Accounting Information System

Accounting Information System:

An accounting information system (AIS) is a system of collection, storage and processing of financial and data that is used by. An accounting information system is generally a computer-based method for tracking accounting activity in conjunction with information technology resources. The resulting statistical can be used internally by management or externally by other interested parties including and tax authorities. The actual physical devices and systems that allows the AIS to operate and perform its functions
Internal controls and security measures: what is implemented to safeguard the data
Model Base Managemen

History:
Initially, accounting information systems were predominantly developed “in-house” as. Such solutions were difficult to develop and expensive to maintain. Today, accounting information systems are more commonly sold as prebuilt software packages from vendors such as and where it is configured and customized to match the organization’s business processes. As the need for connectivity and consolidation between other business systems increased, accounting information systems were merged with larger, more centralized systems known as (ERP). Before, with separate applications to manage different business functions, organizations had to develop complex interfaces for the systems to communicate with each other. In ERP, a system such as accounting information system is built as a module integrated into a suite of applications that can include manufacturing, supply chain, human resources. These modules are integrated together and are able to access the same data and execute complex business processes. With the ubiquity of ERP for businesses, the term “accounting information system” has become much less about pure accounting (financial or managerial) and more about tracking processes across all domains of business.

Software architecture of a modern AIS:
A modern AIS typically follows a separating the presentation to the user, application processing and data management in distinct layers. The presentation layer manages how the information is displayed to and viewed by functional users of the system (through mobile devices, web browsers or client application). The entire system is backed by a centralized database that stores all of the data. This can include transactional data generated from the core business processes (purchasing, inventory, accounting) or static, that is referenced when processing data (employee and customer

account records and configuration settings). As transaction occur, the data is collected from the business events and stored into the system’s database where it can be retrieved and processed into information that is useful for making decisions. The application layer retrieves the raw data held in the layer, processes it based on the configured business logic and passes it onto the presentation layer to display to the users. For example, consider the accounts payable department when processing an invoice. With an accounting information system, an clerk enters the, provided by a, into the system where it is then stored in the database. When goods from the vendor are received, a receipt is created and also entered into the AIS. Before the accounts payable department pays the vendor, the system’s application processing tier performs a three-way matching where it automatically matches the amounts on the invoice against the amounts on the receipt and the initial purchase order. Once the match is complete, an email is sent to an accounts payable manager for approval. From here a can be created and the vendor can ultimately be paid.aa

How to effectively implement AIS:
As stated above,accounting information systems are composed of six main components: When an AIS is initially implemented or converted from an existing system, organizations sometimes make the mistake of not considering each of these six components and treating them equally in the implementation process. This results in a system being "built 3 times" rather than once because the initial system is not designed to meet the needs of the organization, the organization then tries to get the system to work, and ultimately, the organization begins again, following the appropriate process.

Following a proven process that works, as follows, results in optimal deployment time, the least amount of frustration, and overall success. Most organizations, even larger ones, hire outside consultants, either from the software publisher or consultants who understand the organization and who work to help the organization select and implement the ideal configuration, taking all components into consideration. Certified Public Accountants (CPAs) with careers dedicated to information systems work with small and large companies to implement accounting information systems that follow a proven process. Many of these CPAs also hold a certificate that is awarded by the American Institute of CPAs—the Certified Information Technology Professional (CITP). CITPs often serve as co-project managers with an organization's project manager representing the information technology department. In smaller organizations, a co-project manager may be an outsourced information technology specialist who manages the implementation of the information technology infrastructure.

The steps necessary to implement a successful accounting information system are as follows:
Detailed Requirements Analysis
where all individuals involved in the system are interviewed. The current system is thoroughly understood, including problems, and complete documentation of the current system—transactions, reports, and questions that need to be answered are gathered. What the users need that is not in the current system is outlined and documented. Users include everyone, from top management to data entry. The requirements analysis not only provides the developer with the specific needs, it also helps users accept the change. Users who have the opportunity to ask questions and provide input are much more confident and receptive of the change, than those who sit back and don't express their concerns.

Systems Design (synthesis)
The analysis is thoroughly reviewed and a new system is created. The system that surrounds the system is often the most important. What data needs to go into the system and how is this going to be handled? What information needs to come out of the system, and how is it going to be formatted? If we know what needs to come out, we know what we need to put into the system, and the program we select will need to appropriately handle the process. The system is built with control files, sample master records, and the ability to perform processes on a test basis. The system is designed to include appropriate internal controls and to provide management with the information needed to make decisions. It is a goal of an accounting information system to provide information that is relevant, meaningful, reliable, useful, and current. To achieve this, the system is designed so that transactions are entered as the occur (either manually or electronically) and information is immediately available on-line for management to use.

Once the system is designed, an RFP is created detailing the requirements and fundamental design. Vendors are asked to respond to the proposal and to provide demonstrations of the product and to specifically respond to the needs of the organization. Ideally, the vendor will input control files, sample master records, and be able to show how various transactions are processed that result in the information that management needs to make decisions. An RFP for the information technology infrastructure follows the selection of the software product because the software product generally has specific requirements for infrastructure. Sometimes, the software and the infrastructure is selected from the same vendor. If not, the organization must ensure that both vendors will work together without "pointing fingers" when there is an issue with either the software or the infrastructure.

Documentation
As the system is being designed, it is documented. The documentation includes vendor documentation of the system and, more importantly, the procedures, or detailed instructions that help users handle each process specific to the organization. Most

documentation and procedures are on-line and it is helpful if organizations can add to the help instructions provided by the software vendor. Documentation and procedures tend to be an afterthought, but is the insurance policy and the tool that is used during testing and training—prior to launch. The documentation is tested during the training so that when the system is launched, there is no question that it works and that the users are confident with the change.

Testing
Prior to launch, all processes are tested from input through output, using the documentation as a tool to ensure that all processes are thoroughly documented and that users can easily follow the procedures so that you know it works and that the procedures will be followed consistently by all users. The reports are reviewed and verified, so that there’s not a garbage in-garbage out. This is all done in a test system not yet fully populated with live data. Unfortunately, most organizations launch systems prior to thorough testing, adding to the end-user frustration when processes don't work. The documentation and procedures may be modified during this process. All identified transactions must be tested during this step in the process. All reports and on-line information must be verified and traced through the "audit trail" so that management is ensured that transactions will be handled consistently and that the information can be relied upon to make decisions.

Training
Prior to launch, all users need to be trained, with procedures. This means, a trainer using the procedures to show each end user how to handle a procedures. The procedures often need to be updated during training as users describe their unique circumstances and the "design" is modified with this additional information. The end user then performs the procedure with the trainer and the documentation. The end user then performs the procedure with the documentation alone. The end-user is then on his or her own with the support, either in person or by phone, of the trainer or other support person.

Data Conversion
Tools are developed to convert the data from the current system (which was documented in the requirements analysis) to the new system. The data is mapped from one system to the other and datafiles are created that will work with the tools that are developed. The conversion is thoroughly tested and verified prior to final conversion. Of course, there’s a backup so that it can be restarted, if necessary.

Launch
The system is implemented only AFTER all of the above is completed. The entire organization is aware of the launch date. Ideally, the current system is retained and oftentimes run in "parallel" until the new system is in full operation and deemed to be working properly. With the current "mass-market" software used by thousands of companies and fundamentally proven to work, the "parallel" run that is mandatory with software tailor-made to a company is generally not done. This is only true, however, when the above process is followed and the system is thoroughly documented and tested and users are trained PRIOR to launch.

Tools
Online resources are available to assist with strategic planning of accounting information systems. Information Systems and Financial Forms aid in determining the specific needs of each organization, as well as assign responsibility to principles involved.

Support
The end-users and managers have ongoing support available at all times. System upgrades follow a similar process and all users are thoroughly appraised of changes, upgraded in an efficient manner, and trained.

Many organizations chose to limit the amount of time and money spent on the analysis, design, documentation, and training, and move right into software selection and implementation. It is a proven fact that if a detailed requirements analysis is performed with adequate time being spent on the analysis, that the implementation and ongoing support will be minimal. Organizations who skip the steps necessary to ensure the system meets the needs of the organization are often left with frustrated end users, costly support, and information that is not current or correct. Worse yet, these organizations build the system 3 times instead of once.

Some Benefits of an in Accounting Information System(AIS):
Information systems changed forever the way accounting tasks are processed. The days of green paper pads are gone, and instead businesses have a centralized place where all accounting transactions are entered and saved. No more looking for paper journals or adding up long columns--computer software does that for you, error-free. Thanks to reasonably priced hardware and software, even small businesses can benefit from computerized accounting.

Speed
The main benefit of information systems in accounting is the speed of processing tasks. Data is entered once and can then be used and reused in compiling reports by literally pressing a button. If a transaction needs correction, it is easily done, with reports generated afterward at speeds never possible with manual accounting systems.
Classification

When data is entered in an accounting system, manual or computerized, an accountant needs to classify it in a detailed fashion. For example, a transaction could be a sales revenue or an interest revenue. Using information systems, this classification process is easily accomplished with a drop-down menu from which you choose the proper category. You can also quickly generate reports involving classifications. With a manual system, this process takes much more time.
Safety

Once data is entered into a computer, it is safe. The chances of losing data are remote, especially when you perform regular system backups. In manual systems, paper pads can be lost or damaged more easily. You can save data on the Internet, where it will not only be accessible anytime you need it but will also still be secure even if your computer is lost or damaged.

Some Disadvantage of AIS:
Learning the System
· Learning an accounting information system can often be difficult and time-consuming. Individuals must be trained on a system, and this can cause a disadvantage to companies in terms of time and manpower. An accounting information system is made up of many different components, and almost all systems are computerized. Because of their complexity, some people may find them hard to use. It can take weeks or months for a person to understand an accounting system, and usually the individual still does not understand completely what the system is capable of. If the employee quits working at the organization, it can take weeks or months, once again, to train another employee.
Loss of Information

· Accounting information systems are usually computerized. Because of this, there is always a risk of losing information through power outages or system crashes. When this happens, there is a chance that all the information in the system could be lost. Companies take precautions for this problem by backing up their files regularly and performing standard maintenance on all computer systems. They also install anti-virus software as another precaution. Still, none of these steps eliminates the potential problem that may occur. Accounting information systems store a company's financial information for years. If a system crash occurs, it causes a major disadvantage to the company. All, or some, information is lost, and there's a chance it may never be recovered.

Re-evaluation
· Companies often change their way of doing business to keep up with the latest trends. To keep up in a demanding business world, these changes may impact an accounting system. An accounting information system is difficult to set up because every company is unique in its own way. In order to keep up with changes, accounting information systems must be re-evaluated often. Changes often need to be made in a system in order to process information efficiently. This can be a disadvantage to companies because it takes time for the re-evaluation, and it costs money.

Others problems:
Power failure, computer viruses and hackers are the inherent problems of using computerized systems;
Once data been input into the system, automatically the output are obtained hence the data being input needs to be validated for accuracy and completeness, we should not forget concept of GIGO (Garbage In(Input) Garbage out ( Output) and

Accounting system not properly set up to meet the requirement of the business due to badly programmed or inappropriate software or hardware or personnel problems can caused more havoc and
Danger of computer fraud if proper level of control and security whether internal and external are not properly been instituted.

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Some of the commonly Established CRM Objectives are as follows

1.1 INTRODUCTION

CRM, or Customer relationship management, is a number of strategies and technologies that are used to build stronger relationships between companies and their customers. A company will store information that is related to their customers, and they will spend time analyzing it so that it can be used for this purpose. Some of the methods connected with CRM are automated, and the purpose of this is to create marketing strategies which are targeted towards specific customers. The strategies used will be dependent on the information that is contained within the system. Customer relationship management is commonly used by corporations, and they will focus on maintaining a strong relationship with their clients.

There are a number of reasons why CRM has become so important in the last 10 years. The competition in the global market has become highly competitive, and it has become easier for customers to switch companies if they are not happy with the service they receive. One of the primary goals of CRM is to maintain clients. When it is used effectively, a company will be able to build a relationship with their customers that can last a lifetime. Customer relationship management tools will generally come in the form of software. Each software program may vary in the way it approaches CRM. It is important to realize that CRM is more than just a technology.

Customer relationship management could be better defined as being a methodology, an approach that a company will use to achieve their goals. It should be directly connected to the philosophy of the company. It must guide all of its policies, and it must be an important part of customer service and marketing. If this is not done, the CRM system will become a failure. There are a number of things the ideal CRM system should have. It should allow the company to find the factors that interest their customers the most. A company must realize that it is impossible for them to succeed if they do not cater to the desires and needs of their customers. Customer relationship management is a powerful system that will allow them to do this.

It is also important for the CRM system to foster a philosophy that is oriented towards the customers. While this may sound like common sense, there are a sizeable number of companies that have failed to do it, and their businesses suffered as a result. With CRM, the customer is always right, and they are the most important factor in the success of the company. It is also important for the company to use measures that are dependent on their customers. This will greatly tip the odds of success in their favor. While CRM should not be viewed as a technology, it is important to realize that there are end to end processes that must be created so that customers can be properly served. In many cases, these processes will use computers and software.

Customer support is directly connected to CRM. If a company fails to provide quality customer support, they have also failed with their CRM system. When a customer makes complaints, they must be handled quickly and efficiently. The company should also seek to make sure those mistakes are not repeated. When sales are made, they should be tracked so that the company can analyze them from various aspects. It is also important to understand the architecture of Customer relationship management.

1.2 CRM OVERVEW
MEANING OF CRM
Customer Relationship Management is the establishment, development, maintenance and optimization of long-term mutually valuable relationships between consumers and the organizations. Successful customer relationship management focuses on understanding the needs and desires of the customers and is achieved by placing these needs at the heart of the business by integrating them with the organization's strategy, people, technology and business processes.

At the heart of a perfect CRM strategy is the creation of mutual value for all the parties involved in the business process. It is about creating a sustainable competitive advantage by being the best at understanding, communicating, and delivering, and developing existing customer relationships in addition to creating and keeping new customers.

DEFINITION OF CRM

“Customer Relationship Management (CRM) is a co-ordinate approach to the selling process allowing the various operational, customer contact and sales promotional functions of an organization to function as a whole.”

1.3 GOALS OF CRM
Implementing customer relationship management can be a costly undertaking. Organizations spend a lot of money scrutinizing vendors, buying the right CRM software, hiring, consultant, training employees, etc. The only way in which a company can actually measure its success is if it establishes CRM goals prior to the implementation as in this way it is able to determine whether or not it has successfully implemented CRM. Despite the fact that industries have different business aspects they share some common CRM goals.

Some of the commonly Established CRM Objectives are as follows:
1) Increase in Customer Service :
Establishing customer loyalty as one of your top CRM goals is absolutely fundamental to CRM successful implementation .For this task it is essential that the whole organization realize that they play a part in this goal. This objective cannot be achieved with the help of a few employees only. Customers need to feel that they have received excellent service. This ensures their continued patronage. This is by far one of the most essential goals of customer relationship management. Customer retention and brand loyalty is absolutely essential to ensure success. Undoubtedly it is far harder to gain a new customer than to actually keep one. Customer service is the pivotal point around which CRM revolves.

2) Increasing Efficiency:
One of the most important goals of CRM is the increase in organization efficiency and effectiveness. This is almost always adopted by every organization. It is necessitated by the fact that increase in efficiency is required to boost success. CRM achieves this through cost reduction and customer retention. Adequate CRM training achieves this goal.

3) Lowering Operating Costs:
CRM goals also include the reduction of costs of operation. This goal should be clearly established and conveyed to all those involved in the CRM implementation process. CRM manages to reduce operating costs through a workforce management system. This helps to maximize skills and thus reduce cost. These reduced costs enable an organization to achieve greater efficiency. If cost reduction is management's objective then the CRM implementation should be carried out in such a way that this is achieved. Throughout the process maximum reduction in costs should be adhered to in order to meet this particular CRM goal.

4) Aiding the Marketing Department:
Another goal of CRM is generally aiding the marketing department in all its efforts. This includes marketing campaigns, sales promotions etc. If this is fixated as one of the goals of CRM, then it should be communicated to those involved. This goal is fundamental as it boosts sales indirectly thereby increasing the profitability.

1.4 CRM--A POWERFUL TOOL
CRM is a powerful management tool that can be used to exploit sales potential and maximize the value of the customer to the bank. Generally, CRM integrates various components of a business such as sales, marketing, IT and accounting. This strategy may not increase a business's profit today or tomorrow, but it will add customer loyalty to the business.

In the long term, CRM produces continuous scrutiny of the bank's business relationship with the customer, thereby increasing the value of the Customer’s business. Although CRM is known to be a relatively new method in managing customer loyalty, it has been used previously by retail businesses for many years.

The core objective of modern CRM methodology is to help businesses to use technology and human resources to gain a better view of customer behavior. With this, a business can hope to achieve better customer service, make call centers more efficient, cross-sell products more effectively, simplify marketing and sales processes, identify new customers and increase customer revenues.

As an example, banks may keep track of a customer's life stages in order to market appropriate banking products, such as mortgages or credit cards to their customers at the appropriate time.

The next stage is to look into the different methods customers' information are gathered, where and how this data is stored and how it is currently being used. For instance, banks may interact with customers in a countless ways via mails, emails, call centers, marketing and advertising. The collected data may flow between operational systems (such as sales and stock systems) and analytical systems that can help sort through these records to identify patterns. Business analysts can then browse through the data to obtain an in-depth view of each customer and identify areas where better services are required.

1.5 CRM AND BANKS
One of the banks' greatest assets is their knowledge of their customers. Banks can use this asset and turn it into key competitive advantage by retaining those customers who represent the highest lifetime value and profitability. Banks can develop customer relationships across a broad spectrum of touch points such as at bank branches, kiosks, ATMs, internet, electronic banking and call centers.

CRM is not a new phenomenon in the industry. Over the years, banks have invested heavily in CRM, especially in developing call centers, which, in the past, were designed to improve the process of inbound calls. In future, call centers will evolve to encompass more than just cost reduction and improved efficiency. According to Gartner Group, more than 80 per cent of all US banks will develop their call centers as alternative delivery channels and revenue centers, to be used for the delivery of existing products and services. But to be successful, a bank needs more than the ability to handle customer service calls. It needs a comprehensive CRM strategy in which all departments within the bank are integrated.

1.6 OBJECTIVES OF CRM IN BANKS
CRM, the technology, along with human resources of the banks, enables the banks to analyze the behavior of customers and their value. The main areas of focus are as the name suggests: customer, relationship, and the management of relationship and the main objectives to implement CRM in the business strategy are:
To simplify marketing and sales process
To make call centers more efficient
To provide better customer service
To discover new customers and increase customer revenue
To cross sell products more effectively

The CRM processes should fully support the basic steps of customer life cycle. The basic steps are:
Attracting present and new customers
Acquiring new customers
Serving the customers
Finally, retaining the customers

In today's increasingly competitive environment, maximizing organic growth through sales momentum has become a priority for Banks and Financial institutions. To build this momentum banks are focusing on Customer relationship management initiatives to improve

Customer satisfaction and loyalty
Customer insight/ 360º view of customer
Speed to market for products and service
Increase products-to-customer ratio
Improve up sales and cross sales
Capitalizing on New market opportunities

The idea of CRM is that it helps businesses use technology and human resources gain insight into the behavior of customers and the value of those customers. If it works as hoped, a business can: provide better customer service, make call centers more efficient , cross sell products more effectively, help sales staff close deals faster, simplify marketing and sales processes, discover new customers, and increase customer revenues .It doesn't happen by simply buying software and installing it. For CRM to be truly effective, an organization must first decide what kind of customer information it is looking for and it must decide what it intends to do with that information.

For example, many financial institutions keep track of customers' life stages in order to market appropriate banking products like mortgages or IRAs to them at the right time to fit their needs. Next, the organization must look into all of the different ways information about customers comes into a business, where and how this data is stored and how it is currently used.

One company, for instance, may interact with customers in a myriad of different ways including mail campaigns, Web sites, brick-and-mortar stores, call centers, mobile sales force staff and marketing and advertising efforts. Solid CRM systems link up each of these points. This collected data flows between operational systems (like sales and inventory systems) and analytical systems that can help sort through these records for patterns. Company analysts can then comb through the data to obtain a holistic view of each customer and pinpoint areas where better services are needed.

In CRM projects, following data should be collected to run process engine:
1) Responses to campaigns,
2) Shipping and fulfillment dates,
3) Sales and purchase data,
4) Account information,
5) Web registration data,
6) Service and support records,
7) Demographic data,
8) Web sales data.

1.7 NEED OF CRM IN BANKS
Bank merely an organization it accepts deposits and lends money to the needy persons, but banking is the process associated with the activities of banks. It includes issuance of chuque and cards, monthly statements, timely announcement of new services, helping the customers to avail online and mobile banking etc. Huge growth of customer relationship management is predicted in the banking sector over the next few years.

Banks are aiming to increase customer profitability with any customer retention. This paper deals with the role of CRM in banking sector and the need for it is to increase customer value by using some analytical methods in CRM applications. It is a sound business strategy to identify the bank’s most profitable customers and prospects, and devotes time and attention to expanding account relationships with those customers through individualized marketing, pricing, discretionary decision making.

In banking sector, relationship management could be defined as having and acting upon deeper knowledge about the customer, ensure that the customer such as how to fund the customer, get to know the customer, keep in tough with the customer, ensure that the customer gets what he wishes from service provider and understand when they are not satisfied and might leave the service provider and act accordingly.

CRM in banking industry entirely different from other sectors, because banking industry purely related to financial services, which needs to create the trust among the people. Establishing customer care support during on and off official hours, making timely information about interest payments, maturity of time deposit, issuing credit and debit cum ATM card, creating awareness regarding online and e-banking, adopting mobile request etc are required to keep regular relationship with customers.

The present day CRM includes developing customer base. The bank has to pay adequate attention to increase customer base by all means, it is possible if the performance is at satisfactory level, the existing clients can recommend others to have banking connection with the bank he is operating. Hence asking reference from the existing customers can develop their client base. If the base increased, the profitability is also increase. Hence the bank has to implement lot of innovative CRM to capture and retain the customers.

There is a shift from bank centric activities to customer centric activities are opted. The private sector banks in India deployed much innovative strategies to attract new customers and to retain existing customers. CRM in banking sector is still in evolutionary stage, it is the time for taking ideas from customers to enrich its service. The use of CRM in banking has gained importance with the aggressive strategies for customer acquisition and retention being employed by the bank in today’s competitive milieu. This has resulted in the adoption of various CRM initiatives by these banks.

STEP TO FOLLOW
The following steps minimize the work regarding adoption of CRM strategy. These are:
Ø Identification of proper CRM initiatives
Ø Implementing adequate technologies in order to assist CRM initiative
Ø Setting standards (targets) for each initiative and each person involved in that circle
Ø Evaluating actual performance with the standard or benchmark
Ø Taking corrective actions to improve deviations, if any

Customer Relationship Management is concerned with attracting, maintaining and enhancing customer relationship in multi service organizations. CRM goes beyond the transactional exchange and enables the marketer to estimate the customer’s sentiments and buying intentions so that the customer can be provided with products and services before the starts demanding. Customers are the backbone of any kind of business activities, maintaining relationship with them yield better result.

1.8 BENEFITS OF CRM TO BANKS
Despite the fact that in most banks profits sometimes fail, they seldom pay attention to or adopt any customer strategy. It has long been the misconception that banks need not pay much attention to customer focus just because they had customers. Some banks even if they possess good customer relationships are unable to cross sell as they have not figured out who to target with what product/service. What happens is that customers are often approached for the wrong products.

However the new millennium has resulted in banks and financial agencies rethinking their strategies and goals. They have come to understand the importance of hanging onto the customer and keeping him happy. The rules that once governed the banking industry have changed. They have realized that adopting a customer centric strategy is essential and needs to be compulsorily undertaken. The vast majority of banks now realize they need a customer strategy and are opting for CRM - Customer Relationship Management.

Banking CRM software serves to increase the market share and boost growth in the banking industry. What happens in CRM banking solutions is that they change the way the employees think and mould them into customer conscious people. CRM induces bankers to know that they are required to maintain good relationships with their customers and should strive to retain them.

They are made to realize that the business process should consist of efforts to discover and satisfy customer requirements. Since the banking field now boasts of so much of technological innovations there has been a wide variety of innovations in CRM banking as well. Statistics show that bankers will spend $7 billion on CRM. The sector will also evidence an increase in expenditure of 14 percent each year. With such phenomenal statistics it is but a surety that CRM banking solutions sales will soar in the coming years.

FOLLOWING ARE THE BENEFITS OF CRM TO BANKS:
CRM Banking Focuses on the Customer
CRM manages to places the customer at the focal point of the organization in order to cater to his needs, satisfy him and thus maximize the profits of the organization. Banking CRM understands the needs of the customer and integrates it with people, technology, resources and business rocesses. It focuses on the existing data available in the organization and uses it to improve its relationship with customers. Banking CRM uses information and analytical tools to secure customer focus. Thus it is completely essential that banks implement CRM in order to secure this.
Overall Profitability

CRM enables banks to give employee's better training that helps them face customers easily. It achieves better infrastructure and ultimately contributes to better overall performance. The byproducts of CRM banking solutions are customer acquisition, retention and profitability. Banks that don't implement CRM will undoubtedly find themselves with lesser profitability coupled with a sharp decline in the number of customers.

Satisfied Customers
It is important to make a customer feel as if he / she is the only one - this will go a long way in satisfying and retaining them. Bankers need a return on investment and it has been proved that increase in customer satisfaction more than contributes a fair share to ROI. The main value of CRM banking lies in satisfaction and increased retention of customers.
Centralized Information

CRM banking solutions manage to clearly integrate people, processes and technology. CRM banking provides banks with a holistic view of all bank transactions and customer information as well and stores it in a single data warehouse where it can be studied later.

5. CRM Banking Boosts Small Banks
Banking CRM software meets the needs of banks of all sizes in terms of attaining the required accuracy and understanding of customers. Merely assuming that banks that are considerably smaller in size have a better customer approach and are able to deal with their customers in a better manner is wrong.

They are just as much in need of CRM aid as the others. Small banks on account of a limited amount of money have had to realize that a large contribution to profits is directly the result of good customer service. CRM makes sure that the bank delivers exactly what the customer expects.
Customer Segregation

CRM enables a bank to see which customers are costing them and which are bringing benefits. CRM provides them with the required analytical tools that will help them focus on the importance of segregating these two and doing what is required to avail of the maximum returns.

After this segregation is done CRM easily enables banks to increase their communication and cross-selling to their customers effectively and efficiently.
Aggressive Customer Acquisition

CRM solution supports the creation of demand generation through multi-channel and multi-wave campaigns. The solution ensures the bank’s marketing message is appropriately personalized and targeted towards the most suitable segment of prospects. This optimizes marketing efforts and results in greater conversion of prospects
Improved Cross-sell Framework

The solution presents a unified 360° view of the customer, allowing single point access to all the relationships the customer has forged with the bank. This along with robust customer analytics effectively supports true relationship banking, providing a robust framework for cross-sell opportunities.

CRM solution also integrates with other white labeled solutions to facilitate contextual and personalized customer engagement, with a keen focus on right-talk driven right-sell.
Increased Operational Efficiencies and Collaboration

CRM solution supports business automation for processes and business activities, eliminating manual tasks and reducing process time. Straight through processing abilities enhance reduction in turnaround and processing time, increasing output and enabling speedy completion of tasks. The multilingual Web-based single repository of information enables remotely located bankers to collaborate and transact seamlessly.

Lower Total Cost of Ownership (TCO)
A Web-based solution leveraging new-generation technologies, Financial CRM solution is future-proof and can be seamlessly integrated with other enterprise applications. With a robust architecture and proven scalability, it ensures protection for the bank’s technology investments.

11. Campaign Management
Banks need to identify customers, tailor products and services to meet their needs and sell these products to them. CRM achieves this through Campaign Management by analyzing data from banks internal applications or by importing data from external applications to evaluate customer profitability and designing comprehensive customer profiles in terms of individual lifestyle preferences, income levels and other related criteria.

Based on these profiles, banks can identify the most lucrative customers and customer segments, and execute targeted, personalized multi-channel marketing campaigns to reach these customers and maximize the lifetime value of those relationships.
Customer Information Consolidation

Instead of customer information being stored in product centric silos, (for e.g. separate databases of savings account & credit card customers), with CRM the information is stored in a customer centric manner covering all the products of the bank. CRM integrates various channels to deliver a host of services to customers, while aiding the functioning of the bank.

Marketing Encyclopedia
Central repository for products, pricing and competitive information, as well as internal training material, sales presentations, proposal templates and marketing collateral.
360-degree view of company

This means whoever the bank speaks to, irrespective of whether the communication is from sales, finance or support, the bank is aware of the interaction. Removal of inconsistencies of data makes the client interaction processes smooth and efficient, thus leading to enhanced customer satisfaction.
Personalized sales home page

CRM can provide a single view where Sales Mangers and agents can get all the most up-to-date information in one place, including opportunity, account, news, and expense report information. This would make sales decision fast and consistent.
Lead and Opportunity Management

These enable organizations to effectively manage leads and opportunities and track the leads through deal closure, the required follow-up and interaction with the prospects.
Operational Inefficiency Removal

CRM can help in Strategy Formulation to eliminate current operational inefficiencies. An effective CRM solution supports all channels of customer interaction including telephone, fax, e-mail, the online portals, wireless devices, ATMs, and face-to-face contacts with bank personnel. It also links these customer touch points to an operations center and connects the operations center with the relevant internal and external business partners.
CRM with Business Intelligence

Banks need to analyze the performance of customer relationships, uncover trends in customer behavior, and understand the true business value of their customers. CRM with business intelligence allows banks to assess customer segments, which help them calculate the net present value (NPV) of a customer segment over a given period to derive customer lifetime value. Customers can be evaluated within a scoring framework. Combining the behavior key figure and frequency to monetary acquisition analysis with a marketing revenue quota can optimize acquisition costs and cut the number of inefficient activities. With such knowledge, banks can efficiently allocate resources to the most profitable customers and reengineer the unprofitable ones. Data warehousing solutions have been implemented in City bank, IBBL .MBBL.ASIA BANK . And Business Intelligence players hope many more will follow .

1.9 BENEFITS OF CRM TO CUSTOMERS
Customer relationships are becoming even more important for banks as market conditions get harder. Competition is increasing, margins are eroding, customers are becoming more demanding and the life-cycles of products and services are shortening dramatically. All these forces make it necessary for banks to intensify the relationship with their customers and offer them the services they need via the channels they prefer.

CRM helps banks to provide lot of benefits to their customers; some key benefits are as follow.
► Service provisioning throughout the entire life cycle of the corporate customer, from the initial stages to the establishment of a close, long-term relationship with profitable clients,
► Optimization of the use of bank resources, such as alternative channels of distribution (internet and home banking),
► Significant reduction in and limitation of operational costs through system automation and standardization,
► Low maintenance and expansion costs owing to the use of modern administration tools which allow bank employees to make a wide range of modifications to the system
► CRM permits businesses to leverage information from their databases to achieve customer retention and to cross-sell new products and services to existing customers.
► Companies that implement CRM make better relationships with their customers, achieve loyal customers and a substantial payback, increased revenue and reduced cost.
► CRM when successfully deployed can have a dramatic effect on bottom-line performance. For example, Lowe’s Home Improvement Warehouse, in a span of 18 months, achieved a 265 percent return on investment (ROI) on its $ 11m CRM investment.
► According to a study conducted in the sector of banking, convenience of location, price, recommendations from others and advertising are not important selection criteria for banks. From customers’ point of view, important criteria are: account and transaction accuracy and carefulness, efficiency in correcting mistakes and friendliness and helpfulness of personnel. Thus, CRM, high-quality attributes of the product / service and differentiation proved to be the most important factors for customers.
► Another study conducted in a European bank shows that with CRM, the bank was able to focus on profitable clients through efficient segmentation according to individual behavior. Information about ‘who buys what and how much’ enabled the bank to have a commercial approach based on the client and not solely on the product. Thus, the bank was able to better satisfy and retain its customers.

1.10 RECOMMENDATION
Customer Relationship Management (CRM), the most exciting strategies that emerged from networking technology revolution of the nineties, is today fast emerging s one of the most important cooperates strategies. A well-executed Customer Relationship Strategies can result in number of quantitative benefits, including greater ability to sell and cross sell, improved retention besides cost of services.

Customer Relationship Management is do-able. However the following must take into consideration before embarking upon its implementation. All aspects of customer relationship management, including technology solution, must be fully explored effectively deliver the competencies required to realize the business benefits.
1. Tackling any one competence alone will lead to a dysfunctional business. One competence does not customer relationship management make.
2. Take pragmatic steps with a clear view on delivery of all the components in the medium term, rather than piecemeal in the short term.
3. Successful mass customization is crucial to reducing customer acquisition cost and improving the cross selling capacity.
4. Channels are a delivery mechanism. The effectiveness of the mechanism is achieved when it is faultless!
5. 75% of all Customer Relationship Management projects have failed due to lapses in implementation. Technology is not enough, implementation is the key and this is where the people aspect comes into the forefront.
6. Customer Relationship Management implementation is effective when companies are able to identify the internal and external customer and integrate them with its core business process.

1.11 Conclusion
Banking can be mysterious for consumers and how they interact with their finances can be a complex matter. The challenges faced by banks and their customers are many but the trick lies in de-mystifying complex financial relationships.

Technical solutions deployed by banks today are flexible, user-friendly and meant to facilitate specific workflow and requirements in implementation processes. In order to simplify lives, banks have begun to implement end-to-end technologies through all departments with the intention of removing human error from processes. Previously existing manual environments could not have been adequate for future visions, growth plans and strategies.

In this day and age, customers enjoy complete luxury in terms of customized technical solutions and banks use the same to cement long-term, mutually-beneficial relationships. For a bank to succeed in adopting a CRM philosophy of doing business, bank management must first understand CRM as a holistic concept that involves multiple, interlocking disciplines, including market knowledge, strategic planning, business process improvement, product design and pricing analysis, technology implementation, human resources management, customer retention, and sales management and training.

Turning the business strategy into actionable items is a difficult undertaking. For which Customer Relationship Management works a magic wand.

1.2 Appendices

Figure1.1: Evaluation & identification of appropriate CRM product

Figure1.2: Social CRM, The New Rules of Customer Relationship Management

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Difficulties that may arise when two ore more firms from Joint venture

Joint Venture:        

A joint venture refers to a new organization established by two or more organizations. It is an agreement where two or more firms hold eqity  capital in a venture. In this venture, all the partner-firms have some degree of control. The equity arrangement between independent enterprises result in the creation of a new organizational entity. This means that the sponsoring organizations form a separate organization and have shared ownership in the newly-created organization. The partner-companies own the newly created firm. To form a joint venture, at least two firms must agree to jointly establish a new firm. Joint venture is preferred when two or more firms lack necessary component for success in a new business. In the case of construction of Bangabandhu Setu (Jamuna Bridge), for instance, no single construction firm had necessary resources to construct the bridge single-handedly. The solution was a set of joint ventures. There are many joint ventures in Dhaka Export Processing Zone (EPZ) and Chittagong EPZ, both national and international. Many companies like joint ventures to overcome resource constraints and/or take advantage of the distinctive competencies of the partner-companies. There are many countries like India where the government makes it mandatory for the foreign companies to do business on joint ownership basis. This is done to reduce `threat of foreign domination and enhance skills, employment, growth, and profits of local businesses.

Situations Suitable for Joint Venture:     

The following situations are suitable for joint venture:

1.     All the situations suitable for strategic partnerships.

2.     A business activity where pursuing an opportunity is complex or risky. If any business opportunity seems to be very complex or risky or even uneconomical for a single firm, a joint venture is a good way to undertake hat opportunity.

3.     A situation where pursuing an opportunity requires unique competencies. Many business opportunities require unique types of competences of a broader range of know-how. When a firm does not have such competencies or know-how, it can go for joint venture with another firm having the same. Thus, they can jointly pool the resources and competencies to embark on pursuing the business opportunities.

4.     Where entry to a foreign market needs local foreign partner in some countries it may be difficult for multinational companies to enter for business purposes. The difficulty in entry may arise from restrictions by the government or local culture and socio-political situations. In such a situation, a firm must secure a local partner to gain entry into the desired local market.

Difficulties that may arise when two ore more firms from Joint venture:   

                                                                                                           

A joint venture strategy offers many opportunities, no doubt. But it is not without drawbacks. Let us highlight some of the major difficulties with his strategy:

                                                                                        

·        Complicacies arise in dividing the share of control between the partners. The partners in joint venture may have controversies over the role each would play in the organization and also over the extent of control in the organizational affairs.

·        The partner-companies run the risk of giving technical know-how away to their counterparts. Any partner may capitalize on that know-how to compete directly with the other partner.

·        Conflict over how to run the joint venture can tear it apart and result in business failure.

·        In the case of international joint venture, conflicts may arise over the use of local resources, local technology, local employees, compliance with local standards and policies, export volume, operating procedures, use of intellectual property and technology, use of foreign partner’s technology by local partner, etc.

·        Disputes may stem when foreign partners start neglecting the local partner after the foreign partners may consider the local partners’ assistance unnecessary. Foreign partners may even think of dissolving the joint venture.

·        Local partners may start own business by seceding their relationship with joint venture when they could master the technology and  develop competitive skills Capitalizing on their acquired know-how, may launch their own products in separate brand names.

·        The joint venture firm may begin to compete more with one of the partners than the other when all partners are in similar business.

·        Problems may arise. When the sponsoring firms do not provide support to the joint venture equally.

·        Although the partnering companies may not have problems, they may face problems due to complaints from the customers about poorer service or about other issues.

The purposes of Merger and Acquisition Strategies:

The purposes of merger and acquisition are primarily similar. They can-

·        dramatically strengthen an company’s market position;

·        open new opportunities for competitive advantages;

·        fill resource gaps and allow the new company to do things which the prior companies could not to alone;

·        combine the skills and competitive capabilities of the merged companies;

·        achieve wider geographical coverage and greater financial resources;

·        add production capacity and expand into new areas; and/or

·        ensure considerable cost-saving through combining operations of a number of companies.