance no firm can survive for a long run. Finance is like a blood. If finance is the significant element then the information also plays most important role. It not only provides information to the executives but also useful for the public.

Principles of Financial Information System

Following are the principles of Financial Information System

1. Cost effectiveness:

This system must be cost effective. It must outweigh information cost. It can provide desired output and flexible structure

2. Useful output:

Financial information system must be able to provide necessary result The information must be understandable, relevant, reliable, timely and accurate.

3. Flexible:

In accounting information system there must be provision of inclusion of changed information needed by different users. It must be able to meet the changed demand.

Functions of Financial Information System

The various functions of the financial information system are explained as under:

Functions of FIS

1. Collection of Data:

Under the financial information system, the first main element is the collection of data On the basis of data, the best decision is to be taken Under this various activities are performed like collection, analyzing, maintaining the information.

2. Monitoring and Controlling the funds:

Financial information system helps in controlling the funds. It tracks the revenue and expenditure is the organization. As FIS is computer based system which keeps record of the whole activities in it

3. Analyze Past and Current Activities:

Financial information system analyse whole activities. It checks the current as well as past activities so that future decisions can be easily taken. The main aim of the FIS a to maintain record of all the finance related operations in the organization.

4. Helps in Decision Making:

As we know, the DSS supports FIS with the help of financial information the optimal decision is to be taken. All the financial related decision, budgeting, investment are taken with the help at financial information system.

5. Generating Financial Statement:

Financial information system, collects whole finance related information and after proper analysing the financial statement is to be generated so that which is useful for the management for decision making.

6. Recording of Data:

Financial information system records whole data in the system which can be retrieved at any time when required. So whole data is saved or maintained under it which can be used at anytime.

Components of Financial Information System:

The various Components of Financial Information System are:

1. Financial Accounting:

Financial accounting records all the financial transactions in accounts. It records all assets, liabilities , revenue and expenditure. Financial accounting is useful for the maintenance of the statements.

2. Fund Management:

Under the financial information system, fund management plays an active role in the organization. It is a crucial aspect of financial management, the main aim of fund management is to maximize the profits from its investment.

3. Controlling:

Controlling component is useful for the maintenance of whole activities in the organization. It records the revenue and expenditure of all the departments and lead desirable change by controlling the activities.