Week Three

Understanding business terms, systems and processes

Knowing business – It’s important for IT professionals to understand  how business works because it is essential for communication. Without understanding the terminology it is difficultt to provide a level of service that provides the required solutions.

IT professionals are often asked to design or problem-solve systems for businesses and it’s important to know what processes are involved. One of the key ways to understand business processes is first to comprehend the terminology used in business.

Once business terms are understood then business systems can begin to be analysed. One of the central concepts for understanding business systems is the flow of information within the business. For example, invoices, statements, accounts receivable and journals all are interconnected and flow from one to the other. Without an understanding of how the flow of information and the documents involved in that process it is difficult to analyse the business system(s) .

Business systems that may require IT specific solutions/input might include payroll, accounting, HR, marketing, knowledge management, records management, communications and technical processes:

    • Payroll – This may be handled largely inhouse or not so  the amount of processing by internal IT systems can vary. In professional services firms, for example, where hourse have to be acoounted for hour by hour and then processed. This may dictate that different systems must talk to each other so an IT professional has not only to design hwo the systems operate independently but how they affect each other
    • Accounting systems can vary greatly depending on how bespoke they are.  Even if the business uses a straight out of the box package the IT professional may be expected to trouble shoot.
    • Human Resources – It is possible that HR will use  a variety of tools, often Windows based that may or may not interact with other systems external to the business e.g. external recruitment
    • Marketing may make use of such things as Customer Relationship Management software and may also be involved with graphic design software. An IT professional may have to, as is the case with all software with licenses and updates
    • Knowledge Management can include internal systems such as intranets and IT professionals may be asked to help administer these
    • Records Management tend to be managed by peer to peer web systems and require little input from IT but archiving of data and backups may need to be considered in realtion to normal business practices.
    • Communcations technology such as mobile devices and phones need to be managed
    • Technical processescarried out in the coruse of business could include the whole gambit of IT applications. Specialised knowledge might need to be aquired. For example the trouble shooting of oversize printing equipment, the configuration of complex software.

Business Terminology

Accounts Payable – Money owing to suppliers

Accounts Receivable  – Money owed by customers

Assets – Things of value owned by the organisation

Bad Debt – money owed to organisation that will not be paid

Capital Expenditure – money spent on purchase of assets

Cash Flow – movement of cash in and out of bank account(s)

Company – a legal entity for the conduct of business

Cost of Goods Sold (COGS) – amount of money spent by organisation to purchase inventory for  sale

Cost of Sales (COS) –  same as COGS

Creditors – entities that the organisation owes money to

Current Assets – assets owned by the organisation which have liquidity (easily sold to realise cash)

Current Liabilities – money owed by the organisation that will need to be repaid in full within year

Debtors – entities that owe the organisation money

Depreciation – gradual loss of value of fixed asset

Dividend – share of profit paid to shareholders

Drawings – monies paid to owner of organisation

Equity – Amount of value of the combined assets of organisation

Expenditure – money spent by organisation

Fixed Assets – Assets that are not likely to be sold in the near term,

Goodwill – Value of the ‘brand’ or the organisation

Gross Profit – Profit before tax is removed

GST – Tax on goods and services

Intangibles – Assets which have no fixed value

Inventory – Store of goods available for sale

Liabilities – money owing

Mark up – difference between the cost and sale price of goods

Non-current Assets – Assets intended to kept for the long term

Net Profit- Profit after expenses are taken into account

Partnership – legal arrangement of ownership where individual owners have liablility

Retained Earnings – Earing not yet paid out to owners/shareholders

Revenue Expenditure – Expenses involved in earing revenue

Shareholder Someone with a partial ownership in the business

Sole Trader – Legal form of ownership where an individual has liability

Stock – Inventory of the business intended for sale

Work in Progress (WIP) – Stock not yet ready for sale but is the process of production

Working Capital – Capital available for revenue accrual

Business Documents

Balance Sheet – Document balancing debits and credits of business accounts

Chart of Accounts – Classification of accounts by code numbers

Credit Note – Document allowing reduction of money owing to creditor

General Ledger – Collection of accounts with detail of debits and credits

Goods Packing Slip – Document detailing good included in a delivery

Invoice – document detailing money owing by creditor for goods or service purchased

IR330 – Tax code declaration

Journal – record of an account detailing debits and credits

Material Requisition – Request for specific good to be used in production of goods

Order – request for goods

Payslip – Record of money paid to employee

Profit and Loss Statement – Document detailing Revenue versus Expenses to arrive and Gross and Net profit-  Profit after expenses are taken into account

Purchase Requisition – Order of a good to be authorised

Receiving Report – Document summarising goods received

Remittance Advice – Document detailing money owing by creditor including payment details

Statement – Document detailing money owed that does not request payment

Statement of Financial Performance –Summary of Revenue and Expenses

Statement of Financial Position – Summary of Assets, Liabilities and Equity

Timesheet – Form filled by employee to claim wage/salary

Trial Balance – Summary of debits and credits taken from journals

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