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Benefits of online business with accounting information system

1.0 Introduction The past decade has seen the rapid development of online business in worldwide and this breakthrough brings benefits in the business world. In 1970’s, the start of the Internet had existed in its most initial structure but only in 1998 that security conventions were built up that would enable secure financial transactions online (The Mediacenter”,2016). Recent years, it calculated that there are approximately 15.3 million online shoppers, at which it is equivalent to 50% of the population, in Malaysia itself (export.gov, 2018). Clark (2002) defined online business as the phenomenon that is at the same time authorising the internet as a conventional communications medium and changing another commercial business reality. Precious Garments Sdn Bhd is a company which focused on fashionable clothing apparels and under its retailing line, they had been just focusing on walk-in customers. However, Precious Garments had not been doing too well as they are getting hardly any feedbacks from walk-in customers and sales are declining. At the same time, a few of their customers had recommended Precious Garments to have an online site to assist in their sales rather than just depending on walk-in customers. Now, they are several benefits as to why Precious Garments should consider of going online and how Precious Garments could integrate Accounting Information System (AIS) when adopting to be an online business. The company’s productivity is in direct connection with the objective and timely accounting data given by the accounting system (Girdzijauskas, et al., 2008; Kundeliene, 2011). So, AIS is defined as an information handling process giving the data that will be required for the users of data in the business ventures in planning, controlling and maintaining up the activities of the business (Romney, Steinbart & Cushing, 1997). Thus, the accounting system is crucial in providing a dependable, pertinent, significant and valuable data for the users of financial information (Kalcinskaite, 2009). Here are the advantages drawn out for Precious Garments, which will be discussed, as to why they should consider of acquiring online business: ease of conducting business, international marketplace, cost efficiency, security of data and measure of organisational performance. 2.0 Appropriateness going online 2.1 Ease of conducting business Currently, Precious Garments have been selling their clothing apparels through walk-in sales. Hence, Precious Garments need to hire workforce and the employees would only work in a limited time schedule: 8 to 12 hours in a day with a varying productivity. However, if Precious Garments were to shift from just focusing on walk-in purchases to an online business, they would overcome the restricted time frame of selling its clothing apparel where they could sell it 24 hours a day, 7 days a week (Elsevier, 2014). In addition, customers would get accessed and be able to purchase the product at any time in any part of the world at any time zone (Queen, 2013). For instance, one of the world’s largest clothing retailer, Inditex (owner of Zara), has reported an increase of 41% in its online sales alone which had corresponded as 10% of Zara’s net sales (PYMNTS.com, 2018). In application to Precious Garments, they could track down under its accounting information system on which products are selling well and also having demographic information regarding the customer, for instance; name, country, age and country reside. A study carried out by Norfarah Syahirah Mohd Fadzilah (2017) on identifying the importance on the correlation between the ease of use of AIS and the performance where she had concluded with the hypothesis of a positive impact on the significant of software ease of use on the performance of the business. 2.2 International marketplace When Precious Garments get into online businesses, they would be able to exceed from its local customers and get accessed into new markets as AIS focus on registering, compiling and justifying data into a system (Salehi, Rostami and Mogadam, 2010). At the same time, Precious Garments would experience an expansion of their business to a global scale. In order to do so, by incorporating AIS into their online business, they could be able to facilitate in which market their business would be doing well and track their financial performance especially in this global era. Salehi, Rostami and Mogadam (2010) study also show that the key to survive in development of business is performance. This result in the importance of implementing AIS for Precious Garment. In addition, Accounting information could also provide Precious Garments information on the data of the company such as the sales, cost, productivity level and other various important data. This data would enable Previous Garments to develop different strategies on how they could expand their business. Generally, when a business expands internationally, it requires a team that is committed to go through the process until the end (The Economist, 2015). It is also crucial for Precious Garments to take into consideration of the fact that even when researches are conducted extensively through the data from AIS, there is surmounting statement that it is very challenging to forecast unforeseen events in the business world (Rocha, Arkader, and Barreto de Goes, 2014). 2.3 Cost efficiency There are multiple authors such as Benjamin, Elise, Brown, et al. (2003) study which shows the relationship of decision making in moving forward to online business which would impact company’s cost efficiency. In term of cost reduction, with the aid of AIS workforce could be replace and manpower could reduce. The importance of decrease in cost and control is risen in the essential objective and for any organisation which is to earn profits and to expand the profitability of the organisation, without accomplishing the profit margin they are unable to remain for long (Carenys & Sales, 2008). For instance, since Precious Garments are currently focusing on walk-in customers, hence they would need workers for the cashier, a worker to serve customers or even worker to conduct in the store to check for the availability of the stocks. However, if Precious Garments were to shift to online business and at the same time, using AIS, they would only need one specialist to operate the system to receive the data once customer had successfully ordered the clothing apparel and began on the process of checking the availability of the stock through the system and proceed on with delivery. 2.4 Security of data In the recent business environment, the internet is a significant framework utilised by many organization in which it is becoming essential for online businesses to invest more in security of data because AIS contains sensitive and confidential data that should be ensured and remained safe at any time (Teru, Hla, Idoko, Tafida, 2016). Security measures aid in protecting and reducing loss from cyber risk and insufficiency of the information system (Bojanc and Jerman-Blazic, 2008). As for Precious Garments, their data would be more secure once they shift to online business by using AIS as compared to the traditional data keeping where if the bookkeeping is lost by any chance, everything have to be restarted and prepared once again by the accountant. Moreover, when the data is stored in the database of an AIS, more than one user can be reviewing simultaneously so long as they get to be accessed through the system (Beke, 2010). Also, by using AIS, this would prevent or lower the risk of manipulation in the financial data by the management and examples of such companies are waste management scandal (1998) and Saytam scandal (2009) where they report fake earning and falsely boosted revenue (“The 10 Worst Corporate Accounting Scandals of All Time”,” 2019). 2.5 Measure of Organisational performance The AIS design is defined as the information elements that it provides (Chenhall and Morris”,1986; Gul, 1991) Recently, studies has started to check whether organisations systematically changes the AIS design to aid in the chosen strategy, identifying that AIS have the potential to enhance organisational performance (Gerdin and Greve, 2004). Existing literature suggested minimal evidence of the interconnection between AIS and financial performance, however, Grande, Estebanez and Colomina (2010) had discovered a positive relationship between AIS design and the organisational performance. Normally, the organisational performance are being determined by the financial performance measuring ratios which are the ROA (Return of Assets) and ROE (Return of Equity) in order to map future plans by evaluating through the past performance of a firm (Sadia Majeed, 2001). Hence, it can be argued that AIS design may have positive action on organisational performance through ROA and ROE if AIS design is linked to the financial performance which in turn links to the organisational performance. In application, it would be beneficial for Precious Garments to be an online business as the AIS of the company would be able to help them track down information of the financial status of the company. Hence, they would be able to gather the data and determines the organisational performance of that particular period of time. In addition, they could set out various plans in order for Precious Garments to implement. This would result in having a better performance for the upcoming future plan to expand the business and revenue of the company. 3.0 Conclusion To conclude, the objective of this report was to examine the benefit of Precious Garments on shifting to an online business while incorporating AIS to their business. This then resulted in conducting a business to be more feasible to operate and allows accessibility to international marketplace. Moreover, it is cost efficient for the business to operate while having a secured and reliable data to store online and also, it could use to measure the performance of the organization. Hence, it is preferable for Precious Garments to shift into online business as the benefit outweighs the cost.

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