Introduction
The 21st century has been characterised with great technological advancements. These advancements have been seen in various aspects of life including the business world. With the advent computers, information technology has played an important role in shaping the global economy. Organizations have used information technology to make communication faster and more effective and have also used it to process data and for market intelligence (Sheahan, 2012). Information technology and other forms of technological advancements have helped organizations improve their business processes. It is through such technologies that organizations have been able to achieve cost efficiency and have driven revenue growth to greater heights. It is through technology that many financial institutions have been able to maintain a competitive edge among the competitors in the marketplace.
Summary
With the great technological shifts in today’s world, technology has been employed in various ventures including business. Information technology has greatly influenced the finance functions. It has been suggested that among the greatest forces that influence finance are the technological advances and globalization. One aspect that is associated with technology is speed. This may be seen in the speed at which financial statements are produced. Technology has also made budgeting simpler and the streamlining of the cash cycle. Efficiency is also seen in the communication between colleagues at the workplace and among finance institutions (Basu, 2012).
Technological advancements have facilitated the revolution of finance. This may be seen through the ease at which several core financial activities can be performed in a single location and at a relatively low cost. Technological advancements in form of internet have also helped increase financial productivity due to the fact that constant communication between the businesses and the central locations has been made possible.
Finance has transformed significantly over the years and this includes several trends in the evolution of information technology (IT). Each idea built on the other and enabled finance to transform from a narrow function to a more complex one. The simpler functions that were performed previously included internal cost accounting. However, with the transformations, more complex ones (such as those that act as business partners with the top management) were developed.
One of the early trends was in the internal accounting focus. This change was in the nature of the type of accounting that finance performed. Previously, accounting focused on management accounting and internal control. However, the stock market crash of 1929 changed its focus. Thus, it revolved more on public accounting and disclosure. After the crash, the Securities and Exchange Commission (SEC) expected to receive disclosure documents in paper. These documents were sent to the SEC and are still under tight security. The Electronic Data Gathering, Analysis and Retrieval system (EDGAR) that is in use helps to provide easy access of the required information to the investors. Therefore, technology played an important part in external reporting.
The finance function in the banking industry has also changed significantly over the decades. Activities such as credit authorization and check clearing were made possible due to the technological advancements and this has revolutionized the way finance in performed. The technology used in data collection or modelling was initially tested on a small scale and later adopted industry wide since it proved that it could increase productivity. In the banking industry, computers also assisted in the loan process. The bankers did not require keeping loan records in books.
Advancements in information technology have also helped to transform how capital investments are evaluated. Previously, managers of firms had a rough time evaluating what would happen whenever they wanted to build a new plant or make an acquisition. They had to make calculations of the net present value on large pieces of paper, which was cumbersome and involving. However, the technological advancements have made electronic spreadsheets available for such tasks. This made a wide range of permutations possible and over a shorter period. It also enabled finance to make sophisticated justifications that were required to advice management on the way forward.
Another technological advancement in finance is the enterprise resource planning system. This system can be used to collect all the financial data within the cash cycle and make them readily available. This includes those from the purchasing inputs to the invoices that need to be collected. Despite the fact that the implementation of this system may be expensive, the returns are great.
Another development in finance is business intelligence. This has enabled experts to point out business opportunities after the analysis of diverse transactional data. EBay, for example, uses this tool to analyze the performance of millions of its commodities in the website. Microsoft Excel has also come in handy when it comes to the analysis of financial data.
Through technology, businesses have been able to connect the different departments within the company. This is through networking of the computers within the respective departments. This means that the different finance department functions do not work in isolation but as a unit. Many companies do such connections to major servers in order to monitor the entire cash cycle. This technology is helpful since it may prevent a company from losing cash but instead accumulate it.
Technology has also helped in the development of centralized global shared services. Before the advent of new technology in this field, certain businesses used to have country subsidiaries in different areas of the globe and used to employ staff in each of the subsidiaries. Although it was effective, it did not yield optimally. With the new technologies, such businesses have tried to reduce the number of subsidiaries. This has seen the reduction of the subsidiary finance department and centers. The few centers are then placed strategically where the work can be done at a lower cost. An example of company that has used these services includes Oracle.
All these activities are done over the internet and using telecommunications and computing. These technologies help to centralize the various financial functions and assists in the establishment of a consistent global procedure. Companies can place globally shared service centers in far countries and do their businesses. This usually helps in cost saving since establishing centers may be expensive.
With the advent of technologies, finance has transformed into a business partner to the managers. This is because it supports businesses by generating information that may be used in the management of operations. Finance also controls the administrative resources.
Critical evaluation
The invention of computers and the development of diverse finance software have greatly impacted finance. Such technology has made huge computations simple. Calculations that used to take a long period of time can now be done with much ease. Without such technology, some finance professional would not have the ability to provide accurate information instantly. Consequently, this has a negative effect on the marketing performance and is an impediment on the decision making process. Therefore, technologies such as computers, computation devices, information technology and software have made have greatly assisted finance personnel and managers. With the ever-increasing technologies, the industries would be fully automated.
Financial institutions such as banks and insurance companies are also able to process loans and insurance claims faster and more effectively. This would allow more people to use these services due to its efficiency. With technology, such institutions are also able to reduce risks while providing financial assistance. This is mainly due to the ability to store credit histories in their databases. The availability of the unique identification systems also helps institutions provide their services with less risk.
The usefulness of technology is in its efficiency and effectiveness. Finance professionals seeking to perform forecasting, graphical predictions or investment analysis require the use of certain technologies, without which it would have been difficult or impossible. Certain financial decisions require timely responses especially due to the prevailing interest rates and the multiplier effect.
Information technology is useful to every business since it allows firms to work effectively and it also maximizes productivity. A business can also benefit from information technology through the availability of faster communication channels. Technology makes electronic storage and protection of records possible. Electronic storage systems are useful in protecting the firm’s valuable records. Studies have shown that ensuring security and maintenance of client and patient files is required in order to uphold the integrity of the business.
Virtual vaults have been used by several organizations to store information. Such storage areas are restricted to specific users who have access to it. They are the only ones who have the permission and ability to access, remove, add or alter the existing information. In order to enhance the security of such information, IT security engineers are required in order to help prevent the system from being hacked into. These experts are very useful during such disasters.
Another advantage of technology in finance is the ability to perform automated processes. This is whereby technology is used to ensure that more work is done within a shorter period. Automated processes performed using information technology aims at increasing productivity through efficiency. This also means that the burden is taken off the staff. Since the employees are relieved of some duties, this means that they have more time to perform other activities that are beneficial to the business.
Another benefit of using technology in finance is the fact that one can work remotely (Sheahan, 2012). With such technology, one is able to access the organization’s electronic network remotely. This means that one can work in the comfort of his or her home. This exclusive access increases productivity since work continues even in the absence of the individual in the office.
Technology has also enabled effective communication in the business world. Information technology is used by organizations to make communication efficient and effective. The IT department is usually responsible for handling such issues in the organization. For example, they can help the employees to access emails that may be useful in sharing work-related information.
Recent technology has made video conferencing possible. This has revolutionized and changed the way businesses are conducted. This has also taken communication to another level since people can conduct meeting in a virtual boardroom over the internet. This ensures that business partners do not necessarily have to travel great distances to meet at a central location. All they need is the proper electronic device that is internet-enabled.
Technology has made global financing possible. This has enabled finance to reach a global level. With the help of technology, finance markets are able to react to global developments. Financial organizations are also able to frequently acquire the same information as their competitors (Basu, 2012). Such information includes credit ratings and scores. All these information may be accessed through the internet.
Social media is also a technological advancement that is very useful to financial institutions. This may be seen in the way financial institutions can use them to collect valuable information about their clients. Financial institutions can also use the social media to encourage brand loyalty. This is through promoting their products and services to their clients. This also helps such organizations to collect information about brand loyalty and customer satisfaction, among other valuable information. Through such media, the businesses not only target the current client base but also the potential customers. This may be the younger demographics that would make future clients.
Information technology has played a great role in product development (Basu, 2012). This may be seen in the way it may shorten the time required for new products to reach the market. Organizations can produce product requirement documents by collecting information from various databases, sales representatives and client. The decision making process may be made faster using designs that are computer-guided and using manufacturing software. Collaborative technologies, on the other hand, enable various teams around the globe to work on different parts of a particular product at the same time. Information technology has also come in handy in the ever-changing customer requirements since it helps in responding quickly to such changes.
Technology has also helped in stakeholder integration (Basu, 2012). This may be in the availability of round the clock interconnectivity through the use of customer service calls. Call centers located in different areas of the globe help to connect the stakeholder in different locations whereby they are able to receive the required information obtained from servers in different locations. Information technology is also helpful in businesses since it helps in process improvement. This may be seen in the way managers can use one integrated software platform to perform several financial activities at the same time. An example of such a tool is the enterprise resource planning (ERP) system. Such systems also replace the required work force and other functional areas. This makes the internal process more cost-effective and efficient.
Cost effectiveness may be realised by an organization that employs information technology (Basu, 2012). The initial stages of the implementation of such an initiative may be costly but the long-term result is cost reduction. Information technologies may be helpful in reducing the costs incurred during implementation and those required for transaction. For example, the use of emails may help the organization to reduce costs due to duplication and postages. At the same time, this would ensure improved product quality and customer satisfaction. Organizations that quickly adopt the new technologies usually gain a competitive advantage over its competitors (Basu, 2012). This is because the competitors would quickly follow with the trend lest it loses its market share.
Disadvantages of technology
Despite the fact that technology has hugely been helpful, there are several negative effects associated with excessive use of technology in finance careers. Some of the effects include the loss of analytical skills and interpretational skills. With the use of certain technologies, a person may lack the capacity to explain issues, make considerations or make a motivational speech. Such individuals may also lack the holistic and interpersonal characteristics.
Another disadvantage of technology in the business world is the fact that it has great implementation expenses. In order for any organization to consider introducing information technology into the business, it must consider the start-up costs required for implementation of any such system. These are mainly the costs of incorporating hardware and software. However, there may be more costs to be incurred due to the implementation of these information technology systems. This may come in form of the fees required during the licensing of every employee who operates the system. Another cost to be incurred by the organization may be the cost of training the employees who may not be familiar with the new technology. Most basic information technology systems are usually user friendly. However, other advanced programs may require expert advice. Such technological gadgets may also be expensive to maintain.
Another disadvantage of using technology in finance is the fact that automation of financial activities may render some employees useless and may lead to job elimination. Most of the activities that were previously carried out manually by employees may be done more effectively by computers and other technologies. Automated telephone machines have made work easier. However, they have replaced the receptionists. This means that the live receptionists are no longer required in such institutions.
Another disadvantage in the use of technology in finance is the possibility of security breaches. Electronic databases are usually vulnerable to security breaches. This is especially when these databases are accessible through the internet. Therefore, this requires the organization to put in place appropriate measures in order to protect the confidentiality of the information. This might also require the employment of computer specialists to constantly watch for such criminals.
Conclusion
Technology has greatly transformed finance and this may be in its efficiency and effectiveness. Technology has been one of the greatest forces for change in the financial functions. This may be in the speeding up of financial activities and processes. Technology has also ensured cost efficiency since more work can now be done at a shorter time. With technology, storage of valuable information has been made easier and more effective (Sheahan, 2012). Technology in telecommunication has improved communication and ensured that the business processes are improved.
Through technology, various processes may be automated (Sheahan, 2012). This would be beneficial to the organization since it would relieve the employees of some stuff in order to allow them to have more time to perform organizational activities. Technology may also be helpful in enabling people to work remotely. This means that one may not necessarily need to be in the office in order to work. One can simply access the same information from a different location. Networking is another work of technology that has greatly benefited organizations. Despite the few disadvantaged associated with technology, it has played a role in shaping finance by making work easy.
References
Basu, C. (2012). The six important business objectives of information technology. Web.
Cohan, P. S. (2006). Finance and IT: The transforming power of technology. Finance Executive, 22(6), 18-23.
Melville, N., Kraemer, K., & Gurbaxani, V. (2004). Information technology and organizational performance: An integrated model of IT business value. MIS Quarterly, 28(2), 283-322.
Sheahan, K. (2012). What are the advantages of information technology in business. Web.