Financial Management Information Systems (FMIS)

General description of the Information Systems

An information system is defined as the collection of human and technical resources that strives to provide the distribution, storage, communication, and computing of information that is crucial to running of an enterprise. Information systems include software and hardware, data, and users of the system (Baskerville & Wood-Harper, 2016).

Information System Description Framework defines the layout of a system including evaluating how a system performs (Ward & Peppad, 2016). An example of an information system is Financial Management Information System (FMIS). FMIS is tasked with supporting the integration and automation of processes necessary for financial management. These methods include the formulation and execution of the budget, reporting, and accounting. FMIS is also involved in collecting complete, reliable, timely, consistent, and accurate financial data; which is crucial to the governmental agencies and stakeholders. The system also provides data that aids in preparing and executing the budget. Furthermore, it simplifies the process of compiling management reports and financial statements, so that the auditors use information provided by this system to conduct the company’s audit (Willcocks, 2013). FMIS has had a positive influence on the management of business entities and government planning due to its framework. Thus, the essay below analyzes the framework of the FMIS.

Users and Uses of Financial Management Information System

Financial management information system improves the equity and efficiency of a business enterprise and provides room for enhancing such processes as transparency, participation, and accountability. The users who benefit from the information provided by this system include managers, financial analysts, investors, governments, creditors, and shareholders.

Finance Managers

The system provides crucial information that enables managers to make informed decisions that affect the existence of an organization. Financial managers can use information provided by FMIS to accomplish the following responsibilities. First, planning – data derived from FMIS will help a financial manager schedule and forecast financial operations in the company. By doing this, a company can make decisive plans on how to utilize its available funds to achieve its objectives as well as avoid setting unrealistic goals. Second, it also enables quick decision-making by providing accurate, timely, verifiable, and reliable data. The system makes it easy for a manager to make informed decisions about the management of the corporate funds. Third, efficient FMIS provides information that ensures efficiency in reporting financial procedures and operations. For instance, the system can provide solutions to challenges such as financial abuse and provide the formulated measures to mitigate expected and unexpected risks. Competition information technology is one of the most important elements that facilitate a company to gain a competitive edge against its competitors. Possessing the right information, a manager has a power to determine the best practices to employ to improve productivity and customer satisfaction (Galliers & Leidner, 2014).


To audit, a business entity auditors require complete financial information of the entity in question. This financial reporting includes general ledgers, reports, balance sheets, bank records e. Owing to the Financial Management Information System this process will be easy and efficient (Galliers & Leidner, 2014).


These are people who lend money to the business. To determine the ability of the company to pay its debts, it is essential for the lenders to evaluate the financial records of the debtor, in this case, the business and its debt history. Thus, FMIS will act as an excellent source of this information by providing data on the ability of the corporation to settle the debts and by comparing the previous debts that were paid. The data furnished by the system can also be used to determine the financial position of the business, which would help a creditor determine the debt threshold (Galliers & Leidner, 2014).


These are people who either lend money to be used in the expansion of the business or lend money and get involved in the daily running of the firm or starting a new business. Investors will only provide their money for the firms that, in their view, will make profits. Therefore, critical analysis of the financial records of any business to a potential investor is crucial matter of the utmost importance. For this reason, FMIS is an essential tool of any investor.

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A lender seeking to invest in a new industry will need information on the level of profitability of the industry involved. It can be achieved by means of comparing financial records of business enterprise with the ones that are already successful in the industry. The effectiveness of the management, on the contrary, can be measured by comparing their strategies with the strategies of the competitors or financial records, which can also be used to determine whether the company has been complying with the government regulations such as paying taxes (Brigham & Ehrhardt, 2013).

Financial Analysts

To analyze the performance of a particular industry, financial analysts will require financial records of different firms within the industry. Thus, FMIS will provide all the information needed to ease the operations of the analysts (Brigham & Ehrhardt, 2013).


To invest in the shares of any particular company, a shareholder ought to conduct a comprehensive research of the financial capabilities of that company. This enables a shareholder to determine which corporation to buy shares from. Hence, FMIS is an effective tool that can provide this crucial information to anyone investing in the stock market. A shareholder will be able to determine the level of the company’s profitability and the strength of the management to tackle any challenges by analyzing the profits of the organization where the business had previously been faced with challenging tasks. Apart from this, the shareholder will also learn from the data about the criteria used to allocate dividends to each shareholder. This information will make it easier for the shareholder to decide which business entity they will be investing in (Brigham & Ehrhardt, 2013).


The government regulates the performance of all the industries in a given country. This is to ensure that there is a healthy business environment for all businesses irrespective of the capital. To facilitate these duties, the government needs to analyze financial records thoroughly, so that the data analyzed using FMIS will enable the government to determine which sectors of the economy are performing better than others and why. The government can imitate the practices of these industries and implement them in areas that are not working effectively enough. At the same time, it can determine the reason why some industries are not performing as expected and recommend the proper measures to handle this problem (Brigham & Ehrhardt, 2013). Additionally, the government can use this data to measure the effectiveness of the funds allocated to each and every ministry. It can be achieved by comparing the results to the expected outcomes.


These are people who voluntarily donate money to an organization. One must be provided with solid information about the utilization of the company’s funds to contribute money to it. The information produced by FMIS serves as an excellent source of answers that donors may demand before making any financial donations. Through these systems, donors can also monitor how their funds are being used (Schwalbe, 2015).


Each and every employee of a business entity tries to evaluate the job security. They analyze the stability and profitability of their employer’s company. A stable and profitable company will be able to provide substantial employee remuneration. Financial records could also serve as a way to identify potential employment opportunities. A business entity that has healthy financial records over time will most likely have low employee turnover compared to one that have previously had poor financial records.

Workers Union

Workers union is tasked with overseeing and ensuring that all employees are working in healthy conditions and receive good payments and employee remuneration. With the help of financial records, the union will be in a position to determine whether the firm in question is rewarding their employees fairly for the work done. These records could also be considered as evidence in the case of a dispute between the union and the employer.


Financial records are an important source of the information that competitors use to determine how they can devise different strategies to outwit their competitors. These records also provide information on how effective the strategies and structure of corporate business are, and with the help of this information it is easier to determine which areas need improvement. Owing to this data, competitors will also be in a position to either emulate or improve strategies which are weak to help them compete with the business entity under analysis.

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Real Life Application of FMIS

FMIS could be utilized by the government while formulating and implementing the national budget to make informed financial decisions that correspond to the available finances. This will ensure that the scope of the reached decisions is appropriate with regard to the accessible resources and is realized within the stated timeline. The ability of the system to provide data that can be used in mitigating seen and unforeseen risks and curbing fund abuses could help any government ensure that their financial staff is accountable. The data obtained from the system can be also helpful in assessing the effectiveness of management personnel in the ministry of finance (Schwalbe, 2015).

The External Description of the FMIS

External description of the information system includes the inputs and outputs. Inputs are defined as the data entered into a system, while the output covers the results after the data is processed. The inputs of the FMIS are discussed below.


These are professionals who are involved in preparing and examining the financial records of a business entity. They are tasked with maintaining the accuracy of financial records and by doing this, they aid in the smooth operation of a corporate entity. The auditors will provide the following documents to the system: general ledgers, trial balance, records of assets both existing and newly acquired payroll reports, stock option and agreements reports, and records of merger agreements.

Financial Clerks/Accountants

These are professionals who perform the duty of keeping the records in a firm. They are supposed to record all the commercial activities taking place in an enterprise and to prepare such documents as balance sheet, company assets reports, income statements, statements of cash flow reports, and changes in equity reports.

Financial Managers

They are responsible for the process of financial decision-making in the organization. After receiving essential documents from different units of the finance departments, they start analyzing them and making various plans. These documents include statements of cash flow, income statements, company assets, and balance sheets (Li et al., 2012). After the information is fed into the system, the outputs of the data will be beneficial to the following people.


Below is the information provided by the system after the data analysis.


Having investigated the financial records, the system will provide data that will enable auditors to check the financial position of the business. This information gives data that will allow an auditor to determine whether the organization complies with the government regulations, such as paying taxes, for example. Thus, the auditor will be able to identify fraudulent activities occurring in the body. Any case of misuse of the funds will be identified with the help of the information obtained from the system.

Financial managers

After analyzing different financial statements, the system provides feedback regarding available funds, the way the previous funds were utilized, and financial objectives which have already been used and the ones that will be used in the future. The manager will also receive information based on the effectiveness of the decisions made earlier (Hall, 2012).


Having fed the system with the financial statements of the business organization (debtor), the creditor will be provided with the results of the data analysis that will contain information such as the ability of the firm to settle debts on time and the financial position of the business (Hall, 2012).


The government will receive information that will include the previous records of the compliance with the regulations issued by the government, as for instance, paying tax. These files will also give information how to determine the growth of the industry (Davenport, 2013).


The information received from the system after its analysis is useful to the shareholder in terms of the profitability of the company, the efficiency of the management compared to the consistency of the earned profit, and the amount allocated to the shareholder at the end of each financial year (Davenport, 2013).


An investor will receive information about the profitability of the business and the total value of the company. Furthermore, the strength of the management of a company and its ability to tackle tough economic times will be available for review as well.

System Boundary

System boundary is described as the conceptual boundary that divides the external components from internal ones within a system. External users of the system are considered as people that are out of the system and can only take advantage of the information rather than feeding the system with it (Pearlson, Saunders, & Galletta, 2016). The external beneficial of FMIS includes the government, investors, creditors, shareholders, and auditors. On the contrary, internal users are regarded as users who are in direct contact with the system. These users include financial managers and the financial clerks or accountants.

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The External View of the Financial Management Information System

Internal Description of the FMIS

Information Processors

The internal description of the system involves people or secondary systems that interact with the primary system on first-hand basis. The system includes financial clerks, accountants, and financial statements about the software analysis.

Internal View of the FMIS

Financial Clerks/Accountants. The financial clerk’s operations are not performed with the help of computerized information processors. On the one hand, these workers feed the system with all the financial transactions that occur within an organization in the general ledger books. This information is later made available to the accountant who evaluates its accuracy before feeding it into the system.

The accountant, on the other hand, analyzes the data provided by the financial clerk to identify a human error, in case of any, while the records are returned to the financial clerk for adjustments. If there are no human errors, the accountant feeds the information in the special software for financial statement analysis. This software needs computer to function. It examines the data supplied to it by the accountant and gives the financial manager access to the information upon request. However, before the information is made available to the financial manager, the accountant checks the information obtained from the software to try and identify whether it is consistent with the expected results. In case of any discrepancies, the accountant is supposed to repeat the whole process. After the accountant has finished evaluating the accuracy of the provided information, the data is fed into systematic information system which contains all the financial records of the existence of the business corporate. This is a computerized system that analyzes the data fed into it and compares it with the data from previous financial years. The information is represented in the form of charts, graphs, and figures. At this point, there is information available for different users such as the government, shareholders, auditors, creditors, and investors (Kerzner, 2013).

Information Stores. The financial clerk fills the system; the clerk collects and keeps the data regarding the financial activities taking place in a business entity such as the acquisition of new assets, disposal of new assets, and withdrawal of money from the bank, payment made to the company’s staff, and remuneration offered to the employees. The clerk also records dividends data combined with any losses on the firm. These files are collected and recorded manually and stored as a reference whenever the need arises. Alternatively, financial analyzing software gathers and stores the information based on the financial activities of the company. Systematic information system stores the data from the previous financial activities and continually compares it with the current information being fed to it.

Communication Networks

Internal Communication Networks

Financial analyzing software checks the information supplied to it by the financial accountant, and upon request, it provides the information to the financial manager. Due to the nature of the software, it must be pre-installed on a PC for further use. Thus, a systematic information system is a computerized software that interlinks with the financial analyzing software by examining information obtained from it.

External Communication Networks

Memos. Memos act as a mode of communication between different sub-departments within the financial department. Through memos, different users of the FMIS can communicate and consult each other quickly.

Emails. The senior managers can talk to the junior managers using emails which save both time and resources. The systematic financial system connects the financial manager to the entire system; and through the system, the manager can access the financial records of the business corporate.

Teleconferencing. Teleconferencing connects the workers involved in the system via the teleconferencing machines; this creates a one-on-one mode of communication where a junior staff can express concerns about the results of the system to senior staff.

Telephones. Telephones are an efficient method of communication between the employees within the system, in case there are any issues to be raised in the operations of the system at different stages. However, the use of the telephone is expensive due to the charges involved. With the dynamic nature of technology, such communication methods as text messages have enabled a large number of people to communicate at the press of a button and at a subsidized cost respectively (Kerzner, 2013).

It is evident from the above-mentioned that information systems play a very important role in simplifying the daily operations of any business entity. FMIS is a good example of an information system that has improved financial activities of business corporate in such processes as recording, interpretation, analysis, and presentation of the financial data of a business entity. Therefore, it is highly advisable for any firm to employ a FMIS.

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