Interpreting Accounting Information for Decision Making

Question: Discuss about the Interpreting Accounting Information for Decision Making. Answer: Introduction Accounting Information Systems is considered to be a method of collecting, keeping and processing accounting and financial information that are usually used by makers of the decision. It is usually a computer-based system that is used by diverse companies for monitoring accounting activities in conjunctions with resources of information technology (Collier, 2015). In manufacturing companies, Accounting Information Systems, is usually designed to support all the accounting activities and functions that encompass auditing, financial accounting and reporting, management accounting and taxation. This paper discusses the aspect of Accounting Information Systems (AIS) and the role it plays in the manufacturing company value chain, how it can help in making decisions and how it can be utilized to offer a competitive advantage for a manufacturing firm. Role of Accounting Information Systems in the value chain of a manufacturing organization A manufacturing organization involves the conversion of raw materials to finished goods. In a manufacturing setup, raw materials are subjected to the production process and finished goods obtained later after the end of the process (Davenport, 2013). To ensure continued manufacturing process, free from any form of stoppage, it is important that there is a timely availability of information. Raw materials should be procured in time and finished goods distributed in a timely manner to customers. Accounting Information System plays a vital role in a manufacturing business value chain. The roles include; Accounting Information System assists in the collection and storage of data and economic agents since diverse data are important for purposes of decision-making in a company. AIS stores data in relation to suppliers of raw materials and the amount of raw materials required to keep the production process going. The stoppage of the manufacturing process leads to significant losses and affects the corporate image identity. Accounting Information Systems (AIS) plays a role in the value chain of a manufacturing concern by transforming data into information which helps in management decision making. Data is of no importance if it is not converted to information through analysis that is usually done through AIS (Gelinas, Dull, Wheeler, 2011). On a daily basis, management has a duty of making decisions meant to help the company achieve its objectives. Therefore, AIS helps management in making informed decisions that are often vital to the business operations. Accounting Information Systems (AIS) helps a manufacturing concern develop controls that ensure that information is available as and when required. Additionally, AIS helps in boosting the accuracy and reliability of information in a manufacturing concern, thereby making an organization achieve its objectives. Developing proper controls often enables the manufacturing firm with reliable guidelines that if utilized effectively will result in improved productions and sales. How AIS can assist with decision making in a contemporary manufacturing organization As noted, a manufacturing concern entails the conversion of raw materials to finished goods. This happens through an established production process. However, to ensure timely production of goods, it is important that there is proper coordination between departments in an organization (Grabski, Leech, Schmidt, 2011). The coordination entails the establishment of sustainable communication channels with the suppliers of raw materials who are key players in the production process because they ensure that there is no stoppage in the manufacturing process. Similarly, on the part of customers, there should exist a good relationship between the organization and the customers through established communication channels which will ensure smooth flow of data and communications across all the organization units. For decision making, both accounting and the non-accounting information are important. Managers have to make decisions regarding how much raw materials to procure to enhance continuity of the production process, and from whom (Urqua, Prez, Muoz, 2011). Additionally, a decision has to be made on the amount of good to produce in order to meet demand and avoid shortages and the associated costs. AIS, therefore, help managers in decision making by availing necessary information regarding the quantity and quality of raw materials needed for production and the quality and quality of goods required to be produced. AIS help in making decisions regarding revenue maximization techniques and cost reduction techniques. It is unless an organization develops strategies that ensure that costs are reduced as much as possible, and revenue maximized, achievement or organizational goals will be next to impossible Uses of value chain in providing a competitive advantage for a manufacturing company Businesses venture into business operations with the aim of making a profit. However, with the dynamism experienced in the modern business environment, profit is not a guarantee. This is because the business environment has various forces emanating from the business environment which can threaten to blow up a business entity and bring it down (Salehi, Abdipour, 2011). Competition is one of the factors that affect a business performance and it is important that a company develop strategies that will help it counter competitors strategies. Value chain can be used to enable an organization to achieve competitive advantage. In a manufacturing setup, the timely production and delivery of finished goods are important to the organization. In order to maximize profit, an organization should aim at maximizing revenue and minimize the total production cost. Untimely production of goods leads to shortages like the stock out the cost. These shortages negatively affect the reputation of the company and work to the advantage of the competitors. Ideally, when shortages of goods occur due to poor production processes which lead to production stoppages, customers tend to opt for competitors products (Kanellou, Spathis, 2013). The forgone contribution not only affects the companys revenue but also reduces the companys competitive advantage. Additionally, shortages affect the corporate image of an organization consequently affecting goodwill. Therefore shortages increase on costs and minimize on revenue, thus reducing profit margins. In such a case, a company loses competitive advantage. According to Porter (2004), a company achieves competitive advantage if it is in a position to meets the needs of its customers. Well designed AIS helps an organization ensure effectiveness and efficiency of business operations. Additionally, well-designed AIS ensure timely sharing of information and save an organization the agony of loss as a result of broken and inefficient communication channels (Soudani, 2012). Proper communication among the company departments often ensures efficient communication thus effective business operations. References Collier, P. M. (2015).Accounting for managers: Interpreting accounting information for decision making. John Wiley Sons. Davenport, T. H. (2013).Process innovation: reengineering work through information technology. Harvard Business Press. Gelinas, U. J., Dull, R. B., Wheeler, P. (2011).Accounting information systems. Cengage learning. Grabski, S. V., Leech, S. A., Schmidt, P. J. (2011). 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