You have been recently employed as an accountant for the Platinum Manufacturing Group (Platinum). The CEO, James, has tasked you with reviewing their expenditure process for ‘special orders’. To facilitate this, he has provided you with key information relating to Platinums special orders process (available in Interact).
Using the information provided to you, prepare a business report to the CEO including the following:
1.A summarised overview of the expenditure process for special orders, focusing on the process from purchase to payments. (1 mark) [This should be no longer than one (1) paragraph and need to focus on the key relevant facts. The CEO is already aware of this information, but this overview helps bring your report together for other readers]
2.Use a system tool to develop a level 0 data flow diagram to document the current system for special orders.
3.Identification of:
1.internal control weaknesses relating to Platinum’s special orders, focusing on the process from purchase to payments;
2.the impact these weaknesses could have on the organisation;
3.specific internal controls which could be implemented by Platinum in the coming weeks to mitigate the risks posed by the internal control weaknesses you have identified. The CEO does not want theoretical controls suggested. They want practical controls that they can implement; and
4.how the control procedures you recommended in part c. above could be modified if Platinum reengineered it expenditure cycle activities to make maximum use of current IT. For example, EDI, EFT, barcode scanning, and electronic forms in place of paper documents.
Identifying the weakness of the organization
The expenditure of the Platinum Manufacturing Company follows certain steps. These steps includes different inter departmental ways of communication, which are done verbally. The whole process is manual in a partial way. The main objective of this article is to identify the weakness of the entire process and recommending a plan for the improvement and modification of the entire process.
There are four stage sin the expenditure process of the organization- purchasing, receiving, payment for the order and treasury process. During the initial stage of purchase, the purchase form is generated and is sent to the purchasing agents for verification. The choosing of the possible supplier is done after this stage. The selection of the supplier is done on the basis of certain parameters. The order is placed after the choosing of supplier (Horlacher, Klarner & Hess,2016). The purchase order is forwarded to both supplier and the department. The receiving department acknowledges the receiving form and verbally informs the department about the receiving of the order (Norta,Grefen & Narendra, 2014). Open purchase form is filled manually in order to make payment. After the receiving of the vendor invoice, the unpaid invoices are sent for the payment. The machine signature is done for the cheques under $ 10,000. The signature of both cashier and the treasures are needed for the cheques above $10,000.
Figure 1: 0 Level DFD of the Platinum Manufacturing Company
(Source: Created by Author)
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Factors |
Discussion |
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a) Identifying the weakness of the organization |
There are several weaknesses present in the whole expenditure process within the organization. Each stages of the process have some flaws that can be considered as weakness. Purchasing: The process for verifying the purchasing form is manual. The manual process of verification takes much time and there is a chance that mistake can be happened during the verification process. The order placement process is done verbally, which is not desirable (Gureva et al.,2016). The verbal communication between the supplier and the organization can lead to misunderstanding of the attributes and the confusing over understanding the requirements of the organization for the suppliers (De Haes et al.,2017). The documentation regarding purchase order along opening the purchase file is done manually. This manual process can be replaced by the automatic process. Apart from that the verbal communication is replaced nay system of communication which is able to keep the proof of the conversation. Receiving: The receiving department receives the order after stamping the order id. The order id is stamped after the attributes of the orders. This is also a manual process and it takes much time (Utesheva, Simpson & Cecez-Kecmanovic,2016). Moreover there is a chance of human error during the checking process (Mack & Veil, 2017). The acknowledgement after the receiving of the order is also a verbal process which is not desirable for the company. Payment Process: The open purchase file in generated after receiving the order the opening of the purchasing file is also a manual process which can be modified by the application of technology. Apart from that, the filling of the invoice form takes much time. Treasure Process: The cheques are classified into two types- one is for paying bill of $10,000, which is machine signed and the cheques for paying more than $10,000 will need the signature of cashier and the treasurer. There is no need for nay modification in this process. |
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b) Impact of weakness |
There are certain impact of the weaknesses or the flaws in the system on the organization: The inter-departmental communication in the organization is verbal process. In the verbal communication, there is a chance of misinterpretation of the conversation. This can lead to serious trouble for the organization. Another flaw in the system is the manual insertion of data and checking of data (Conforti et al.,2015). The manual process takes much time in the processing along with that there is a chance of error that can lead to the mismatch of data. The information stored in the organization is done in the offline process (Kane et al.,2015). This can lead to the misplacement of important records. The payment made by the company to the suppliers is done in offline mode (Majchrzak, Markus & Wareham, 2016). This offline payment of money is time consuming along with that there are certain risks associated with the offline transaction. |
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c) Requires implementation to reduce the risks in the organization: |
Certain steps can be taken in order to mitigate the identified risks in the organization. The two identified major issues in the organization are the manual process of data entry and checking and the verbal communication among the different departments of the organization. The manual process of checking the data of order id and receiving order along with filing the invoice can be done in an automated process. This will reduce the processing time along with that it will also deliver a cost effective solution. In this case, the bard code can be used (Hyvönen, 2018). In the barcode all the information regarding the order. Scanning the barcode can help to retrieve all the data automatically. This system helps to reduce the time and cost of data processing. The substitution for the verbal communication can be achieved by using electronic forms. The use of electronic forms can help to arrange the communication in a formal way along with that it also makes the transfer of communication faster in the organization. The communication can also be developed using certain user interface in the system. The system can be connected through internet or LAN. The other minor flaws in the organization are the offline transaction of money and the storage system. The organization has large amount of information to store. To avoid the misplacement of the records, the cloud storage can be used to store the data. Cloud provides more secured way of storing data along with that it also provides large storage space. The organization can use electronic transaction system for payment of the money. This will enable the transfer of money in a more secured way. |
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d) Recommendations for the reengineered version implemented din the organization |
Recommendations can be made for the Platinum Manufacturing company so that the implementation can use the maximum utilization of the IT. Advanced technologies like barcode scanning, use of electronic forms and electronic fund transfer can be utilized in the organization in order to get the maximum benefit of the advanced technologies. In order to implement the system, the existing infrastructure of the organization is needed to be improvised. The user interface is needed to be deployed so that the use of electronic form exchange can be done. In order to develop this system interface the group of software experts is needed. For the barcode scanning, suitable equipment for scanning and reading the information encrypted in the barcode is needed to be done. In order to implement the cloud architecture for the storage of data, certain cloud vendor is needed to be chosen (Armada & Martin,2016). The security issues are needed to be concerned in this matter as , the storage security is handled by the cloud provider. The security of the modified system is the major issue. The security of the system is maintained by the using of passwords (Zimon, 2016). The passwords should be accessed only for the officials and doing certain modification of the system can only be done by the authorized person. The security gateway during the transaction of the money is needed to be secured. To protect the system and network form unnecessary traffic, firewall is needed to be used in the system. Periodic backup of the information is needed to be taken, so that the loss of information can be eliminated. The training of the workers and the security staffs are needed to be carried out, so that they can get familiar with the newly modified system. |
Conclusion
The above discussion helps to identify the exact flaws of the current expenditure system of the Platinum Manufacturing system. The security issues and issues regarding the organizational process due to these flaws can be eliminated with the help of the advanced technology. Certain types of technologies those can be implemented in the organization are discussed in this article. It can be concluded form the above discussion that flaws of Platinum Manufacturing Company can be improvised with certain technical changes.
References
Armada, A. A., & Martin, A. (2016). Business model disruption: innovation as a catalyst. Frontiers of health services management, 33(2), 39-44.
Conforti, R., de Leoni, M., La Rosa, M., van der Aalst, W. M., & ter Hofstede, A. H. (2015). A recommendation system for predicting risks across multiple business process instances. Decision Support Systems, 69, 1-19.
De Haes, S., Joshi, A., Huygh, T., Jansen, S., & Caluwe, L. (2017). A board level dashboard for digital strategy & oversight.
Gureva, M. A., Kirillov, A. V., Vinichenko, M. V., Melnichuk, A. V., & Melnychuk, Y. A. (2016). Management of innovations and innovative process: concept, essence, classification and diffusion. International review of management and marketing, 6(6S).
Horlacher, A., Klarner, P., & Hess, T. (2016). Crossing boundaries: Organization design parameters surrounding CDos and their digital transformation activities.
Hyvönen, J. (2018). Strategic leading of digital transformation in large established companies–a multiple case-study.
Kane, G. C., Palmer, D., Phillips, A. N., Kiron, D., & Buckley, N. (2015). Strategy, not technology, drives digital transformation. MIT Sloan Management Review and Deloitte University Press, 14.
Mack, O., & Veil, P. (2017). Platform Business Models and Internet of Things as Complementary Concepts for Digital Disruption. In Phantom Ex Machina (pp. 71-85). Springer, Cham.
Majchrzak, A., Markus, M. L., & Wareham, J. (2016). Designing for digital transformation: Lessons for information systems research from the study of ICT and societal challenges. MIS Quarterly, 40(2), 267-277.
Norta, A., Grefen, P., & Narendra, N. C. (2014). A reference architecture for managing dynamic inter-organizational business processes. Data & Knowledge Engineering, 91, 52-89.
Utesheva, A., Simpson, J. R., & Cecez-Kecmanovic, D. (2016). Identity metamorphoses in digital disruption: a relational theory of identity. European Journal of Information Systems, 25(4), 344-363.
Zimon, D. (2016). Influence of quality management system on improving processes in small and medium-sized organizations. Calitatea, 17(150), 61.
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