An Overview of Transaction Processing Systems

1. An Overview of Transaction Processing Systems

2. Transaction Processing Systems (Operational level) • A transaction is any business-related exchange e.g. payments to employees, sales to customers, payments to suppliers. • Transaction processing system (TPS) - an organized collection of people, procedures, software, databases, and devices used to record completed business transactions. • To understand a TPS is to understand basic business operations and functions.

3. Transaction Processing Systems (Operational level) • Bottom managers e.g. a manager at a supermarket, must identify, collect and register all transactions and events when sales are made, and when goods are shipped. • Financial data on account receivables/payables, payrolls, cash receipts must be recorded as they occur.

4. TPS (operational IS) • TPS support the most fundamental, basic business operations of the organization; as it records every detail of each transaction. • TPS can be manual or automated. • TPS is the earliest use of computers to reduce costs by automating routine, repetitive, labour-intensive business procedures. • E.g. ATMs, supermarket’s check-out cashiers, use of smart card technology in transportation, fast food stores etc.

5. A Payroll Transaction Processing System

6. Benefits of automated TPS • Reduced cost: less labour/personnel • Increased speed (operational efficiency): processing is faster • Increased accuracy: less typing mistakes, error-free input and processing. • Increased quality customer service: faster response to customer’s queries or needs, 24-hour access to information. • Increased data for decision making: serve as the foundation for DSS; as TPS collects & stores all transactional data into the databases.

7. Traditional Transaction Processing Methodsby computers • Batch processing – processing of business transactions are accumulated over a period of time and prepared for processing later as a single unit. Some time delay between the occurrence of transaction and the actual processing of the transactions. • Previous slide has some e.g. of batch processing. • On-line transaction processing (OLTP) - processing of each transaction is done immediately and the affected records are updated.

8. E.g. of on-line processing • Stock market exchange: transactions of buying/selling of stocks are processed instantly. • Airline reservation systems, especially cheap or budget airline tickets which are usually sold on airline’s website. • Gambling: soccer or horse racing bets can be placed on appropriate websites and processed immediately. • Suitable for more urgent transactions that require data updated quickly.

9. Batch versus On-Line Processing

10. E.g. of TPS in 4 business functions

11. Integrated TPS’s in a financial accounting system and its major components

12. Typical inputs and outputs of an accounts receivable TPS • Inputs: • payments, sales orders, adjustments (returns) • Outputs: • customer statements, aging reports, schedule of accounts receivable

13. Typical inputs and outputs of an accounts payable TPS • Inputs: • purchase orders, payments, adjustments (returns) • Outputs: • checks to creditors, list of bills due, schedule of accounts payable

14. Data Processing Activities Common in all TPSs

15. Data collection in TPS • captures and gathers all necessary data to complete transactions. • Data must be recorded at its source accurately, in a timely fashion and automatically with minimal manual effort. • Automated input devices e.g. barcode scanners at libraries, point-of-sale cashiers at supermarkets

16. Data editing in TPSs • Detects for any errors in input data • Performs validity and completeness checking in input data • E.g. quantity and cost data must be in numeric, • E.g. names must be alphabetic

17. Data correction in TPSs • If input data is invalid, TPS should give appropriate error messages so that corresponding corrections can be made. • Data correction involves reentering mis-keyed or mis-scanned data.

18. Data Manipulation in TPSs • The actual processing inside the TPS such as calculations and data transformations related to the transactions. • E.g. classifying data, sorting data in categories, performing calculations, summarizing results

19. Data Storage in TPSs • Update one or more databases with new transactional data. • Once the update process is complete, this data can be further processed and used by other types of information systems e.g. MIS, DSS for tactical decision making or strategic planning.

20. Document or report production in TPSs • TPSs produce important business documents about the transactions. • Documents can be hardcopy or displayed on computer screens. • E.g. paychecks of a payroll system, • E.g. receipts of an order processing system, • E.g. outstanding balance report for invoices for an accounts receivable TPS.

21. Characteristics of TPS • Repetitive – transactions repeat daily, weekly, or monthly. • Predictable – information always has expected results e.g. customers are billed for what they purchased in a month. • Emphasis on the past – information describes past activities e.g. payroll output describes employee’s past work pay. • Detailed nature - output information is very detailed e.g. paychecks have details on the worksheet of each employee’s gross and net pay. • Structured form – input and output data format are structured, e.g. data on time cards are carefully formatted in identical fashion. • Great accuracy – input and output data to/from TPS must be accurate and carefully checked.