What is a database?
Learn what databases are, how they work, and their benefits for effective data management in business.
A database is a collection of records typically stored in an electronic format. These records are organised in a way that makes it possible to quickly find and manage information. A simple example of a database is:
- a list of names and phone numbers that can be sorted alphabetically
- an ascending list of stock codes with current stock levels or item details
Understanding databases
You can store data in various formats, known as database models. The most common model is the relational database model, which uses relations and sets to store the data. In practice, this looks like data is organised in tables. To access information from a database, you typically need a database management system.
What is a database management system (DBMS)?
A database management system (DBMS) is software designed to create, update, analyse, retrieve and store data in computer systems. There are several types of database systems available, each suited to different needs.
Database use in business
Businesses use databases to organise and manage essential information, including customer records, inventory data and employee information. Databases can streamline various processes, such as:
- customer management
- inventory tracking
- order management
- employee management
- productivity reporting
- financial reporting
- data analysis
The key to effectively using database technology lies in structuring information for efficient processing and management.
Manual vs computerised database systems
Manual filing systems can be inefficient and prone to errors. For example, if your business uses a simple card file system for customer information, its effectiveness will depend on consistent organisation. If all cards list the customer's surname in the same spot, they can be easily sorted alphabetically. However, if some cards have the postcode in that position, finding information becomes much harder.
While single-card file indexes are straightforward, cross-referencing information across multiple files can be complicated. In contrast, a relational database management system uses common identifiers - or ‘keys’ - to connect related information. For example, a customer ID number can link a specific customer to all their orders, making it easier to retrieve and manage data.
To effectively streamline your data practices, explore which database solution may be best for your business.