Use of Technology in Finance
In the recent years, technology has entered all spheres of the human life. There are different ventures in the technology world where companies adopt computerized based activities and keep their clients updated with these innovations. To increase efficiency in their undertakings, both the private and the public institutions work hard to go hand in hand with the technology growth. Nonprofit organizations like the Red Cross, UNICEF and much more use computer aided services and processes in their activities to reach to their vast stakeholders. With the help of the technology, firms grow to the level of multinationals where they expand their investments to the stock market exchange. While in the public offerings, enterprises encounter with many stakeholders and money transactions that call for more reliable methods to handle these activities. Large computer systems and internet based activities are the solutions to these dilemmas for the multinational companies to get in touch with their stakeholders. From the placement of the shares to the calculation of the profits from the proceeds of these transactions, computers and the Internet are the best gadgets to rely on for accurate results.
Industry Structure Changes
Level of Competition
Technology and Initial Public Offering go hand in hand; clients have the internet on their gadgets like smartphones where they keep updated on everything. As competition increases in every area, clients look for the firms with the best, efficient and affordable services as their partners. The technology in the IPOs operates in a way that if the management needs to acquire cash, to finance their activities, they offer shares to the public to subscribe. After subscription, the shareholders keep on checking the progress of their holdings to know their progress and when is the best time to sell . This action interests the clients as they can transact i.e. buy and/or sell their shares at any time and place convenient to them. In the past, people used to go to the NSE centers and spend a lot of time there to monitor the company’s holdings progress. Enterprises that adopted and embraced this technology have grown very much regarding finance. They are able to attract clients at any time and take clients from other firms which fail to invest in this technology. The state of being at the brim of the competition assists a company in making more profits and ensuring its growth.
In the case of sensitive investments like the shares that call for multi-millions amounts of funds, enterprises require a lot of capital. The implemented technology platform requires high sensitive features that can detect actions like hacking, virus intrusion and much more. To embrace these features, the financial portfolio of the company should be at stake, and proper plan using the investment returns predictors used . Using features like NPV, IRR, MIRR, etc. will give the company a green light on whether to implement the plan. With the system, the company will get information regarding the total number of subscribers and sellers. Reducing the inspections costs and the numbers of staff enables the company to increase its finances and net worth of the investors.
Information Technology Changes and Impacts
Convenience is the term to describe the IT changes in transacting business and increasing finances of the firms. With the current need to accumulate funds by people and businesses in the world, there is a need for virtual investments. People cannot afford to go to the companies and the stock exchange centers to fill paper documents that show the proof of security purchase. In the time of sales, in the past it was very hectic as buyers were supposed to meet sellers and exchange the transactions. Stock brokers were the people who benefited the most as they connected the sellers with the buyers and made profits out of the transactions. These kinds of transactions were not safe for both sellers and buyers because conmen would take advantage of their innocence and take their money. Nowadays, neither the client nor the seller of the shares have to withdraw their money from the account as they only make an online transfer of the funds (
. After negotiations over the phone or the internet regarding the number of shares to transfer and the amount of money, they just exchange the bank account numbers. The seller first changes ownership and gives the buyer the authority to check and input passwords to their accounts. After confirmation, the purchaser sends the agreed amount of money to the delivered account number and starts following the progress of his/her investments. Upon the transactions, clients deal with the company that offered the shares and keep a close look at the movement of their shares and how well they do. Upon the declaration of the dividends, the clients see their financial accounts in their mobile phones and confirm them.
There are many companies that wish to invest in the stock market but find the process very tiresome. In the past, there were many procedures that had to be followed before a company registered itself to be listed on the stock exchange. However, nowadays, the procedure is much easier in most of the countries, since these companies only visit the stock exchange sites and place their applications. Upon application, they submit their financial statements that undergo vetting under the bond of executives in the stock exchange offices, and they get feedback in the specified time. In the United States, this action enables many firms to grow financially and undertake their activities effectively. Technology has made a lot of enhancements and enabled the corporations to make great strides in their stock market investments. With the online registrations, these companies easily record their proceeds and keep up to date financial statements. It ensures that there are no mistakes and that adherence to the government regulations is well followed.
Books of Account
With the increased transactions in the stock exchange where potential and current shareholders subscribe, companies require better bookkeeping methods. These methods include keeping track of all the shares issued and the movement in ownership. Every customer has an account in the company where their claim goes on with the prices and their fluctuations. Keeping updates of these price moves is very hectic especially if kept manually. However, with the use of an application like QuickBooks, Sage Pastel and other, this activity is very easy. Technology enhances these activities and ensures that there are no errors.
Financial Impact of the Changes in the Use of Technology in Finance
There are many costs associated with the installation and implementation of the technological activities in finance. In the real sense, designing a system that will harmonize all the clients’ transactions and update them in the company books is very expensive. It is the duty of the designers of this technological system to make sure that it is safe from hackers and fraudsters. These costs pass to the end clients who get high charges on their interests and high costs of transactions. Second, there are the maintenance costs of the system that are tricky as they need frequent updates and protection from hackers and fraudsters.
Access to Capital
The online business and its effectiveness and efficiency assist the company to grow and accumulate capital (figure 2) The increase in stock is a goal for any management and the happiness to the shareholders (Grajek & Röller, 2012). Shares are like diversification in the portfolio where the proceeds achieved capital to the company. The services such as online banking attract more shareholders and entertain the current ones to purchase more shares of the company without hustle.
Upon acquisition of the system, there will always be a decline in the revenues achieved. This action refers to the window stage of the investment where the company has to work well to recover the invested amounts (figure 1). However, after a period of three to four years, the investing company starts to reap the fruits of technology investment. The efficiency of doing business ensures that no losses come along and after the early stage of the system implementation, returns flow in the company smoothly.
There is a risk associated with every business innovation; however, whenever implementation and adopting goes well, there is the minimization of this risk. Considering the current trends in the technology world, it goes on advancing and more features come into the industry . Therefore, businesses and huge corporations that want to implement technology based shares sales should not worry. Since the initiation of high technological business undertakings, there is no time it becomes redundant. Therefore, no management should fear initiation of the technologically based activities for the fear of failing.
Strengths and Weaknesses
As the internet enabled gadgets like mobile phones, laptops, iPad, tablets and much more are the key drivers of technology, it is highly efficient to develop this area. A lot of people have access to these gadgets which makes it easy for the intending corporations to invest in the stock market excel. Investors demand virtual businesses where they can handle multiple activities at the same time. This need drives them to embrace the new technology activities and make it better. The issue of technology adoptions is not resisted by any stakeholder in the firm. Therefore, making the necessary steps is very easy, and they will subscribe to these efficient and effective services. There is a need to enhance competitive advantages in businesses. Virtual undertakings enhance the competition level of a company. This need calls for technology embracement and adoption.
The technology-based procedures are very expensive. Companies spend a lot of cash to invest in security and infrastructural areas. It is not easy to make this step at a glance. The procedures changes affect the operations of the company that makes hard to adopt. In the stock market undertakings, firms require specialists with the high quality of expertise in the stock investments. At the initiation of the project adoption, there are many challenges that call for very close monitoring. These actions demand dedication of some of the company staffs which results to diverged activities among the employees of the company.
The article claims that the use of technology-based activities in the stock exchange has positive outcomes. There are more benefits for the implementing firm than the shortcomings. It will be beneficial to operations of the firm, increase in revenues, accumulation of capital, job creation to the economy and much more. While reading through the material, there are the necessary steps that firms need to take as implementation procedures. These procedures are tested and proven as the early adopters of the technology that have very positive responses regarding the strategy. As the future of technology is very unpredictable, all the enterprises with the need to grow and have better undertakings in the stock exchange should implement the technology. As the time goes, they will only need to expand their infrastructure.