What is Batch Processing?
Batch processing is the bookkeeping or accounting practice of accumulated multiple source documents like employee time sheets and processing them all at once each day, week, or month. In other words, bookkeepers that use batch processing wait to record or input information into the accounting system until several different documents can be input.
Batch processing is the processing of transactions in a group or batch. No user interaction is required once batch processing is underway. This differentiates batch processing from transaction processing, which involves processing transactions one at a time and requires user interaction.
While batch processing can be carried out at any time, it is particularly suited to end-of-cycle processing, such as for processing a bank’s reports at the end of a day or generating monthly or biweekly payrolls.
Batch processing is the processing of data on a delayed basis. This approach is commonly used when the following issues are present:
- Timeliness. There is no immediate need for the information, so it is reasonable to delay the processing.
- Efficiency. There is an increased cost associated with immediately processing the data, or it is possible to increase the efficiency of operations by delaying processing.
Understanding Batch Processing
For large enterprises, batch processing became a normal way of data compilation, organization, and report generation around the middle of the 20th century with the introduction of the mainframe computer. The early mechanics of processing a batch involved feeding a computer a stack of punched cards that held commands, or directions, for the computer to follow.
Herman Hollerith (1860-1929) is credited with developing the punch card around 1890 when he was employed as a statistician for the U.S. Census Bureau. It was this punch card that became the seed for widespread batch processing around 50 years later.
Batch processing jobs are run on regularly scheduled times (e.g., overnight) or on an as-needed basis. As an example, bills for utilities and other services received by consumers are typically generated by batch processing each month. Batch processing is beneficial because it is a cost-effective means of handling large amounts of data at once. One caveat is that the inputs for the processing must be correct or else the results of the whole batch will be faulty, which would cost time and money.
Batch accounting refers to a system of transferring items from journal, to ledger, to financial statement in a linear order. In this system, transactions are grouped and processed by subledger and results in entries that will not instantly appear in your general ledger. Batches are accumulated in your books of record through a process called “posting” after which period-end reporting can be finalized.
With batch-based entry, you have the opportunity to review data entry work prior to posting to the books of record. Many software systems check a batch for out of balance errors before it is posted, and your staff gets the chance to catch and fix any errors in the batch prior to its posting. Once a batch is posted, there is typically no automatic mechanism to make changes. Posted items are permanent, but you always have the option of correcting an erroneous entry when necessary by creating a modifying entry that reverses the original one.
Posting a transaction results in permanency because the original posting batch cannot be deleted or modified. This system establishes internal controls because the multi-step process allows for peer review before posting, therefore making it more accountable.
For example, batch processing may be a reasonable alternative in accounting when there are a large number of transactions in the sales journal; in this case, they may be aggregated and posted to the general ledger only at long intervals, such as once a month. Similarly, the payroll clerk may choose to enter all employee time cards in a batch. By doing so, she can remain in the timekeeping data entry module in the accounting system, which is configured for the most efficient data entry of timecard information.
For example, bookkeepers tend to input employee time sheets or time cards in a batch. All employees’ time cards are collected and processed together. This saves time and is much more efficient than processing each time sheet individually. Bookkeepers also tend to use batch processing for depositing checks, entering bank statements, and mailing bills.
All of these processes are more efficient to process in batches. It doesn’t make sense to record and deposit one check at a time. Instead, bookkeeps wait until multiple checks are available to process and deposit at once.
Batch Processing Today
Unlike earlier iterations, the functions of modern batch processing are completely automated to meet certain conditions of time. While some tasks are done immediately, others are conducted in real-time. The latter are monitored on a regular basis. If there are any problems with the process, the system notifies the appropriate personnel through exception-based management alerts. This saves managers time for their daily duties and other pressing tasks without having to supervise the batch processing system.
The software identifies exceptions through a system of monitors and dependencies, which cause the batch processing to start. Exceptions may include online customer orders or a request from the system for new supplies.
Advantages of Batch Processing
Faster and Lower Cost
Operational costs such as labor and equipment are cut when batch processing is used. This is because it eliminates the need for human clerks and physical hardware like computers. And because batch processing is designed to be quick and efficient, and to cut out human error, key personnel can focus their efforts on their daily duties.
Unlike others, batch processing systems work anywhere, any time. That means they continue to work outside regular business hours. They can also work in the background in an offline setting, so even during down periods, you can rest assured they’ll still work without putting a dent in the organization’s daily routine.
As mentioned above, having a batch processing system in place gives managers and other key personnel time to do their own jobs without having to spend time on supervising batches. Alerts are sent if there are ever any problems. This allows the manager to take a hands-off approach to batch processing.
Disadvantages of Batch Processing
Business owners may want to consider a few of the pitfalls of batch processing before putting such a system into place.
Deployment and Training
Like many technologies, a degree of training is required to manage batch processing systems. Managers will need to learn what triggers a batch, how to schedule them, and what exception notifications mean, among other things.
Someone within the company or organization should be familiar with the system. That’s because they’re often very complex. Without a knowledgable person on the team, you may need to hire someone else to help you out.
Batch processing infrastructure can be an expensive capital outlay. For some businesses, the costs may seem unfeasible.