Guide
A transaction processing system records the business; an MIS reports on it
A transaction processing system (TPS) captures each sale, bill, receipt and payment as it happens. A management information system (MIS) takes those records once a period and shows what they add up to. One is for doing the work, the other for managing it.
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A transaction processing system records one event at a time
The meaning of a transaction processing system is in its name: it processes transactions, the individual events of a business. An invoice is raised, a bill is entered, a customer pays, a supplier is paid. Each is recorded completely, checked as it goes in, and saved whole or not at all, because a half-recorded sale is worse than none.
The work is high in volume and routine. The people using it are the ones doing the work, and what they need from it is speed and accuracy, not analysis.
Transaction processing system examples most businesses already run
- Invoicing and accounting software records sales invoices, purchase bills, credit notes, receipts and payments.
- A point-of-sale till records each sale at the counter and how it was paid.
- An order management or e-commerce system records orders, shipments and refunds.
- Payroll records each employee's pay, deductions and payment for the month.
- A bank records every deposit, withdrawal and transfer on an account.
- Inventory and warehouse systems records goods received, issued and moved between locations.
TPS vs MIS, side by side
The same sales, seen from the two ends: the system that records them and the report that sums them up.
| Transaction processing system | Management information system | |
|---|---|---|
| Its job | Record each event as it happens: a sale, a bill, a receipt, a payment. | Report what the events add up to, so someone can manage the business. |
| The unit it works in | One document: invoice 1042, for one customer, on one date. | A period: the month, the quarter, the year to date. |
| Who uses it | The people doing the work: billing, purchasing, the cashier, the bookkeeper. | The people deciding: the owner, the finance lead, the accountant, the board. |
| How often | All day, every day, in real time or in batches. | Once a period, after the books for it are closed. |
| What it holds | Detail, and lots of it — every line of every document. | Totals, ratios and comparisons, with a way back to the detail. |
| If it is wrong | A customer is billed the wrong amount; it is corrected with another document. | A decision is made on the wrong figure; it is corrected in next month's report. |
The report is built from what the records export
A transaction processing system in MIS terms is the source, and the export is the bridge. Accounting software prints a sales register, a purchase register, a day book or an invoice list; the MIS reads those, adds each document once, and sets the month against the one before. Nothing in the report should be a number somebody typed: each total goes back to the documents it came from.
Magic MIS sits on the reporting side and never on the recording side. Its Transactions board reads the registers and invoice lists your software exports and shows sales, purchases, customers, receipts and tax for the month; its MIS reads the trial balance and builds the full management report. Neither posts anything back, so your books stay exactly as you kept them.
Above the MIS: decision support and executive systems
The textbook ladder goes on. A decision support system (DSS) takes the management figures and asks what would happen if something changed — a price, a cost, a customer lost. An executive information system (EIS) puts the few figures that matter most, from every part of the business, on one screen for the people at the top. Each rung reads the one below it, which is why all of them depend on the transaction processing system getting the records right.
What students and owners ask about transaction processing
What is a transaction processing system in MIS?
In the textbook ladder of information systems, the transaction processing system is the bottom rung: it records the business's events. The management information system sits above it and turns those records into periodic reports for managers. Decision support and executive information systems sit above that again.
Is accounting software a transaction processing system?
Its day-to-day part is: entering invoices, bills, receipts and payments is transaction processing. Its reports — the trial balance, the profit and loss, a sales register — are the first step towards management information, which is why an MIS is usually built from what accounting software exports.
What are the characteristics of a transaction processing system?
High volume, routine and repetitive work, each record complete and checked as it is entered, and nothing half-saved: a transaction is recorded whole or not at all. Speed and accuracy matter more than analysis.
Can an MIS work without a transaction processing system?
No. An MIS reports on records, and the records come from the transaction processing system. A report is only as good as the invoices, bills and entries beneath it.
Read next
- Transactions: a sales and purchase dashboard from your own registersLoad your sales and purchase registers, invoice lists or day book and get a monthly board of sales, purchases, receipts, payments, customers and tax, each document counted once.
- What is an MIS report? Meaning, contents and its name in every marketWhat an MIS report is, what it contains each month, and what the same report is called elsewhere — management accounts, monthly financial reporting, a board pack.
- Sales MIS report: the month's sales figures from your sales registerA sales MIS report built from the sales register: net sales, invoices, customers, returns, tax and collections, month on month, with every figure traceable to its documents.
Turn last month's records into a report
Create an account and upload the registers or the trial balance your software exports — paid per action from prepaid credits.
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