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Transaction Processing Systems

Every organisation has manual and automated transaction processing systems (TPSs), which processes thedetailed data necessary to update records about the fundamental business operations of the organisation. These systems include order entry, inventory control, payroll, accounts payable, accounts receivable, and general ledger.

For most organisations, TPSs support routine day-to-day activities that occur in the normal course of business that help the company add value to its products and services. Depending on customer, value may mean lower price, higher quality, better service or uniqueness of product. By adding a significant amount of value to their products and services, companies insure further organisational success.

Organisations expect their TPSs to accomplish a number of specific objectives, including the following:

Process data generated by and about transactions

This can be directly or indirectly related to selling products and services to customers. Processing orders, purchasing materials, controlling inventory, billing customers and paying suppliers are all business activities that result from customer orders. These activities produce transaction data that are stored and processed by TPS.

Maintain a high degree of accuracy and integrity

One objective of any TPS is error-free data input and processing. Even before the utilisation of computer technology, humans were responsible of inspecting all the documents and reports introduced by or into company business process. Because humans are fallible, the transactions were often inaccurate, resulting in wasted time and effort or in worst case lost profits and customers. As the volume of data being processed and stored increases, it becomes more difficult for individuals to review all input data. For example, E-Commerce companies face this problem when accepting credit card information over the Internet. How can these companies make sure that people making purchase are entering valid credit card numbers? One approach is to automate the process and let TPS do the real-time validity check at time the purchase is being made. Check may consist of contacting the bank or at least applying a credit card number check algorithm.

Produce timely documents and reports

Manual transaction processing can take days to produce routine reports. Fortunately, the use of computerised TPS significantly reduces this response time. The ability to conduct business transactions in timely way can be very important for the profitable operation of organisation. For instance, if bills are sent to customers few days earlier than usual, payments may be received earlier. Because of electronic recording and transmission of sales information, transactions can be processed in seconds rather than overnight thus improving companies’ cash flow.

Increase labour efficiency

Today, transaction processing systems can substantially reduce clerical and other labour requirements. The TPS replaces the room full of clerks, typewriters, and filing cabinets.

Help provide increased service

Without question, we are becoming service-oriented economy. Even strong manufacturing companies, including hose hold appliance makers and automobile manufactures, realise the importance of providing superior customer service. A transaction processing system for concert tickets, for example, allows concert enthusiasts to order tickets over Internet instead of standing in line for hours.

Help build and maintain customer loyalty

A firm’s transaction processing systems are often means for customers to communicate. It is important that the customer interaction whit TPS keeps customers satisfied and returning.

Achieve competitive advantage

A goal common to almost all organisations is to gain and maintain a competitive advantage. Depending on the nature and specific goals of the business, TPS can help provide some or all of the following: customer loyalty increased, superior service provided to a customer, better relationship with suppliers, superior information gathering, costs dramatically reduced.


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