INTRODUCTION

The purpose of this text is:

• to inform on significant new possibilities in finance and managerial practice, by means of INTELIGENT COMPUTER SYSTEMS

• to present new development directions for accounting and control, made possible by intelligent computer systems.

• general description of intelligent financial computer system

• description of the work of intelligent financial system

• example of use of intelligent financial system

• financial models that could be used

• modes of using the system

• general characteristics of the system, training and costs considerations

• development directions for accounting and control, based on intelligent computer systems

• conclusion.

• can accept expert financial knowledge, in the form of various financial models

• transforms general ledger data, according to those financial models

• delivers answers to the "why ...", "what is required to ..." and "what if ..." questions.

TOMAS is a generalized information system for the management of various types of organizations. Here, possibilities of TOMAS as intelligent system in accounting and management control are described.

In short, these possibilities are the following:

• cut-through the financial plans and general ledger, according to the financial model chosen by the user

• answers to the following questions :

• why the given element of the model has been changed, in the period to be analyzed

• what is required to achieve given value

• what is going to happen with all of the model elements, if certain accounts are to be increased or decreased, for a given amount or percentage

• graphic representation of the value for any of the financial indicators.

• Financial managers and controllers in an organization:

• get much better control of what is being done in accounting dept., for in few seconds consistency of booking data could be checked

• get much more accurate and better insight in the business results of the organization, for it is easy to get various key business indicators of manager and controller's choice.

• Managers and owners get full and permanent insight in the business results, expressed in business categories, rather then in accounting categories, hence they do not have to have knowledge of accounting.

• External and internal financial control can do their job much easier and better.

DESCRIPTION OF THE INTELIGENT FINANCIAL SYSTEM

Components of TOMAS, pertinent for use as intelligent system are:

1. Database in which, normal general ledger data and financial plans are entered, primarily for standard accounting.

 
2. Knowledgebase in which various financial models are entered. Financial model is a set of financial relations (statements), based on accounts. Such a model is, e.g. balance sheet, profit and loss statement, set of various financial indicators etc. TOMAS makes possible use of any model that user could take from literature or make it specifically.

 
3. Informationbase, where any report could be stored and:

• could be modified, i.e. could be added comments, graphically enhanced, etc
• could be kept for later use
• permanently and promptly is available to authorized persons
• has built-in various search and editing functions, so it is easier and more efficient to analyze report on the screen, rather than on the paper.

1. User enters in TOMAS:

• the report type (analysis or graphical representation)
• period to be treated
• financial model to be used
• the choice of whether the report is to be done by organizational units, work orders etc. or for the organization as a whole.

1. Then follows intelligent data refinement by TOMAS:

• database search in accordance with financial models, i.e. retrieves booked items, according to accounts in a financial model ...
• ... applies computing operations according to the model ...
• ... and, finally, produces a report that could be:

• standard report, i.e. the list of computed results
• analysis:

• why changes happened in some of the elements of the model
• what is required to achieve the given value
• what would be the consequences for each model element, if values for user accounts defined by user would be increased or decreased for a given amount or percentage

• graphical or tabelar presentation of the value flow in a time period, for any element of the model.

1. Report handling types that TOMAS offers are:

• screen display
• report modifications - delete parts, add comments etc
• print the report
• store the report in informationbase for later use.

In order to show an example of use of intelligent system, the following example is presented:

Database contains:

• general ledger data
• financial plan data, i.e. planned monthly amounts for each account considered to be relevant for business planning.

Model of profit and loss statement, that is in TOMAS entered in the following way:
 

Model	R.n.	Description	Relation
RM	1	PROFIT AND LOSS STATEMENT	0=
RM	2	Net sales	K75#P+K76#P=
RM	3	Cash paid to suppliers	K70#D+K71#D=
RM	4	Income of other activities	K74#P+K77#P=
RM	5	Costs of other activities	K72#D=
RM	6	Extra income	K78#P=
RM	7	Extra costs	K73#D=
RM	8	Profit before taxes	K75#P+K76#P+K78#P-K70#D-K71D=
RM	9	Taxes	0,35*(R2-R3+R4-R5+R6-R7)=
RM	10	Net profit	R8-R9=

One of the reports that intelligent system delivers is the following:
 

CROATIA - INVEST D.D. TOMAS, 11.07.1998.  FINANCIAL RESULTS ANALYSIS FOR 1. – 6.98. ***************************************** MODEL: Profit and loss statement
Description	In current month	From the beginning of the year
	Plan       Actual  Index	Plan     Actual   Index
Net sales	2,250.000    1,975.688   0,88	16,400.000 17,020.887    1,04
Cash paid to suppliers	1,750.000    1,405.883   1.24	11,644.000 12,688.954    1,09
Income of other activities	300.000      300.000   1,00	1,800.000  1,800.000    1,00
Costs of other activities	30.000       26.000   1,15	180.000    211.552    1,18
Extra income	100.000       72.876   1,37	600.000    311.237    0,52
Extra costs	10.000	60.000     38.892    0,65
PROFIT BEFORE TAXES	860.000      915.993   1,06	6,916.000  6,192.398    0,89
Taxes	301.000      320.598   1,06	2,420.600  2,167.339    0,89
NET PROFIT	559.000      595.395   1,06	4,496.600  4,025.059    0,89

Hence, TOMAS produced this report, retrieving general ledger data and financial plan data, and destined those data according to the chosen financial model.
 

FINANCIAL MODELS THAT COULD BE USED

TOMAS could use any financial model where addition, subtraction, multiplication, division and recursion (use of previously defined relations) are used.
In user documentation of TOMAS, as for a start, the following financial model is suggested:

KNOWLEDGEBASE FOR MANAGEMENT REPORTING

Results for a period:

• total income
• total costs
• profit before taxes
• income taxes
• netto profit
• receivables
• payables
• total payables
• inventories

• current assets minus inventories
• total assets
• capitalization = total assets - short term debts
• equity = total assets - total debts

Liquidity and coverage:

• quick ratio (acid test) = Liquid assets/short term debts
• debt/total assets ratio = total debts/total assets
• debt to equity ratio = total debts/equity
• current ratio = current assets/current debts

• total costs as % of sales
• costs of sales as % of sales

• net sales turnaround coefficient = (net sales/total assets) x 360/ days since beginning of the year
• receivables turnaround coefficient = sales / receivables) x 360/ days since beginning of the year
• total assets turnaround coefficient = total income/total assets
• receivables average payment period = 360 x receivables/ sales x days since beginning of the year

• profit before taxes as a % of sales
• profit after taxes as a % of sales
• brut profit margin = profit before taxes/ total income
• netto profit margin = profit after taxes/ total income
• return on assets = profit after taxes/total assets
• profitability = profit before taxes/total assets

INTELIGENT FINANCIAL SYSTEM USAGE MODALITIES

This kind of systems could be used for the following purposes:

1. In corporations and other organizations for:

• Finance and control support:

• day to day control of completeness and consistence in bookkeeping
• business results control and analysis.

• Management and owners support:

• permanent control of operations

• business results analysis

• decision support - answer to questions:

• why some indicator has been changed in a period
• what is necessary to achieve a given value
• what is going to be the consequence of increasing or decreasing some costs, investments etc.

1. In financial (CPA and auditing) firms:

• much easier and more efficient work, considering that voluminous and tedious data treatment is eliminated

• more standardized and higher quality of work, due to the automatic use of standard models

• remote work, i.e. without coming on the user premises and possibility for having "consilium" in-house, whenever necessary.

1. In governmental financial institutions:

• financial control and analysis of state institutions

• control and analysis of business results of organization in the city, county, state

• Ease of use: financial models could be easily entered in a knowledgebase of TOMAS in a few minutes. Entering models is simple and training for this is only 2 - 3 hours. Training for use of informationbase is even shorter.

• Low costs: if one uses complete TOMAS, investment in the computer equipment is cca 2.000 DM/workstation. Use of TOMAS software costs cca 200 DM/month and workstation.

• Exceptional speed: due to special developments method of TOMAS, all data are resident in central memory, rather than on discs and makes TOMAS cca 20 times faster than other systems.

• Unique solution: there is no other system on the market with these capabilities, even in the systems that cost millions of dollars.

There are various possibilities for the development of new methods in finance and management, as well. Some of them are presented below:

1. DEVELOPMENT OF FINANCIAL DSS MODELS (Decision Support Systems) that could be based directly on general ledger data.

DSS models have been on the market for some years, for various types of activities, including the financial ones. However, the existing DSS solutions are such that the user has to enter all input data, in the form suitable for that DSS.
TOMAS is using standard general ledger module data, and no other input has to be done.
One type of financial DSS could have the following structure: to produce a report that would give clear picture of financial performance of the organization. This is an example of such a report.

KEY FINANCIAL INDICATORS FOR XY Inc.
 

Indicator	very good	good	poor	very poor
inventories turnov. coeff.	X
receivables turnov. coeff.		X
debt/current assets ratio			X
profitability	X

To achieve this, in TOMAS should be entered values that are considered to be very good, good etc, for the elements of the financial model. These data should be maintained for various types of organizations.
 

2. DEVELOPMENT OF FINANCIAL EXPERT SYSTEMS

TOMAS is a unique solution with such capability, there is no other on the market - even the solutions that cost tens times more, do not have this capability.