eFinance Part 1 - Basic Concepts

It seems that everything now has an "e" in front of it. Finance, like any other function, is subject to profound changes because of e-commerce. This article will outline some basic concepts for moving traditional finance into an e-commerce environment.

In the World of eFinance, complex decisions are made using sophisticated models that demonstrate what destroys value and what creates value. eFinance pulls together all stakeholders behind value-creation: Employees, customers, suppliers, etc. eFinance works 24 x 7 (24 hours a day, 7 days a week), providing instant knowledge to decision makers on an enterprise wide basis.

eFinance, like all e-business applications will consolidate and integrate business processes, sharing and distributing a process electronically for global collaboration. Additionally, financial data is transformed into business rules and intelligence, thereby enhancing the knowledge and intellectual capital of the organization. A database of knowledge, leveraged by mining tools is a major component of eFinance.

The technology for making eFinance happen usually consists of three layers:

•  Database servers that manage the data.

•  Application servers that distribute information to end-users.

•  Clients - Personal Computers, Laptops, Workstations, etc.

The term "client-server" is often used to describe the architecture of eFinance.

eFinance, like all e-commerce applications will involve unique risk:

• Integration of processes into one integrated system is extremely difficult.
• Critical applications may be down, resulting in major interruptions of business processes.
• Loss of personal interaction since everything is now electronic.
• Corrupted or compromised information.
• However, the benefits of eFinance are enormous:
• Increased productivity.
• Faster and better decision making.
• Better collaboration through a consistent, standard process.

One obvious benefit of eFinance is lower transaction cost. For example, according to the International Technology Group, on-line transaction processing can result in the following savings per transaction:

Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . Manual Costs . . . . . . On-Line Costs

Process Order for Purchasing Equipment . . . $ 65.00 . . . . . . . . . . . . .$ 6.85

Issue Retail Invoice to Customer . . . . . . . . . .$ 2.77 . . . . . . . . . . . . . . $ .88

Process Purchase Order . . . . . . . . . . . . . . . .$ 130.00 . . . . . . . . . . . . $ 28.00

Customer Query . . . . . . . . . . . . . . . . . . . . . $ 22.00 . . . . . . . . . . . . . .$ 2.32

The goal of eFinance is to transform traditional financial functions into value-added services that creates and enhances value. eFinance delivers strategic financial information faster and sooner, not only about what happened in the past, but also giving you forecasts and insights into what will happen next quarter or next year. In today's competitive business world, eFinance has become a matter of survival. In Part 2 of this article, I will touch on some specific components of eFinance, such as e-procurement.