Transaction Process System – Activities, Objectives and Characteristics

Transaction processing system (TPS), an information system (IS) mostly used by managers in operational management to record internal transactions, economic events that occur within an organization and external transactions where the business event took place outside the organization to make operational decision. TPS supports different tasks by setting a set of rules and guidelines that specify the ways to capture or collect, process and store any transaction in a form of data or information.

Transaction Process System Activities

Processing business transactions was the first application of computer of most firms. Since the 1950s, Transaction processing system (TPS) have evolved from slow, manual systems to advanced computerized system. TPS, a cross-functional information system were among the earliest computerized systems developed to record, process, validate, and store business for future use or retrieval. Transactions are the economic events or exchange between two or more business entities. Basically, TPS is an organized collection of people, procedures, databases, and devices used to record completed business transaction and store data about these transaction.

  1. Data collection:  The process of capturing and gathering the needed data to complete transactions. Data collection can be manual process or automated process. The usage of automated data collection devices have made data collection faster, more efficient and reliable and allow firms to use the collected data in much more flexible ways. For example, retail stores use scanners to read the bar code from product packages and automatically enter the price item to TPS. Once the price data is entered, the computer will determine customer’s bill.
  2. Data manipulation: The process of performing calculation and other data transformation related to business transactions and store data and information in organization’s database for further processing. For example, in a payroll TPS, managers multiply employee’s hours worked times the hourly pay rate.
  3. Data storage: Data storage involves placing transaction data or information in database. The stored data can be further processed and manipulated by other information system.In other words, the data appears to be the source of data for other information systems
  4. Data production: The process of outputting records and reports. The documents may be in the form of hard copy paper reports or soft copy where documents are displayed on computer screens.

Objectives  of Transaction Process System

Organizations expect their TPS to accomplish a number of specific objectives such as:

  • Process data generated by and about transactions: The primary objective of TPS is to capture, gather, process, and store transactions and to produce useful documents related to routine business activities to managers.
  • Maintain high degree of accuracy: One of the objectives of TPS is error free data input and processing. In manual TPS, the resulting transactions were often inaccurate because human are fallible, resulting in wasted time, effort and requiring resources to correct them. In contrast, with computerized TPS, transaction processed appeared to be accurate or errors were minimized because accuracy checks were done by both humans and computer system.
  • Ensure data and information integrity: TPS ensure that all the data and information stored in databases are always accurate, current, appropriate and up to date.
  • Produce timely documents and reports: Manual TPS take longer time than computerized TPS to produce routine documents. Computerized TPS and the improvements in information technology (IT) allow transaction to be processed in a very short period of time.
  • Increase labor  efficiency: Manual TPS were labor intensive in which the process of business transaction are done by hand. With computerized TPS, firms can reduce the need of many labors as computer can replace human labors, thus saving the cost.
  • Help provide increased and enhanced services: TPS assist organization in providing superior customer service. For example, computerized TPS enable customer to place orders for raw materials electronically and helps firms to track customer orders through all stages from order to delivery to receipt of payment. Thus, this allows firms to be more responsive to customer needs and queries.

Characteristics  of Transaction Process System

There are 4 characteristics in every single transaction processing systems.

  1. Rapid response: In order to shorten the waiting time of the users, TPSs are modified to process transactions instantly to ensure the data will be available in the shortest waiting time.
  2. Reliability: Due to the involvement of cash, the reliability of TPS has to be in place. TPSs have to be designed in a way to avoid the transactions slip past the net in the same time remain themselves operating permanently. Also the failure rate has to be remained within the tolerance levels. With that comprehensive safeguards and disaster recovery systems have to be incorporated by the designed TPSs.
  3. Inflexibility: Mistakes or errors can occur once the steps alter. To maximize the efficiency of the TPS, transactions have to be processed in the same order. With that, TPS interfaces have to be designed so that the identical data for each transaction can be acquired.
  4. Controlled Processing: Transaction processing monitor is found at every end of the computer to ensure that the transactions are correctly inputted. Still it requires human controls on it. TPSs can be used even in modify the data and fraudulent the transactions. With that the user of the system has to be restricted only for people who have the authority.

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