What is an Accounting Information System (AIS)?

An accounting information system (AIS) involves the collection, storage, and processing of financial and accounting data used by internal users to report information to investors, creditors, and tax authorities. It is generally a computer-based method for tracking accounting activity in conjunction with information technology resources. An AIS combines traditional accounting practices, such as the use of Generally Accepted Accounting Principles (GAAP), with modern information technology resources.

How an Accounting Information Systems (AIS) is Used

An accounting information system contains various elements important in the accounting cycle. Although the information contained in a system varies among industries and business sizes, a typical AIS includes data relating to revenue, expenses, customer information, employee information, and tax information. Specific data includes sales orders and analysis reports, purchase requisitions, invoices, check registers, inventory, payroll, ledger, trial balance, and financial statement information.

An accounting information system must have a database structure to store information. This database structure is typically programmed with query language that allows for table and data manipulation. An AIS has numerous fields to input data as well as to edit previously stored data. In addition, accounting information systems are often highly secured platforms with preventative measures taken against viruses, hackers, and other external sources attempting to collect information. Cybersecurity is increasingly important as more and more companies store their data electronically.

The various outputs of an accounting information system exemplify the versatility of its data manipulation capabilities. An AIS produces reports including accounts receivable aging reports based on customer information, depreciation schedules for fixed assets, and trial balances for financial reporting. Customer lists, taxation calculations, and inventory levels may also be reproduced. However, correspondences, memos, or presentations are not included in the AIS because these items are not directly related to a company’s financial reporting or bookkeeping.

Benefits of Accounting Information Systems

Interdepartmental Interfacing

An accounting information system strives to interface across multiple departments. Within the system, the sales department can upload the sales budget. This information is used by the inventory management team to conduct inventory counts and purchase materials. Upon the purchase of inventory, the system can notify the accounts payable department of the new invoice. An AIS can also share information about a new order so that the manufacturing, shipping, and customer service departments are aware of the sale.

Internal Controls

An integral part of accounting information systems relates to internal controls. Policies and procedures can be placed within the system to ensure that sensitive customer, vendor, and business information is maintained within a company. Through the use of physical access approvals, login requirements, access logs, authorizations, and segregation of duties, users can be limited to only the relevant information necessary to perform their business function.

What Is Always Be Closing—ABC?

Always Be Closing (ABC) is a motivational phrase used to describe a sales strategy. It implies that a salesperson following the regimen should continuously look for new prospects, pitch products or services to those prospects, and ultimately complete a sale.

As a strategy, ABC requires that the salesperson be persistent, but also that they know when to cut their losses and move on to another prospect.

The Basics of ABC

The phrase Always Be Closing was popularized in the 1992 film, “Glengarry Glen Ross” starring Alec Baldwin, Al Pacino, and Jack Lemmon. The movie was written by David Mamet and was based on his Pulitzer Prize-winning play. It emphasized the darker, cutthroat side of the sales industry.

In the film, an aggressive representative from the corporate office is brought in to motivate a group of real estate agents, telling them to sell more property or be fired if they fail. He delivers a profanity-laced tirade, accusing the salespeople of being timid and unmotivated. He flaunts his wealth and success.

During his speech, he flips over a blackboard on which the words “Always Be Closing” are written, and he repeats the phrase several times. The speech backfires, however, because the salespeople resort to a host of unethical tactics to achieve their sales numbers.

Later, in the 2000 film “Boiler Room,” a sales trainer mentoring a young stockbroker asks the trainee if he’s seen “Glengarry Glen Ross.” He then proceeds to quiz him on the meaning of Always Be Closing.

The Effectiveness of Always Be Closing

The term has become a catchall example of a few of the pithy quotations that sales managers often use to motivate their sales staffs and to drive home the importance of being tenacious with prospects. It serves as a reminder that every action a salesperson takes with a client prospect should be done with the intention of moving the sale toward a close.

From the initial rapport-building stage of the sales process to uncovering customer needs and product positioning, the representative should be “closing” the entire time, setting the customer up to to a point where the only logical thing to do is pull out his checkbook.

Real World Example

While it might be entertaining on the big screen, ABC is seldom successful in real life situations for a variety of reasons.

A 2018 study by CSO Insights, an independent research and data provider, indicated that successful salespeople spent, at most, 35% of their time actually selling or “closing” deals. The research found that lead generation, customer follow-up, strategy and planning sessions, and administrative tasks comprised the lion’s share of their time.

As InvestementNews.com reports, research suggests that the ABC mentality is losing its effectiveness. The average 21st-century customer comes armed with significantly more information than a consumer did in 1984, when the David Mamet story was a Pulitzer Prize-winning stage presentation, and even since 1992, when the film was released. Modern customers prefer to shop around and research before making purchases. They’re much less susceptible to slick sales pitches than people once were.

What Is the 80-20 Rule?

The 80-20 rule, also known as the Pareto Principle, is a familiar saying that asserts that 80% of outcomes (or outputs) result from 20% of all causes (or inputs) for any given event.

In business, a goal of the 80-20 rule is to identify inputs that are potentially the most productive and make them the priority. For instance, once managers identify factors that are critical to their company’s success, they should give those factors the most focus.

Although the 80-20 rule is frequently used in business and economics, you can apply the concept to any field. Wealth distribution, personal finance, spending habits, and even infidelity in personal relationships can all be the subject of the 80-20 rule.

How Does the 80-20 Rule Work?

You may think of the 80-20 rule as simple cause and effect: 80% of outcomes (outputs) come from 20% of causes (inputs). The rule is often used to point out that 80% of a company’s revenue is generated by 20% of its customers.

Viewed in this way, it might be advantageous for a company to focus on the 20% of clients that are responsible for 80% of revenues and market specifically to them. By doing so, the company may retain those clients, and acquire new clients with similar characteristics. However, there’s a more fundamental meaning to the 80-20 rule.

Core Principle

At its core, the 80-20 rule is about identifying an entity’s best assets and using them efficiently to create maximum value. For example, a student should try to identify which parts of a textbook will create the most benefit for an upcoming exam and focus on those first. This does not imply, however, that the student should ignore the other parts of the textbook.

Misinterpretations

People may not realize that the 80-20 rule is a precept, not a hard-and-fast mathematical law. Furthermore, it is isn’t necessary that the percentages equal 100%. Inputs and outputs simply represent different units. The percentages of these units don’t have to add up to 100%. It’s the concept behind the rule that matters.

There’s another way in which the 80-20 rule is misinterpreted. Namely, that if 20% of inputs are most important, then the other 80% must not be important. This is a logical fallacy. The 80% can be important, even if the decision is made to prioritize the 20%.

80-20 Rule Background

The 80-20 rule is also known as the Pareto principle and is applied in Pareto analysis. It was first used in macroeconomics to describe the distribution of wealth in Italy in the early 20th century. It was introduced in 1906 by Italian economist Vilfredo Pareto, who is best known for the concepts of Pareto efficiency.

Pareto noticed that 20% of the pea pods in his garden were responsible for 80% of the peas. Pareto expanded this principle to macroeconomics by showing that 80% of the wealth in Italy was owned by 20% of the population.

In the 1940s, Dr. Joseph Juran, a prominent figure in the field of operations management, applied the 80-20 rule to quality control for business production.

He demonstrated that 80% of product defects were caused by 20% of the problems in production methods. By focusing on and reducing the 20% of production problems, a business could increase the overall quality of its products. Juran referred to this phenomenon as “the vital few and the trivial many.”

Benefits of the 80-20 Rule

Although there is little scientific analysis that either proves or disproves the 80-20 rule’s validity, there is much anecdotal evidence that supports the rule as being essentially valid, if not numerically accurate.

Performance results of salespeople in a wide range of businesses have demonstrated success by incorporating the 80-20 rule. In addition, external consultants who use Six Sigma and other management strategies have incorporated the 80-20 principle in their practices with good results.

Example of the 80-20 Rule

A Harvard graduate student, Carla, was working on an assignment for her digital communications class. The project was to create a blog and monitor its success during the course of a semester.

Carla designed, created, and launched the site. Midway through the term, the professor conducted an evaluation of the blogs. Carla’s blog, though it had achieved some visibility, generated the least amount of traffic compared with her classmates’ blogs.

Define the Problem

Carla happened upon an article about the 80-20 rule. It said that you can use this concept in any field. So, Carla began to think about how she might apply the 80-20 rule to her blog project. She thought, “I used a great deal of my time, technical ability, and writing expertise to build this blog. Yet, for all of this expended energy, I am getting very little traffic to the site.”

She now understood that even if a piece of content is spectacular, it is worth virtually nothing if no one reads it. Carla deduced that perhaps her marketing of the blog was a greater problem than the blog itself.

Apply the 80-20 Rule

To apply the 80-20 rule, Carla decided to assign her 80% to all that went into creating the blog, including its content. Her 20% would be represented by a selection of the blog’s visitors.

Using web analytics, Carla focused closely on the blog’s traffic. She asked herself:

• Which sources comprise the top 20% of traffic to my blog?
• Who are the top 20% of my audience that I wish to reach?
• What are the characteristics of this audience as a group?
• Can I afford to invest more money and effort into satisfying my top 20% readers?
• In terms of content, which blog posts constitute the top 20% of my best-performing topics?
• Can I improve upon those topics, and get even more traction from my content than I’m getting now?

Carla analyzed the answers to these questions, and edited her blog accordingly:

1. She adjusted the blog’s design and persona to align with her top 20% target audience (a strategy common in micromarketing).
2. She rewrote some content to meet her target reader’s needs more fully.

Significantly, although her analysis did confirm that the blog’s biggest problem was its marketing, Carla did not ignore its content. She remembered the common fallacy cited in the article—if 20% of inputs are most important, then the other 80% must be unimportant—and did not want to make that mistake. She knew it was necessary to address aspects of the content, as well.

Results

By applying the 80-20 rule to her blog project, Carla came to understand her audience better and therefore targeted her top 20% of readers more purposefully. She reworked the blog’s structure and content based on what she learned, and traffic to her site rose by more than 220%.

What Is an Application Programming Interface (API)?

An application programming interface (API) is a set of programming codes that queries data, parse responses, and sends instructions between one software platform and another. APIs are used extensively in providing data services across a range of fields and contexts.

APIs have become increasingly popular tools, with the likes of Meta (formerly Facebook), Amazon, SalesForce, and many more establishing their own APIs that allow companies to access some of their services without having to fully migrate into their ecosystem. This new paradigm has led to the rise of what some experts call the “API economy,” a model that enhances a company’s bottom line by improving interoperability and thus creating new systems from existing ones.

In the domain of financial markets and trading, one may use an API to establish a connection between a set of automated trading algorithms and the trader’s preferred trading broker platform for the purpose of obtaining real-time quotes and pricing data or to place electronic trades.

Understanding Application Programming Interfaces (APIs)

APIs have become increasingly popular with the rise of automated trading systems. In the past, retail traders were forced to screen for opportunities in one application and separately place trades with their broker. Many retail brokers now provide APIs that enable traders to directly connect their screening software with the brokerage account to share real-time prices and place orders. Traders can even develop their own applications using programming languages like Python and execute trades using a broker’s API.

Two types of traders use broker APIs:

• Third-Party Applications – Many traders use third-party applications that require access to broker APIs for pricing data and placing trades. For example, MetaTrader is one of the most popular foreign exchange (forex) trading applications and requires API access to secure real-time pricing and place trades.
• Developer Applications – A growing number of traders develop their own automated trading systems, using programming languages like Python, and require a way to access pricing data and place trades.

Despite the apparent benefits of APIs, there are many risks to consider. Most APIs are provided to a broker’s customers free of charge, but there are some cases where traders may incur an extra fee. It’s important to understand these fees before using the API.

Traders should also be aware of any API limitations, including the potential for downtime, which could significantly affect trading results.

Where to Find APIs for Traders

The most popular brokers supporting API access in the traditional stock and futures markets include TradeStation, TDAmeritrade, and InteractiveBrokers, but many smaller brokers have expanded access over time. APIs are more common among forex brokers where third-party applications and trading systems—such as MetaTrader—have been commonly used for many years.

Many brokers provide online documentation for their APIs. Developers can find out exactly how to authenticate with the API, what data is available for consumption, how to place orders through the API, and other technical details. It’s essential to be familiar with these details before choosing a broker when looking for specific functionality.

Some brokers also provide libraries in various languages to make interaction with their API easier. For example, a broker may offer a Python library that provides a set of functions, or methods, for placing a trade rather than having to write your own functions to do so. This can help accelerate the development of trading systems and make them less costly to develop.