This paper is about the expenditure procedure of the Platinum Manufacturing Group Enterprise which is one of the most prestigious organisation. The report deals with the special orders that the organisation buys from the dealers. In the recent years the organisation has bought special orders worth the amount of the over $13 million. The organisation leader that is the CEO wants to properly understand the expenditure process and enhance the sales of the organisation (Stiglitz & Rosengard, 2015). Also, the CEO wants to improve the process of buying the equipment’s and the betterment of the process of the same. In order to do, the information provided is summarised in the given paper. This includes the buying process, receiving process and treasurer and the accounts department approval of the process. Further a level 0 data flow diagram of the task is also included in the document for the better understanding of the process. The risk that is the backlogs of the entire system is also discussed in the given paper. The internal control measure which can be done in order to improve the process of the buying is also a part of the report.
The platinum manufacturing Group which is one the most prestigious business organisation. The organisation follows a well-developed a maintained expenditure process for the organisations special orders that are bought by the organisation. The special orders which are generally for the low volume orders that is the orders in the less quantity of the department managers (Becker & Egger, 2013). In order to purchase the demands from the equipped departments, the request for buying is initially sent to the purchasing department, the purchasing department then checks for the is the order is indeed placed by the head of the department and no one other. when the department get the confirmation about the product, the purchase requisition buyers finds a suitable dealer and finds the product and the verification call for about the availability and the price of the product (Dumas et al., 2013). The buyer then calls the seller, asks for the mentioned price quote, and places a verbal order, that is the order is taken over phone and there is no written copy of the product. In order to take the order a pre-numbered purchase order is processed, with the original sent to the supplier and copies to the department head, receiving, and accounts payable. After the completion of all the processes, when the work of the receiving department starts. The receiving clerk checks for the quantity and the quality of the product, and if there is any mismatch with the order the clerk marks the product with red ink and forwards the product to the concerned department. The clerk also gives a stamp on the product and sends it to the requisition department, receiving department and verbally confirms the order status. After receiving the purchase order history, the clerk writes the order details in the open purchase order file and when the invoice for the same is received the clerk matches the it with the with the required order purchase the amount of the payable is debited from the requisitioning department’s equipment account. Also, the unpaid orders whose payments are yet to be paid are noted a due orders and check regarding the same is forwarded to the treasurer for signature. After the completion of this process the invoice and purchase order are then filed by purchase order number in the paid invoice file (Lohrmann & Reichert, 2013). The work of the treasurer departments work is only to pass the order and sign the checks. This department divides all the checks in to two segments, the checks which are above the amount of $10000 and the orders that are less than $10000. The orders which are below the sum of the $10000 is machine signed and check by the cashier but the order that above the given sum are thoroughly checked and then signed by the cashier and forwarded to the treasurers. After the tressure’s signs the check, it is forwarded. Although the process of taking a special order seems to be very complicated but all these things are done in a very swift way and the order is processed within day of being ordered by the customer and hence giving a better customer satisfaction and increasing the value of the organisation.
A data flow diagram can be said as the is a graphical illustration of the “flow” of data through an data system, modelling its process aspects (Fagbola, T. M., Adigun & Oke, 2013).
(Figure-1- Level 0 Data Flow Diagram)
(Source: Author)
Although there the process of taking orders are very enhanced and advanced of the organisation but there lie some loop holes in the system which can cause problems to the organisation and make loss for the same also. Some of the problems that the organisation faces are while giving the orders and receiving the orders (Mitra, Jaggi & Hossain, 2013). That is when the organisation is giving any special order the order is taken the order is noted down verbally, this can cause problems in the orders future as if the order is processed and the seller refuses for the order, can cause problem. This can cause loss for the organisation. Also, every order is kept hand written and can cause problems if the papers are messed up. Also keeping a track of each and every order can cause problems and chaos for the organisation. The installation of the products can cause problems, supposing if the organisation order something the there is no technical who can properly fit the instruments can cause a loss for the organisation (Hilton & Platt, 2013). Other than this storing the materials is also one of the major problem that the organisation faces, if lumpsum number of order are placed then the area for storing the same also decreases and hence storage problem occurs.
These problems can cause huge loss in the organisations expenditure cycle. Like if the organisation is in a need of a certain item and the delivery of the item is yet not completed can cause stoppage to the production in the organisation and hence losses. Also like if the item is delivered and yet not working then also may cause serious problems like the space issues and other related problems (DRURY, 2013).
Specific Internal control can be defined as a process intended to deliver realistic guarantee concerning the achievement of objectives in the following categories, 1st is the Effectiveness and efficiency of operations in a particular organisation. 2nd is the Reliability of financial reporting related to the organisation and finally the 3rd is Compliance with applicable laws and regulations. There are two types of the internal controls, namely the Preventive and Detective Controls. The working of these controls is different from one another. Preventive controls try to avert or prevent unwanted procedures from happening. These are practical controls that eradicated any loss (Rahman, 2013). In this organisation the preventive controls that might be helpful are proper authorization of the bulk materials, adequate and proper documentation of the items that are ordered, and physical control over assets after the orders are received. On the other hand, the detective controls are the attempts to detect any undesirable acts (Christensen et al., 2015). Detective controls which can be implemented in the organisation are reviews of the products before ordering, analyses of the products and audits of the items. Both the types of the controls are essential in order to an effective internal control system and to avoid any kind of loss.
If the organisation updates the systems of the working, then there may less chances of any error in the order processing systems(Warren, 2016). The system that the organisation follows must be updated in order to have a better ordering process, like the new technologies like bar code scanners and the EID’s(Electronic data interchange, which is the concept of businesses collaborating electronically) and the EFT ( Exchange trading fund) can help the organisation in eradication the old techniques of the pen and paper systems that it followed.
Conclusion
Thus, concluding the topic, it can be said it can be said that all though the organisation is having a very well-structured expenditure process for buying of the special goods, but needs to improve the process of the same in order to improve the management of the goods. The previous expenditure process had some backlogs which are highlighted in the paper and measures to eradicate those are provided in the paper. The data flow diagram given in the paper slows a clear image of the previous process of the expenditure. The organisation can import goods in bulk that is the goods that are required by every department in common, this will in turn reduce the cost for the transitions the installation and help the organisation to save some good amount of money.
References
Becker, S. O., & Egger, P. H. (2013). Endogenous product versus process innovation and a firm’s propensity to export. Empirical Economics, 44(1), 329-354.
Christensen, H. B., Lee, E., Walker, M., & Zeng, C. (2015). Incentives or standards: What determines accounting quality changes around IFRS adoption?. European Accounting Review, 24(1), 31-61.
DRURY, C. M. (2013). Management and cost accounting. Springer.
Dumas, M., La Rosa, M., Mendling, J., & Reijers, H. A. (2013). Fundamentals of business process management (Vol. 1, p. 2). Heidelberg: Springer.
Fagbola, T. M., Adigun, A. A., & Oke, A. O. (2013). Computer-based test (CBT) system for university academic enterprise examination. International journal of scientific & technology research, 2(8), 336-342.
Hilton, R. W., & Platt, D. E. (2013). Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education.
Levy, M., Weitz, B. A., & Grewal, D. (2012). Retailing management (Vol. 6). New York: McGraw-Hill/Irwin.
Lohrmann, M., & Reichert, M. (2013). Understanding business process quality. In Business Process Management (pp. 41-73). Springer, Berlin, Heidelberg.
Mitra, S., Jaggi, B., & Hossain, M. (2013). Internal control weaknesses and accounting conservatism: Evidence from the post–Sarbanes–Oxley period. Journal of Accounting, Auditing & Finance, 28(2), 152-191.
Rahman, A. R. (2013). The Australian Accounting Standards Review Board (RLE Accounting): The Establishment of Its Participative Review Process. Routledge.
Stiglitz, J. E., & Rosengard, J. K. (2015). Economics of the Public Sector: Fourth International Student Edition. WW Norton & Company.
Warren, C. M. (2016). The impact of International Accounting Standards Board (IASB)/International Financial Reporting Standard 16 (IFRS 16). Property Management, 34(3).
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