# What Is Batch Processing? How It Works, Examples, and History

## What Is Batch Processing?

Batch processing is the processing of [transactions](https://www.investopedia.com/terms/t/transaction.asp) 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's 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](https://www.investopedia.com/terms/p/payroll.asp).

### Key Takeaways

*   Batch processing is a technique for automating and processing multiple transactions as a single group.
*   Batch processing helps in handling tasks like payroll, end-of-month reconciliation, or settling trades overnight.
*   Batch processing systems can save money and labor over time, but they may be costly to design and implement up-front.

## 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 foundation for widespread batch processing around 50 years later.

Batch processing jobs are run at regularly scheduled times (e.g., overnight) or on an as-needed basis. As an example, bills for [utilities](https://www.investopedia.com/terms/u/utility.asp) 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, wasting time and money.

## History of Batch Processing

A defining characteristic of batch processing is minimal human intervention, with few, if any, manual processes required. This is part of what makes it so efficient, though it wasn't always that way.

Batch processing started with punch cards, which were tabulated into instructions for computers. Entire decks, or batches, of cards, would be processed at one time. This system, created by Herman Hollerith, goes as far back as 1890. Hollerith developed it to be used to process data from the U.S. Census. Punched manually, the card was fed into and read by an electromechanical device. Hollerith patented his invention as the "Electronic Tabulating Machine", and later joined a group of other inventors and investors to form the Computing-Tabulating-Recording Company (CTR), which would eventually become International Business Machines, or IBM.

> **Important**
>
> Batch processing started out with the use of paper punch cards.

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 and 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 automation provides [managers](https://www.investopedia.com/articles/financial-theory/10/manage-business-like-jack-welch.asp) time for other duties.

The software identifies exceptions through a system of monitors and dependencies, which causes the batch processing to start. Exceptions may include online customer orders or a request from the system for new supplies.

> **Important**
>
> Because batch processing involves handling large amounts of data at once, if the inputs are off in any way the whole batch will be flawed, wasting time and money.

## Advantages of Batch Processing

### Faster and Lower Cost

[Operational costs](https://www.investopedia.com/terms/o/operating-cost.asp) such as labor and equipment are cut with batch processing because it cuts the need for human oversight physical hardware like computers. And because batch processing is designed to be quick, efficient and error-free, personnel can focus on other duties.

### Offline Features

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, they'll still work without putting a dent in the organization's daily routine.

### Hands-Off Approach

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 supervising batches. Alerts are sent when problems arise. This allows workers 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, training is required to manage batch processing systems. Managers will need to learn what triggers a batch, how to schedule processing, and what exception notifications mean, among other things.

### Debugging

The systems are often complex, requiring someone on staff to be familiar with the program. Otherwise, companies or organizations may need to hire an information technology specialist for help.

### Cost

Batch processing infrastructure can be an expensive upfront investment. For some businesses, the costs may not seem feasible.

> **Article Sources**
>
> 1.  U.S. Census Bureau. "[Herman Hollerith](https://www.census.gov/history/www/census_then_now/notable_alumni/herman_hollerith.html)." Accessed August 3, 2021.