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In transaction processing systems, transactions are processed either in batches or one at a time. Batch processing occurs when similar transactions are grouped together, and that group is processed as a batch. A familiar example of batch processing is processing payroll checks. All time cards for the pay period are collected, and the resulting pay checks are processed and printed in a group, or batch. Accounts payable and accounts receivable transactions are often processed in batches. For example, payments to vendors are often processed in batches. The alternative to batch processing is real-time processing. Real-time processing occurs when transactions are processed immediately. This processing is interactive because the transaction is processed when it is entered. When determining whether batch or real-time processing is appropriate, system professionals must consider response time, efficiency, complexity, control, and storage media. Batch systems have slow response times, because the transactions are not processed until the whole group is ready to be processed. Real-time systems have fast response times, because transactions are processed as entered. Batch processing is more efficient for a large volume of similar transactions. This is true for several reasons. First, persons who focus on gathering and processing similar types of transactions become efficient at handling those transactions. That is, they become more specialized. ... Get Accounting Information Systems: The Processes and Controls, 2nd Edition now with the O’Reilly learning platform. O’Reilly members experience live online training, plus books, videos, and digital content from nearly 200 publishers.
By Indeed Editorial Team February 4, 2022  Purchasing an item at a store or online requires an exchange of currency that happens through a series of processes that help transition the money to the store and the product to a customer. Each transaction depends on the functionality of transaction processing systems to complete the sale. In this article, we explore how a transaction processing system works, its two systems types, the main components of a TPS and the benefits of using one. What is a transaction processing system?A transaction processing system is software that ensures the completion of a business transaction and also keeps track of transactions. An OTPS, or online transaction processing system, is an equivalent system that online merchants use for e-commerce. The transaction processing system, or TPS, ensures that each transaction is successful by storing, sending and receiving information via a database. It supplements the business point of sale system (POS), which is the unit that reads credit cards, prints receipts and accepts and stores cash. For example, if a customer purchases a book from a shop, they might pay with a credit card. A transaction processing system takes the customer's card information, communicates with their bank and approves or declines the purchase based on their account balance. Related: What Is OLTP and What Are the Benefits? (Plus Examples) Types of transaction processing systemsThere are two types of transaction processing systems: Batch processingThrough batch processing, a TPS interprets sets, or batches, of data by grouping items based on similarities. Batch processing can create a time delay because it reviews several sets of data simultaneously, requiring more computing power. Example: A customer pays for a subscription service at the end of the month, The TPS system processes the transactions as a batch because they occur at the same time. In this case, a delay in processing transactions is acceptable because the system only interprets batches once per month. Related: Cashier Skills: Definition and Examples Real-time processingReal-time processing is a method to process transactions as they appear. This helps prevent delays in processing and can provide a more accurate result. Example: An e-commerce website might use a TPS to process credit card transactions in real time to ensure payment before the company starts its fulfillment process. Processing transactions in real time also helps the company identify and address errors quickly, as well as increase its overall response times. Related: What Are the Different Types of Databases? Transaction processing system componentsEach TPS has four major components that help it function: 1. InputsAn input is an original request for a product or payment that an outside party sends to a company's TPS. If your company uses batch processing, its TPS stores groups of inputs and then processes them at a later time. In comparison, if your company uses a real-time system, it processes each input as it arrives. Inputs typically include:
2. Processing systemThe processing system reads each input and creates a useful output, such as a receipt. This element can help you define the input data and what the output should be. Based on the kind of TPS your company is using, processing times can vary. 3. StorageThe storage component of TPS refers to where a company keeps its input and output data. Some companies store these documents in a database. The storage component ensures the organization, security and accessibility of every document for later use. For example, if a vendor would like to confirm that your company has paid an invoice, you can check your system's storage to find the invoice and determine if you delivered a payment. 4. OutputsTPS outputs are documents the system generates once it completes processing all inputs, such as receipts the company stores in its records. These documents can help validate a sale or transaction and provide important reference information for tax and other official purposes. For example, if a vendor sends your company an invoice, you can pay the invoice and send the vendor confirmation of your payment. Then, you can amend the original invoice and mark it as "paid" in the company's TPS. Related: A Guide to Purchase Orders (With FAQs) TPS benefitsHere are some common benefits of using a TPS: Increased transaction speedsWith a TPS in place, businesses can effectively increase the speed of each transaction to minimize wait times for customers. Some systems process transactions in real time, while others collect transaction information during a set period and then process it at a later time, often after business hours. Improved cost efficiencyA TPS can potentially conduct and organize thousands of transactions throughout the day. This can save a company money by reducing the need to upgrade the system or use more than one system to meet demand. Improved reliabilityUsing a TPS can ensure that you process customer transactions quickly and accurately. A reliable TPS can also help your organization save money on potential troubleshooting or coding costs for malfunctioning systems. Automated managementATPS automates much of a company’s internal resource and revenue management. By increasing automation, employees can spend less time reviewing transactions. Automation is an important part of increasing the profitability of a business because it offers employees more time to focus on engaging tasks that require critical thinking. Related: OLTP vs. OLAP: What's the Difference? (Plus Benefits and Examples) |
What type of processing method processes transactions as they occur?
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