OM: Chapter 3: Process Strategy
OM: Chapter 3: Process Strategy Process strategy specifies the pattern of decisions made in managing processes so that the processes will achieve their competitive priorities. 4 basic process decisions: 1. Process structure (including layout): determines the process type relative to the kinds of resources needed, how resources are partitioned between them, and their characteristics. • Customer contact: the extent to which the customer is present, is actively involved, and receives personal attention during the service process. 2. Customer involvement: reflects the ways in which customers become part of the process and the extent of their participation. 3. Resource flexibility: the ease with which employees and equipment can handle a wide variety of products, output levels, duties, and functions. 4. Capital intensity: the mix of equipment and human skills in a process. The greater the relative cost of equipment, the greater is the capital intensity. Economies of scope by focusing on modular design to keep costs as low as possible, while still being able to offer product variety. Process choice: the way of structuring the process by organizing resources around the process or organizing them around the products. Job Process: a process with the flexibility needed to produce a wide variety of products in significant quantities, with considerable divergence in the steps performed. Batch process: a process that differs from the job process with respect to volume, variety, and quantity because the same or similar products or parts going into them are produced repeatedly. Line process: lies between the batch and continuous processes on the continuum, volumes are high and products are standardized, which allows resources to be organized around particular products. Continuous flow process: the extreme end of highvolume standardized production and rigid line flows, with production not starting and stopping for long time intervals. Maketoorder strategy: a strategy used by manufacturers that make products to customer specifications in low volumes. (medical eq. castings, expensive homes) Assembletoorder strategy: a strategy for producing a wide variety of products from relatively few subassemblies and components after the customer orders are received. Maketostock: feasible for standardized products with high volumes and reasonably accurate forecasts. (garden tools, electronic components, soft drinks, and chemicals). Competitive priorities Top quality and flexibility Job process or small batch process Consistent quality, delivery speed, and lowcost operations large batch, line, or continuous flow process Topquality, ontime delivery, and flexibility maketoorder Delivery speed and variety assembletoorder Lowcost operation and delivery speed maketostock
AIS: Chapter 4: DOCUMENTING INFORMATION SYSTEMS There are two types of systems documentation: data flow diagrams and systems flowcharts. Bubble symbol: depicts an entity or a process within which incoming data flows are transformed into
outgoing data flows. Data flow symbol: represents a pathway for data
External entity symbol: portrays a source or destination of data outside the system.
Data store symbol: represents a place where data are stored. Data flow diagram (DFD): is a graphical representation of a system. Data flow diagram (DFD) guidelines: include within the system context any entity that performs one or more information processing activities Context Diagram: a toplevel, or least a detailed, diagram of a system depicting the system and all its activities as a single bubble and showing the data flows into and out of the system and into and out of the external entities. Data flow labels in context diagram usually describe the nature of the data (logical labels). There is one bubble, 2 external entities in a correctly drawn context diagram. In drawing a context diagram, we should include only one normal processing routines. * External entities: those entities (persons, places, things) outside the system that send data to, or receive data from, the system. Perform no information processing activities for the system. Physical data flow diagram: a graphical representation of a system showing the system’s internal and external entities and the flows of data into and out of those entities. The physical DFDs specify where, how, and by whom a system’s activities are accomplished. It does not tell us what activities are being accomplished. There are 3 bubbles, 2 external entities (square), 1 data store symbol in a correctly drawn physical data flow diagram. * Internal entities: an entity within the system that transforms data. (Accounting clerks, departments and computer) Logical Data Flow Diagram: a graphical representation of a system showing the system’s processes (as bubbles), data stores, and the flows of data into and out of the processes and data stores. Used to
document systems because we can represent the logical nature of a system without having to specify how, where, or by whom the activities are accomplished. Advantage of a logical DFD: we can concentrate on the activities that a system performs. In a logical data flow diagram, the bubble symbol represents a process but not the entire system. There are 4 bubbles, 2 external entities, and 1 data store symbol in a correctly drawn logical data flow diagram. To make a logical data flow diagram (DFD) readable, we should use 57 bubbles. Data flows on a logical DFD never go from a highernumbered to a lowernumbered bubble. Systems Flowchart: a graphical representation of a business process, including information process (inputs, data processing, data storage, and outputs), as well as the related operations process (people, equipment, organization, and work activities). Depicts the sequence of activities performed as the business events flow through the process. Guideline: divide the flowchart into columns, one for each internal entity, and label each column. Computer processing is represented by a Parallelogram; a paper file is represented by a triangle; a solid line with an arrow indicates a logical flow. System flowchart logic should flow from left to right flow top to bottom but minimize crossed lines and connectors
^Figure 4.6
When two data flow diagrams (DFDs) have equivalent external data flows, we say that the two diagrams are balanced. Topdown partitioning: A process in which successive layers of data flow diagrams (DFDs) are constructed by "exploding" the bubbles on a less detailed DFD to show more detailed data flows. Which of the following statements related to the construction of data flow diagrams (DFDs) is false? Sources and destinations are depicted by parallel horizontal lines, between which the name of the entity is shown.
A systems flowchart varies from a data flow diagram (DFD) because it represents the management system, the operations system, and the information system. Information processing activities: retrieve data from storage, transform data, or file data. Auditors and systems analysts use systems documentation to understand, explain, and improve complex systems. When a transaction cannot be processed in a routine fashion because of an error or other processing problems, the transaction must be handled by exception routine. The following is a jumbled list of the activities suggested in this text for drafting data flow diagrams (DFDs) for an existing system: I. II. III. IV. V.
Prepare a table of entities and activities. Prepare an annotated table of entities and activities. Draw a physical data flow diagram. Draw a logical data flow diagram. Draw a context diagram.
The best sequence for undertaking these activities is: I, V, III, II, IV. Rich Picture Diagram: is a graphical depiction of a work system highlighting the people involved (“actors”), the activities and objects they are involved with, and the specific concerns of the people involved with the work system. A work system is more than just a process or set of activities: it includes the interactions between customers, suppliers, stakeholders, and other objects involved in the performance of some type of work.
Chapter 10: The Order Entry/Sales (OE/S) Process The Order entry/sales (OE/S) process is an interacting structure of people, equipment, activities, controls that is designed to achieve certain goals. The OE/S process is part of ordertocash process. The OE/S process includes the first four steps in the ordertosales process. The order of these four steps is presales activities, sales order processing, picking and packing, shipping. The primary function of the OE/S process is to create information flows that support decision needs of those who manage various sales and marketing functions. In addition to the warehousing function, the three primary departments that you would expect to be part of a typical OE/S process are sales order, credit and shipping. The ultimate goal of the OE/S process is to create value for the customer. The first step in the OE/S process is typically a data flow from a customer. Flow No.
Description
1
Customer places order
2
Sales order department requests credit approval from credit department.
3
Credit department informs sales order department of disposition of credit request
4
Sales order department acknowledges order to the customer, and notifies the warehouse, shipping, and the B/AR/CR process of the sales order.
5
Warehouse sends completed picking ticket to shipping.
6
Shipping department informs carrier, B/AR/CR process, the general ledger process, and the sales order department of the shipment.
When the sales order department acknowledges a customer order, it is an example of a horizontal information flow. When the salesrelated data are captured in the sales order department and then the information flows to the managers housed in the marketing department, it is an example of a vertical information flow. . The OE/S process addresses the decision needs of managers of various sales and marketing functions through the use of both vertical and horizontal information flows. Data warehousing applications in organizations are usually viewed as being focused on either operational or analytical applications. Analytical applications, which include data mining, are intended to allow the use of sophisticated statistical and other analytical software to help an organization's members develop insights about customers, processes, and markets. Buyside systems use the Internet to automate and manage purchases and the vendors from which these purchases are made with the predominate technology being electronic data interchange (EDI). A specific type of reject stub is called an exception routine. Example: back order process. In a logical DFD for the OE/S process, general ledger master data is least likely to interact with the process validate sales order.
For a typical OE/S process to check a customer's credit, all of the following data stores likely would be consulted except the general ledger master data. A document that is used when filling a sales order to authorize the movement of goods from a warehouse to shipping is called a picking ticket. At the time that the shipping notice is prepared and disseminated, two data stores within the OE/S process are normally updated: sales order and inventory master data Marketing data: is designed primarily to serve the vertical information needs of the organization rather than the horizontal information flows. Bar code readers are devices that use light reflection to read differences in bar code patterns to identify a labeled item. In constructing a control matrix for an OE/S process, the principal data input(s) to the information system likely would be customer order and shipping notice inputs. The file most important for ensuring validity of customer order inputs is the customer master data. The control plan preformatted screens is directed primarily toward achieving the information process control goal of ensuring sales order input accuracy. The control plan confirm input acceptance helps to achieve the sales order input control goal of sales order input accuracy. In the OE/S process, the document that represents an independent authorization to ship goods to the customer is the sales order. Digital image processing systems are capable for capture, store, retrieval and presentation of images of objects such as pictures and documents. The system that enables users of an ERP system to view source documents from any location.
Chapter 11: The Billing/Accounts Receivable/ Cash Receipts (B/AR/CR) Process The Billing/accounts receivable/cash receipts (B/AR/CR) process is an interacting structure of people, equipment, activities, and controls designed to create information flows and record. First, the B/AR/CR process supports the repetitive work routines of the departments. Next, it supports the problem solving processes involved in managing the controller and treasury functions. The B/AR/CR process assists in the preparation of internal and external reports including GAAPbased financial statements. The functions of the B/Ar/CR/ process collects amounts due from customers. According to the concept of segregation of duties, accounts receivable department manager should report to the controller rather than to the treasurer. In an organization in which the OE/S and B/AR/CR processes are separate processes, the B/AR/CR process usually accomplishes all of the following activities except picking goods in the warehouse. The principal master data that you would expect to see in a B/AR/CR process is the accounts receivable. Shipping notice normally would trigger the billing process in a B/AR/CR process. In a logical DFD for a B/AR/CR process, you would expect that a credit memo would be sent by the B/AR/CR process to the customer from manage customer accounts. Remittance advice normally would trigger the B/AR/CR process to record a customer payment. RA is a business document used by the payer to notify the payee of the items being paid. RA generally records cash receipts data and accounts receivable master data. In general, adjustments to customer balances in the accounts receivable master data will be necessary for all of the following except estimates of uncollectible accounts. A company using a centralized database approach might not maintain a relational table for ACCOUNTS RECEIVABLE. Rather, accounts receivable balances at any point in time could be computed as the difference between the relations for which of the following continuous events? Sales invoices and cash receipts. One type of accounts receivable system is balanceforward, the other is electronic funds transfer system. In a prebilling system, invoices are prepared immediately upon acceptance of a customer order. Lapping: the perpetrator attempts to cover the theft of cash received from customer A by applying cash collected from customer B to A's account, then applying a receipt from C to B's account, and so forth. Deposit slips are usually generated by the B/AR/CR process as part of processing cash receipts. Typically, the operations process goals of the B/AR/CR vary, depending on the organization and its particular view of these processes. A process control is an organizational policy, business rule, or other process design element whose purpose is to help ensure a process is performed correctly to maximize the effectiveness and efficiency of the process, while at the same time preventing fraudulent or opportunistic behaviour. Control goals are the set of outcomes that are deemed to be most important for the correct performance of a process. We can divide these control goals into information control goals and operations control goals.
•
•
•
Operations Effectiveness Control Goals: provide timely and accurate confirmation of customer’s order; provide assurance of customer’s credit worthiness; provide timely and accurate delivery of goods and services; provide timely and accurate billing. Resource Efficiency Control Goals: provide an integrated orderfulfilment information system that supports best practices in managing sales orders and accounts receivable and ensures employees are properly recruited, screened, trained, and compensated. Resource Security Control Goals: provide physical security measures so that goods and services cannot be stolen or damaged.
(Recommend control plan)
In the billing process, the control plan of review shipped not billed sales orders (tickler file) helps to ensure effectiveness of operations (timely billing). Of the two types of billing systems discussed in the text, the prebilling system requires the more accurate inventory records. Accounts receivable aging report is not part of the horizontal information flows of the B/AR/CR process. Security of funds is most commonly associated with the treasury function Electronic bill presentment: Placing a customer's bills on a company's own Web site and sending an e mail telling the customer that his or her bill is there. There are two types of accounts receivable system: Openitem system: The accounts receivable system in which all the accounts receivable master data contains individual open invoices, against which payments and other adjustments are applied. Balanceforward system: The accounts receivable system typically used by utilities. There are two kinds of billing systems: + Postbilling system: The billing system in which the invoice is prepared after goods have been shipped and the sales order notification has been matched to shipping's billing notification. + Prebilling system: A billing system that can be used when there is little or no delay between the receipt of the customer order and the shipment of the goods. The technology that allows information on documents to be converted into machinereadable data through a scanner is called an OCR. In the billing function described in the text, the control plan that contributes to effective operations is review shipped not billed sales orders (tickler file) Which control is most effective in contributing to the goal of ensure input accuracy in the billing function? – compare input shipping notices to sales order master data.
The control independent billing authorization ensures that bills are for goods actually ordered by the customer. Lockbook: A customer is instructed to send his remittance advice and check to a bank's postal address. This method for collecting customer cash receipts. Factoring: a service to reduce the cost of collecting its accounts receivable, a company sells its accounts receivable to a financial organization.
Chapter 12: The Purchasing Process The purchasing process is an interacting structure of people, equipment, activities, and controls that is designed to accomplish the following:
•
Handle the repetitive work routines of the purchasing department and the receiving department.
•
Support the decision needs of those who manage the purchasing and receiving departments.
•
Assist in the preparation of internal and external reports.
The purchasing process is part of the purchasetopay process for a merchandising firm. The term services specifically refers to work performed by outside vendors. Accounts payable department manager is most likely to report to the controller. The typical information flows in a purchasing process might include all of the following except a copy of a receiving report is sent to the cashier. Supply Chain Management (SCM) is the combination of processes and procedures used to ensure the delivery of goods and services to customers at the lowest cost while providing the highest value to the customers. The goal is to increase product availability while reducing inventory across the supply chain. Reduced customer orders is not a potential benefit of supply chain management In a purchasing process, once requirements are determined and a vendor selected, the next step is the purchase order. The purchasing process¾receive goods and services¾normally would be triggered by the data flow vendor packing slip. At the time that a purchasing orders goods and services, the process is likely to interact with all of the following data stores except the purchase receipts data. At the time that a purchasing process places an order for goods or services, which of the following is typically updated? – Purchase order master data. A data flow called “inventory’s purchase requisition” = determine requirements. Outputs of a purchasing process normally might include purchase order, PO inventory notification sent to the inventory system, receiving report, except vendor invoice. The supervisor of the requisitioning department usually authorizes a purchase requisition. ABC Analysis: a technique for ranking items in a group based on the value, activity, sales, or other relevant metric for the items. EQQ models: following techniques analyzes all incremental costs associated with acquiring and carrying particular items of inventory. Inventory carrying costs include opportunity cost of investment funds, insurance costs, and obsolescence and deterioration except clerical cost of ordering goods.
The document one business sends to another business that identifies the goods or services to be purchased is purchase order. Purchase orders are sent to vendors. Quantities would be most likely “blinded” on a copy of the purchase order. A control that can ensure that receiving clerks are not influenced by quantity information while actually counting incoming goods is to send a “blind” copy of the purchase order to receiving. A "blind" copy of the purchase order should be sent to receiving so that receiving clerks will be forced to actually count the goods that are received. In the process of preparing a receiving report, the receiving department should perform all of the following tasks except compare the vendor's packing slip to a copy of the purchase requisition A receiving report is to goods, an acceptance report is to services. Data about vendor compliance with the terms of the purchase order normally would be included in the vendor master data. In a database containing (among others) six relations¾VENDORS, PURCHASE_REQUISITIONS, PURCHASE_ORDERS, PURCHASE_RECEIPTS, INVENTORY, and EMPLOYEES¾you would expect that the attribute Vend_No (vendor number) would be the primary key in the vendor relation. The resources for which the purchasing process wants to ensure security: purchase order master data and inventory. CoManaged Inventory: type of supply chain collaboration methods includes the vendor replenishing standard merchandise while the buyer manages the replenishment of promotion merchandise.
Chapter 13: The Accounts Payable/Cash Disbursements (AP/CD) Process The typical AP?CD process would capture and record data related to the daytoday operations of cashier, receiving, except Shipping. Such as recording vendor invoices and paying those invoices. In an AP/CD process "establish payable" would normally be triggered by vendor invoice. In an AP/CD process, a process "make payment" normally would be triggered by the data flow payment due date information. . At the time that an AP/CD process makes payment for goods or services, the process generally follows prepare proposed payments, select and record payments, issue and record disbursements. When the AP/CD process records a payable obligation, the data flow between "validate invoice" and "record payable" is validated vendor invoice. Data flows of an AP/CD process normally might include PO accounts payable notification, receiving report, vendor invoice, except sales report. The treasurer usually authorizes a payment. A disbursement voucher is designed to reflect the formal approval of the voucher for payment. An exception routine is usually performed for purchase returns and allowances. The document one business sends to another business that identifies the amount to be paid is vendor invoice. Vendor invoice document typically notifies the purchaser of his or her obligation to pay Purchase order would be matched with the vendor invoice to ensure that the purchase was authorized (i.e., to ensure input validity). Voucher system: disbursement system most easily facilitates paying a number of invoices with a single check. A credit memorandum is issued to the vendor: would not occur when an inventory manager decides to return merchandise to a vendor. In a voucher system, the data flow between the originating department and the process "prepare disbursement voucher" typically is the payment request. Information for evaluating vendor performance normally would reside on the vendor master data. The availability of cheap color printers has caused an escalation of check forgeries in recent years. The resources for which the AP/CD process wants to ensure security typically include cash, accounts payable master data, except accounts receivable master data. The control plan tickler file of payments due, is directed primarily at input completeness. A control plan that helps ensure the security of resources within the AP/CD process is independent authorization to make payment. A control plan to ensure input accuracy in payables processing is match invoice, purchase order, and receiving report.
The control plan independent validation of vendor invoice is directed primarily at input validity. For payment voucher input validity, which control plan uses records in the AP master data to give authorization to the cash disbursements computer program to make a payment – independent authorization to make payment. Epayments are settled through the ACH network, by wire transfer, or by debit or credit card. Tickler file of open purchase orders and receiving reports is most likely to address the goal of input completeness. The AP/CD process handles the repetitive work routines of cashier. Information technology has enhanced the AP/CD process by reducing the cost to process an invoice by up to 40%. The debit entry in the general ledger at the time that the vendor invoice is recorded will be to a clearing account because of the design of the business process, software employed, credit entry made when the goods were received. An enterprise system may facilitate the AP/CD process by linking the PO and receiving report, the PO and invoice, the invoice and the related cash disbursements.
AIS: Chapter 4: DOCUMENTING INFORMATION SYSTEMS There are two types of systems documentation: data flow diagrams and systems flowcharts. Bubble symbol: depicts an entity or a process within which incoming data flows are transformed into
outgoing data flows. Data flow symbol: represents a pathway for data
External entity symbol: portrays a source or destination of data outside the system.
Data store symbol: represents a place where data are stored. Data flow diagram (DFD): is a graphical representation of a system. Data flow diagram (DFD) guidelines: include within the system context any entity that performs one or more information processing activities Context Diagram: a toplevel, or least a detailed, diagram of a system depicting the system and all its activities as a single bubble and showing the data flows into and out of the system and into and out of the external entities. Data flow labels in context diagram usually describe the nature of the data (logical labels). There is one bubble, 2 external entities in a correctly drawn context diagram. In drawing a context diagram, we should include only one normal processing routines. * External entities: those entities (persons, places, things) outside the system that send data to, or receive data from, the system. Perform no information processing activities for the system. Physical data flow diagram: a graphical representation of a system showing the system’s internal and external entities and the flows of data into and out of those entities. The physical DFDs specify where, how, and by whom a system’s activities are accomplished. It does not tell us what activities are being accomplished. There are 3 bubbles, 2 external entities (square), 1 data store symbol in a correctly drawn physical data flow diagram. * Internal entities: an entity within the system that transforms data. (Accounting clerks, departments and computer) Logical Data Flow Diagram: a graphical representation of a system showing the system’s processes (as bubbles), data stores, and the flows of data into and out of the processes and data stores. Used to
document systems because we can represent the logical nature of a system without having to specify how, where, or by whom the activities are accomplished. Advantage of a logical DFD: we can concentrate on the activities that a system performs. In a logical data flow diagram, the bubble symbol represents a process but not the entire system. There are 4 bubbles, 2 external entities, and 1 data store symbol in a correctly drawn logical data flow diagram. To make a logical data flow diagram (DFD) readable, we should use 57 bubbles. Data flows on a logical DFD never go from a highernumbered to a lowernumbered bubble. Systems Flowchart: a graphical representation of a business process, including information process (inputs, data processing, data storage, and outputs), as well as the related operations process (people, equipment, organization, and work activities). Depicts the sequence of activities performed as the business events flow through the process. Guideline: divide the flowchart into columns, one for each internal entity, and label each column. Computer processing is represented by a Parallelogram; a paper file is represented by a triangle; a solid line with an arrow indicates a logical flow. System flowchart logic should flow from left to right flow top to bottom but minimize crossed lines and connectors
^Figure 4.6
When two data flow diagrams (DFDs) have equivalent external data flows, we say that the two diagrams are balanced. Topdown partitioning: A process in which successive layers of data flow diagrams (DFDs) are constructed by "exploding" the bubbles on a less detailed DFD to show more detailed data flows. Which of the following statements related to the construction of data flow diagrams (DFDs) is false? Sources and destinations are depicted by parallel horizontal lines, between which the name of the entity is shown.
A systems flowchart varies from a data flow diagram (DFD) because it represents the management system, the operations system, and the information system. Information processing activities: retrieve data from storage, transform data, or file data. Auditors and systems analysts use systems documentation to understand, explain, and improve complex systems. When a transaction cannot be processed in a routine fashion because of an error or other processing problems, the transaction must be handled by exception routine. The following is a jumbled list of the activities suggested in this text for drafting data flow diagrams (DFDs) for an existing system: I. II. III. IV. V.
Prepare a table of entities and activities. Prepare an annotated table of entities and activities. Draw a physical data flow diagram. Draw a logical data flow diagram. Draw a context diagram.
The best sequence for undertaking these activities is: I, V, III, II, IV. Rich Picture Diagram: is a graphical depiction of a work system highlighting the people involved (“actors”), the activities and objects they are involved with, and the specific concerns of the people involved with the work system. A work system is more than just a process or set of activities: it includes the interactions between customers, suppliers, stakeholders, and other objects involved in the performance of some type of work.
Chapter 10: The Order Entry/Sales (OE/S) Process The Order entry/sales (OE/S) process is an interacting structure of people, equipment, activities, controls that is designed to achieve certain goals. The OE/S process is part of ordertocash process. The OE/S process includes the first four steps in the ordertosales process. The order of these four steps is presales activities, sales order processing, picking and packing, shipping. The primary function of the OE/S process is to create information flows that support decision needs of those who manage various sales and marketing functions. In addition to the warehousing function, the three primary departments that you would expect to be part of a typical OE/S process are sales order, credit and shipping. The ultimate goal of the OE/S process is to create value for the customer. The first step in the OE/S process is typically a data flow from a customer. Flow No.
Description
1
Customer places order
2
Sales order department requests credit approval from credit department.
3
Credit department informs sales order department of disposition of credit request
4
Sales order department acknowledges order to the customer, and notifies the warehouse, shipping, and the B/AR/CR process of the sales order.
5
Warehouse sends completed picking ticket to shipping.
6
Shipping department informs carrier, B/AR/CR process, the general ledger process, and the sales order department of the shipment.
When the sales order department acknowledges a customer order, it is an example of a horizontal information flow. When the salesrelated data are captured in the sales order department and then the information flows to the managers housed in the marketing department, it is an example of a vertical information flow. . The OE/S process addresses the decision needs of managers of various sales and marketing functions through the use of both vertical and horizontal information flows. Data warehousing applications in organizations are usually viewed as being focused on either operational or analytical applications. Analytical applications, which include data mining, are intended to allow the use of sophisticated statistical and other analytical software to help an organization's members develop insights about customers, processes, and markets. Buyside systems use the Internet to automate and manage purchases and the vendors from which these purchases are made with the predominate technology being electronic data interchange (EDI). A specific type of reject stub is called an exception routine. Example: back order process. In a logical DFD for the OE/S process, general ledger master data is least likely to interact with the process validate sales order.
For a typical OE/S process to check a customer's credit, all of the following data stores likely would be consulted except the general ledger master data. A document that is used when filling a sales order to authorize the movement of goods from a warehouse to shipping is called a picking ticket. At the time that the shipping notice is prepared and disseminated, two data stores within the OE/S process are normally updated: sales order and inventory master data Marketing data: is designed primarily to serve the vertical information needs of the organization rather than the horizontal information flows. Bar code readers are devices that use light reflection to read differences in bar code patterns to identify a labeled item. In constructing a control matrix for an OE/S process, the principal data input(s) to the information system likely would be customer order and shipping notice inputs. The file most important for ensuring validity of customer order inputs is the customer master data. The control plan preformatted screens is directed primarily toward achieving the information process control goal of ensuring sales order input accuracy. The control plan confirm input acceptance helps to achieve the sales order input control goal of sales order input accuracy. In the OE/S process, the document that represents an independent authorization to ship goods to the customer is the sales order. Digital image processing systems are capable for capture, store, retrieval and presentation of images of objects such as pictures and documents. The system that enables users of an ERP system to view source documents from any location.
Chapter 11: The Billing/Accounts Receivable/ Cash Receipts (B/AR/CR) Process The Billing/accounts receivable/cash receipts (B/AR/CR) process is an interacting structure of people, equipment, activities, and controls designed to create information flows and record. First, the B/AR/CR process supports the repetitive work routines of the departments. Next, it supports the problem solving processes involved in managing the controller and treasury functions. The B/AR/CR process assists in the preparation of internal and external reports including GAAPbased financial statements. The functions of the B/Ar/CR/ process collects amounts due from customers. According to the concept of segregation of duties, accounts receivable department manager should report to the controller rather than to the treasurer. In an organization in which the OE/S and B/AR/CR processes are separate processes, the B/AR/CR process usually accomplishes all of the following activities except picking goods in the warehouse. The principal master data that you would expect to see in a B/AR/CR process is the accounts receivable. Shipping notice normally would trigger the billing process in a B/AR/CR process. In a logical DFD for a B/AR/CR process, you would expect that a credit memo would be sent by the B/AR/CR process to the customer from manage customer accounts. Remittance advice normally would trigger the B/AR/CR process to record a customer payment. RA is a business document used by the payer to notify the payee of the items being paid. RA generally records cash receipts data and accounts receivable master data. In general, adjustments to customer balances in the accounts receivable master data will be necessary for all of the following except estimates of uncollectible accounts. A company using a centralized database approach might not maintain a relational table for ACCOUNTS RECEIVABLE. Rather, accounts receivable balances at any point in time could be computed as the difference between the relations for which of the following continuous events? Sales invoices and cash receipts. One type of accounts receivable system is balanceforward, the other is electronic funds transfer system. In a prebilling system, invoices are prepared immediately upon acceptance of a customer order. Lapping: the perpetrator attempts to cover the theft of cash received from customer A by applying cash collected from customer B to A's account, then applying a receipt from C to B's account, and so forth. Deposit slips are usually generated by the B/AR/CR process as part of processing cash receipts. Typically, the operations process goals of the B/AR/CR vary, depending on the organization and its particular view of these processes. A process control is an organizational policy, business rule, or other process design element whose purpose is to help ensure a process is performed correctly to maximize the effectiveness and efficiency of the process, while at the same time preventing fraudulent or opportunistic behaviour. Control goals are the set of outcomes that are deemed to be most important for the correct performance of a process. We can divide these control goals into information control goals and operations control goals.
•
•
•
Operations Effectiveness Control Goals: provide timely and accurate confirmation of customer’s order; provide assurance of customer’s credit worthiness; provide timely and accurate delivery of goods and services; provide timely and accurate billing. Resource Efficiency Control Goals: provide an integrated orderfulfilment information system that supports best practices in managing sales orders and accounts receivable and ensures employees are properly recruited, screened, trained, and compensated. Resource Security Control Goals: provide physical security measures so that goods and services cannot be stolen or damaged.
(Recommend control plan)
In the billing process, the control plan of review shipped not billed sales orders (tickler file) helps to ensure effectiveness of operations (timely billing). Of the two types of billing systems discussed in the text, the prebilling system requires the more accurate inventory records. Accounts receivable aging report is not part of the horizontal information flows of the B/AR/CR process. Security of funds is most commonly associated with the treasury function Electronic bill presentment: Placing a customer's bills on a company's own Web site and sending an e mail telling the customer that his or her bill is there. There are two types of accounts receivable system: Openitem system: The accounts receivable system in which all the accounts receivable master data contains individual open invoices, against which payments and other adjustments are applied. Balanceforward system: The accounts receivable system typically used by utilities. There are two kinds of billing systems: + Postbilling system: The billing system in which the invoice is prepared after goods have been shipped and the sales order notification has been matched to shipping's billing notification. + Prebilling system: A billing system that can be used when there is little or no delay between the receipt of the customer order and the shipment of the goods. The technology that allows information on documents to be converted into machinereadable data through a scanner is called an OCR. In the billing function described in the text, the control plan that contributes to effective operations is review shipped not billed sales orders (tickler file) Which control is most effective in contributing to the goal of ensure input accuracy in the billing function? – compare input shipping notices to sales order master data.
The control independent billing authorization ensures that bills are for goods actually ordered by the customer. Lockbook: A customer is instructed to send his remittance advice and check to a bank's postal address. This method for collecting customer cash receipts. Factoring: a service to reduce the cost of collecting its accounts receivable, a company sells its accounts receivable to a financial organization.
Chapter 12: The Purchasing Process The purchasing process is an interacting structure of people, equipment, activities, and controls that is designed to accomplish the following:
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Handle the repetitive work routines of the purchasing department and the receiving department.
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Support the decision needs of those who manage the purchasing and receiving departments.
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Assist in the preparation of internal and external reports.
The purchasing process is part of the purchasetopay process for a merchandising firm. The term services specifically refers to work performed by outside vendors. Accounts payable department manager is most likely to report to the controller. The typical information flows in a purchasing process might include all of the following except a copy of a receiving report is sent to the cashier. Supply Chain Management (SCM) is the combination of processes and procedures used to ensure the delivery of goods and services to customers at the lowest cost while providing the highest value to the customers. The goal is to increase product availability while reducing inventory across the supply chain. Reduced customer orders is not a potential benefit of supply chain management In a purchasing process, once requirements are determined and a vendor selected, the next step is the purchase order. The purchasing process¾receive goods and services¾normally would be triggered by the data flow vendor packing slip. At the time that a purchasing orders goods and services, the process is likely to interact with all of the following data stores except the purchase receipts data. At the time that a purchasing process places an order for goods or services, which of the following is typically updated? – Purchase order master data. A data flow called “inventory’s purchase requisition” = determine requirements. Outputs of a purchasing process normally might include purchase order, PO inventory notification sent to the inventory system, receiving report, except vendor invoice. The supervisor of the requisitioning department usually authorizes a purchase requisition. ABC Analysis: a technique for ranking items in a group based on the value, activity, sales, or other relevant metric for the items. EQQ models: following techniques analyzes all incremental costs associated with acquiring and carrying particular items of inventory. Inventory carrying costs include opportunity cost of investment funds, insurance costs, and obsolescence and deterioration except clerical cost of ordering goods.
The document one business sends to another business that identifies the goods or services to be purchased is purchase order. Purchase orders are sent to vendors. Quantities would be most likely “blinded” on a copy of the purchase order. A control that can ensure that receiving clerks are not influenced by quantity information while actually counting incoming goods is to send a “blind” copy of the purchase order to receiving. A "blind" copy of the purchase order should be sent to receiving so that receiving clerks will be forced to actually count the goods that are received. In the process of preparing a receiving report, the receiving department should perform all of the following tasks except compare the vendor's packing slip to a copy of the purchase requisition A receiving report is to goods, an acceptance report is to services. Data about vendor compliance with the terms of the purchase order normally would be included in the vendor master data. In a database containing (among others) six relations¾VENDORS, PURCHASE_REQUISITIONS, PURCHASE_ORDERS, PURCHASE_RECEIPTS, INVENTORY, and EMPLOYEES¾you would expect that the attribute Vend_No (vendor number) would be the primary key in the vendor relation. The resources for which the purchasing process wants to ensure security: purchase order master data and inventory. CoManaged Inventory: type of supply chain collaboration methods includes the vendor replenishing standard merchandise while the buyer manages the replenishment of promotion merchandise.
Chapter 13: The Accounts Payable/Cash Disbursements (AP/CD) Process The typical AP?CD process would capture and record data related to the daytoday operations of cashier, receiving, except Shipping. Such as recording vendor invoices and paying those invoices. In an AP/CD process "establish payable" would normally be triggered by vendor invoice. In an AP/CD process, a process "make payment" normally would be triggered by the data flow payment due date information. . At the time that an AP/CD process makes payment for goods or services, the process generally follows prepare proposed payments, select and record payments, issue and record disbursements. When the AP/CD process records a payable obligation, the data flow between "validate invoice" and "record payable" is validated vendor invoice. Data flows of an AP/CD process normally might include PO accounts payable notification, receiving report, vendor invoice, except sales report. The treasurer usually authorizes a payment. A disbursement voucher is designed to reflect the formal approval of the voucher for payment. An exception routine is usually performed for purchase returns and allowances. The document one business sends to another business that identifies the amount to be paid is vendor invoice. Vendor invoice document typically notifies the purchaser of his or her obligation to pay Purchase order would be matched with the vendor invoice to ensure that the purchase was authorized (i.e., to ensure input validity). Voucher system: disbursement system most easily facilitates paying a number of invoices with a single check. A credit memorandum is issued to the vendor: would not occur when an inventory manager decides to return merchandise to a vendor. In a voucher system, the data flow between the originating department and the process "prepare disbursement voucher" typically is the payment request. Information for evaluating vendor performance normally would reside on the vendor master data. The availability of cheap color printers has caused an escalation of check forgeries in recent years. The resources for which the AP/CD process wants to ensure security typically include cash, accounts payable master data, except accounts receivable master data. The control plan tickler file of payments due, is directed primarily at input completeness. A control plan that helps ensure the security of resources within the AP/CD process is independent authorization to make payment. A control plan to ensure input accuracy in payables processing is match invoice, purchase order, and receiving report.
The control plan independent validation of vendor invoice is directed primarily at input validity. For payment voucher input validity, which control plan uses records in the AP master data to give authorization to the cash disbursements computer program to make a payment – independent authorization to make payment. Epayments are settled through the ACH network, by wire transfer, or by debit or credit card. Tickler file of open purchase orders and receiving reports is most likely to address the goal of input completeness. The AP/CD process handles the repetitive work routines of cashier. Information technology has enhanced the AP/CD process by reducing the cost to process an invoice by up to 40%. The debit entry in the general ledger at the time that the vendor invoice is recorded will be to a clearing account because of the design of the business process, software employed, credit entry made when the goods were received. An enterprise system may facilitate the AP/CD process by linking the PO and receiving report, the PO and invoice, the invoice and the related cash disbursements.
