Earlier discussions provide the steps involved in building a model—defining the system bound-aries and then breaking it up into tractable components. Data flow among components and the system is an important characteristic. After a process model is refined, it represents a powerful tool for studying how the company conducts business. Until business practices are clearly defined and understood, an information system cannot be designed.
Consider an example from the financial management area. For simplicity, the example involves a checking account, savings account, and credit card. This might be an adequate model for a cash-based, service business. As discussed earlier, though, product sales demand consideration of interfaces to the inventory system. The data flow analysis involves building all the possible tracks by which money can flow among these. The goal is to offer an instantaneous, accurate account balance as well as long-term trends checking. Long-term trends might be related to statistical or historical data.
Each sub-element has inputs and outputs. In the case of the savings and checking accounts, the inputs are income, interest, and fund transfers between the two. The credit card inputs are pay-ments and interest. Outputs for the savings account are cash withdrawals, service fees, and fund transfers. The checking account outputs are checks written, automatic withdrawals, cash transfers, and service fees. Finally, it is useful to consider credit card purchases as an output.
The three accounts interact by money transfers. For example, the owner might make payments on the credit card balance using checks. The funds for the checks might stem from a transfer of money from the savings account. Of course, the savings account contains these funds as a con-sequence of income. Figure 6.3 offers a diagram of this interaction.
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income interest
transfers
transfers via checks
other payments via checks
purchases savings account
checking account
credit card account
FIGURE6.3
Cash flow model.
Money also flows to other accounts such as the payroll system. For the sake of reducing plexity, many companies rely on separate systems for payroll and accounts. In fact, some com-panies contract out to a payroll service. This has the effect of reducing payroll to simply another expense category.
For each account, the balance is simply computed as
balance = (start balance) + (all inputs) - (all outputs)
However, finer resolution is usually desirable. For example, it is useful for purposes of tax accounting to break the outputs into expense categories such as those of Table 6.1. Similarly, it is important to classify the inputs, being careful to separate interest from ordinary income.
TABLE6.1 Expense Categories
Category Explanation
Computers and software Office equipment
Consultants Non-payroll reimbursements for contract
services
Electronic mail Connection service fee
Insurance Business liability, other
Mail Stamps, other postage
Meals, entertainment Marketing
Mileage Repayment for use of personal vehicle
for business
Office supplies Expendables such as paper
Payroll Payments to employees, benefits, taxes
Professional Accountant, lawyer
Telephone Office telephone
Travel, non-meals Transportation, hotel
In terms of formal modeling, the entity is a “financial account” of which this model has three instances. These, of course, are savings, checking, and credit. A financial account has one input port and one output. Its behavior is to produce the balance described previously.
The relationship among sub-elements is somewhat arbitrary, but when established, should be enforced. The model of Figure 6.3 captures the policy decisions (business rules associated with account management) that
• Ordinary income is always a deposit to savings, never checking or credit.
• Cash withdrawals are always taken from savings.
• Funds transfers from savings provide the money for checking.
• Credit card payments are always by check.
Figure 6.3 describes three data elements, or entities: savings account, checking account, and credit card account. Processes determine how these data elements are accessed, and how data flows; hence, a data flow diagram.
The benefits for enforcing such processes come monthly and at tax reporting time. With such procedures in place, it is simple to reconcile bank and credit card statements. At tax time, expense reports, interest income, and other relevant material is easily obtainable. Such a sys-tem is essential to achieve accuracy and responsiveness.
The abstract model of a financial account is a tool that forces managers to reason precisely about company policy involving these accounts. It might be advantageous to allow cash with-drawals from checking, for example. However, the linkage among the models illustrates that fewer data paths result in analysis that is easier to understand.
Summary
Business modeling is the transition point between gathering information from interviews and actually designing a database. Business modeling uses gathered information in order to model the business from a logical standpoint. In order to model a business, various diagrams are drawn that represent key components which belong to an organization in relation to the organi-zation’s need to store information. These key elements include mainly data elements and processes.
A data element represents an organization’s data, and is modeled by breaking data elements into what are called entities. Entities are those objects graphically shown in an entity relation-ship diagram. Processes are decomposed into process steps and data flows. Processes define how individuals within an organization operate in order to accomplish their daily tasks.
Processes are represented in diagrams such as process models, data flow diagrams, and func-tional hierarchy diagrams. The implication of the need for a database implies that a significant amount of these tasks affect data. Therefore, both data (entities) and processes must be mod-eled, and relationships must be defined between them. The next several chapters discuss enti-ties, processes, and logical modeling in more detail.
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