Process for Purchase to Payments
The present study intends to provide an overview of the expenditure process for special orders, giving main consideration towards process from purchase to payments. Along with this, the study offers a reliable tool for monitoring material movements. On and on, the study also identifies the internal control weaknesses, and the impact of the same on the organization in regards to the Platinum’s special orders. Based on the analysis, the study will draw viable recommendations to assist the organization in managing its internal process and the mitigating the identified risks and weaknesses.
By considering the existing scenario, the purchasing team is required to firm the purchase order to the supplier on the basis of the requirement derived from the planning team. In a situation where the material is derived in store, outlets and factories associated with the count of raw materials physically (Goldratt and Cox, 2016). By this, the supplier provides a packing slip, which is further sent to the purchase and is then assessed with the order of purchase by the purchasing team. Further, the transferring of payment is done to the specified supplier on the date at which is due when the packing slip is accepted with the confirmation. Thus, the material is then sent to the production floor when the request is received.
In the prevailing situation, there can be the implementation of the SAP system for the material movement from one plant location to another, for the optimum material accountability. In this case, SAP ERP would be very beneficial in terms of tracking and monitoring the stock system across the production process (Chang, 2016).
On the basis of special orders, at present, the Platinum is constantly monitoring the movement of material by mailing the hard copy of the documents. The weakness can come in the form of miscommunication, thereby failing the entire process. If there is the presence of miscommunication in respect of any of the team member, then there is also a mismatch in the data‘s information (Monczka, Handfield Giunipero and Patterson 2015). Miscommunication can give birth to several other issues such as inaccuracy in the purchase order information, which are related to items or quantities. Also, there can be the threat of non-authorized purchases, defrauding or abusing of purchasing systems and un-authorization of adjustment in supplier accounts. One of the main weaknesses that take place from the purchase order process is that the appearance of invoice data prior to the date of purchase in the system, this generally takes place, when the invoice is gained prior to the setting up of purchase date, making it a more complex process. Lack of training and compliance are the main causes, causing considerable delay (Knechel, and Salterio, 2016).
Other related weakness in the purchase order generally arises throughout organizations in regards with the processed purchase order inclusive of; a considerable delay taking place between the times when there is receiving of receipt and when the same is processed in opposition to the purchase order within the system. Inadequate compliance in regards to the requirement of the purchase order and a shortage of review of purchase orders is another root cause. Thus, such weakness and issues can arise when processes to issue purchase order on time to time basis are not stabilized, better controls and approvals for allotting purchases orders are absent also there is no managerial support (Úbeda, Alsua and Carrasco, 2015).
Monitoring Material Movements
The organization can be impacted by the difficult management of monitoring of the purchase orders and doing the same in an effective manner is very challenging, and is prone to mistakes, complexities also these can be easily circumvented (Song and Thorén, 2017). If there is the absence of proper control, then the organizations suffer from a breakdown in the purchase order areas.
By considering the identified risks and impacts, the internal process can be effectively managed by following these steps:
- Categorizing duties to employees
- Allotting specified duties to all employees
- Job rotation
- Use of SAP and ERP
When the duties are segregated by the company to employees, then it helps in reducing the chances of an employee to harm the assets while preventing the changes of theft. If the organization allows each employee, particular duties, then they will be able to track the misplaced documents and can identify whether the transaction was appropriately recorded or not. On a frequent basis, organizations have a rule that all employees must consider the policy of annual vacation (Laudon and Laudon, 2015). Further this, policy demotivates the theft, as most of the invalid schemes fail when there is no attendance of the employees on that particular scheme. Companies must also make use of various tools and devices which are SAP and ERP protect the assets, by this company will be able to manage proper and justified records. One of the best methods to make sure that the accounting record is accurately managed is the SAP control which will determine and consider risks related with the material movement by making use of a dynamic approach while evaluating adoption of the means selected to mitigate the risks.
A given in the part (c) that there is the availability of Enterprise resource planning system in order to conduct monitoring of all involved activities, for the same SAP is very beneficial IT tool that can be adopted by the Platinum for evaluating the movement and material from one place to another.
When the raw material is received in the factory, then it is required to be entered in the SAP immediately. Further, the request can be provided by the specific department meant for the next material movement. In addition, the SAP has a range accessible module with distinct characteristics such as the QM module, MM module, PP module and so on. For reducing the duplicity and other related weaknesses, organizations are required to form solid controls throughout the request and processes of approval (Holub and Bruckner, 2016).
The recommended SAP system, assist the organizations in achieving the optimized opportunities in this system is the configuration by vendors. Also, this control system assists in ensuring that purchase order are fully completed, and at the time of invoice processing, vital documented which are implemented for verification could be sent to a comparison on a full basis. By the implementation of SAP, organization take benefit of the double authorization of the sensitive areas, this will help in securing data fields and other sensitive information. In addition, this will also help in eliminating the risk of fraud (Bradford, 2015).
The SAP control can assist the organization in achieving higher automation, by matching the order to the receipt of product; this will enable the organization to ensure they do not agree with receipts of products which are not ordered by them (Hahn and Packowski, 2015). The SAP system also facilitates organizations to match the products receipt quantity to invoices, by this organizations can make sure that it is not paying for the products that are not received by them.
This control also enables automatic to approve the invoice for the last payment, if the purchase order, invoice and product receipt are verified, and then the system on an automatic basis will do the payment issue to the supplier, thereby eliminating any error (Kumar, 2018).
Conclusion
Based on the above analysis, the conclusion can be drawn that it is significant for companies to develop internal control procedures of operations to ensure risk mitugat6ion. By considering the identified risks in the present scenario, the SAP is the most suitable system, as it offers the capability to establish tolerance of the invoice processing that is associated with the specific purchase order.
References
Bradford, M., (2015). Modern ERP: select, implement, and use today’s advanced business systems. Lulu Com.
Chang, J.F., (2016). Business process management systems: strategy and implementation. Auerbach Publications.
Goldratt, E.M. & Cox, J., (2016). The goal: a process of ongoing improvement. Routledge.
Hahn, G.J. & Packowski, J., (2015). A perspective on applications of in-memory analytics in supply chain management. Decision Support Systems, 76, pp.45-52.
Holub, I. & Bruckner, T., (2016). Measuring complexity of SAP systems. Complex Systems Informatics and Modeling Quarterly, (8), pp.60-67.
Knechel, W.R. $ Salterio, S.E., (2016). Auditing: Assurance and risk. Routledge.
Kumar, A., (2018). Business process management. Routledge.
Laudon, K.C. & Laudon, J.P., (2015).Management information systems (Vol. 8). Prentice Hall.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. & Patterson, J.L., (2015). Purchasing and supply chain management. Cengage Learning.
Song, P. &Thorén, M., (2017). The relationship between management control systems and strategy: Multiple institutional logics in practice. Sage.
Úbeda, R., Alsua, C. & Carrasco, N., (2015). Purchasing models and organizational performance: a study of key strategic tools. Journal of Business Research, 68(2), pp.177-188.
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