What is Transaction Management?
Transaction management is the process of monitoring and controlling all aspects of an executed financial transaction, from entry to exit. It is the process of managing all the different transactions that occur at any given time. Businesses use transaction management to keep tabs on their income, revenue, and expenditure. They do this by keeping records of every transaction that occurs at any given point in their business.
Why is Transaction Management Important for Businesses?
Businesses use transaction management to monitor revenue, expenses, and investments. The process helps businesses plan for future investments because it lets them know how much money they have available to invest in new ventures. The process also helps monitor costs so businesses don’t overspend or save too little for future investments. Generally, revenue is money gained by sale of goods or services. Expenses are the costs associated with the purchase of materials needed to provide goods or services. Investments are funds used for business growth by purchasing new equipment, hiring additional workers etc. Transaction management is an important part of double-entry accounting because it helps monitor income, expense, and investment levels that are stored in an accounting database software program. This software program then uses the data to help businesses manage their finances more effectively.
It’s important to note that a business records every transaction that occurs at any given point in time. Each transaction is marked with a date stamp and an amount, and the transaction itself includes information about who did the transaction, what the transaction was for, how much it cost, and other relevant details.
In accounting terminology, there are three types of transactions: sales transactions, purchases transactions and expenses/investments (this includes salaries and wages). A single entity (business or individual person) does all of these transactions in one go, or split them up over different periods of time. When we break down the transactions into different periods of time and different entities (business and customers) then some or all of these transactions may happen at different times. For example if we had a retail business with ten employees and ten customers, we may want to track how much money our employees spend each week on groceries and other necessities. In other words, we would be looking at transaction details for expenses over a period of time. In that type of scenario, we would record all ten employees’ lunch money that month in one big lump sum for expenses.
The main distinction between business and non-business transactions is that business transactions usually involve money changing hands either from one party to another, or from one entity (business, customers etc.) to another. Non-business transactions don’t usually involve money changing hands such as when a magazine subscriber gives their name and address information to a magazine company for free in exchange for getting an annual subscription to certain magazines for free, or when two people trade books with each other – not involving any money at all.
The Goals of Transaction Management
The goal of transaction management is to achieve accurate and complete records for all completed transactions; it can also be used as an auditing tool for identifying errors in transactions that were not accounted for. The process starts with reconciling information into two sets-data that will be recorded through normal procedures (data coming into the system) and data that will be recorded through ad hoc procedures (data coming out of the system). This is a common use of batch-processing. Because of the volume of data involved, there are also specialist functions, such as reconciliation management and reconciliation management reporting.
The primary goals are:
i) Transaction monitoring ensures that all transactions can be monitored and reported accurately and in a timely fashion. This can be done using either automated processes or manual processes performed by the person assigned to the job.
ii) The predominant approach for manual transaction monitoring is still the completion of a daily journal for each account maintained by the company, which lists all transactions that have occurred during the day.
iii) Transaction reporting can be used to report on any routine, routine exception, or ad hoc transactions. This information is intended to help users make decisions based on their knowledge of what has occurred with their account, or what activities are taking place that may be out of line with previous activity.
iv) Transaction processing provides automated systems that are designed to facilitate efficient and accurate completion of both routine and ad hoc transactions.
Uses of transaction Management
Transaction management has many uses in business operations. The primary areas where this functionality will be used are accounting, finance, human resources, marketing, and IT/IS departments.
In accounting, transaction management will provide a number of useful features, including:
In finance, transaction management solutions will provide a number of features, including:
In human resources, transaction management provides a way for staff to automate repetitive tasks in their daily performance. In addition, it also provides reports that help users to track the performance of their employees in numerous areas. A few examples include:
In marketing and sales-related operations, the use of transaction management is quite broad. In particular, these systems provide a way for businesses to manage pricing and discounts for their products and services in real time. Other features include:
In information technology and information systems (IT/IS), transaction management provides a variety of capabilities that can greatly improve the accuracy and consistency of data. The most common areas where this functionality will be used are:
While transaction management is generally referred to as a coherent area of functionality, it should be noted that there is no such thing as a single definition for “transaction” or even “management.” Instead, there are numerous approaches to each of these concepts. The specific approach taken will depend on the requirements placed on the solution by the company implementing it.
There are several methods of computing the significance of transaction activity. Some organizations compute the dollar value of every transaction, while others only consider transactions that are large enough to be considered material. It is also possible to examine the size of the transactions relative to the size of an account, or to examine how frequently they occur. There are various ways in which this information can be displayed, including:
Transaction management also provides for a number of other measures. These include:
Transaction management may provide features for reporting on financial statements in a variety of ways:
Some companies use automated reporting to receive automated notifications when there is a problem with their accounting systems.
Software-Based Transaction Management
A number of companies have emerged in recent years that provide software that facilitates more efficient and transparent business practices, often referred to as “transaction management software.” This is because the term “transaction management” describes the entire process of overseeing entities’ day-to-day transactions. There are more than 400 known methods of transaction management, although the two main categories are “process management” and “transaction management.” There are many types of Transaction Management Software (TM) services. Some firms provide software specifically for foreign exchange, equities, bond trading, insurance, accounting and bank reconciliation. Some firms offer tax planning for international transfers. For example, some firms allow their clients to manage their capital moves within a country or across one or more countries by cross border transfers or through local brokers.
One of the most common examples of transaction management software is trade confirmation processing. The currency transfer process can be divided into three parts: currency buying, currency selling and currency transfer. The currency buying stage is about identifying the currency pair (such as EUR/USD for European Uniono), making an order (such as EUR 100,000) and receiving funds (such as USD 100,000) in return for the order. Once the process is complete, the bank may feed the information back to other parties involved in other processes, including other banks or brokers.
How Fintalent Can Help you Achieve Your Transaction Management Goals
Revenue is an important component in almost any company’s financial statements. Transaction management solutions are designed with the specific objective of improving revenue visibility by providing real-time access to financial data concerning past and present transactions. Whether your organization chooses the Software or Human route to transaction management, Fintalent has best-in-class experts in Distributed Ledger Technology, payments, cybersecurity, as well as Risk and Compliance all of which can combine to provide a foolproof transaction management system.