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Sales Process

Question:

Discuss about the Regulating business by an independent commission.

Bucks Phyz is a medium sized company that derives an annual turnover of $2.5 million. The issue that has been presented in the question is that being the new accountant of the company the particular operation that has to carried out, is reviewing the sales process of the company based on the key information derived from the staff interviews. The company has undergone a restructuring program within the sales team due to the major changes that took place in the operating environment of the company. The change in the structure of key personnel authorities may also have impacted business (Almeida, KIM, & Kim, 2015). The particular impact that has been mentioned in the case study is that the delegated responsibilities in relation to the new tasks have become blurred. Bucks Phyz has also been facing fraudulent behavior in the accounts department.  Thus, the current circumstances of the company have been such that the management of the company will not be able to allow any revenue leakage. Therefore, the internal control that is required by business has been included in this study and the decision of the introduction of the corporate credit cards has been analyzed. The study aims to provide an understanding of the internal controls within an organization and the how these controls effectively aid the smooth execution of the business operations (Sadgrove, 2016).

The sales process that has been incorporated by business is that the new pricing tools that had been introduced by the sales managers which can effectively calculate the prices of the offers that are send out by the managers. However, the authorization policy has not been strictly adhered to by the managers. This is evident from the opinion of the Head of Sales. The head of sales, Barry has stated in his interview that in spite of the existence of a standardized process in regards to the particular process of the sending offers by the managers to their customers, that standardized process is not strictly adhered to as it has not been mapped yet (Bernstein 2015). The other issue that persists with the sales process is that the standard contract template that is available in the company intranet is not satisfactory in terms of quality. The credit check process can be summarized as checking of the credit worthiness of the customer from the credit rating agency’s web site. The credit rating being anything other than C results in granting of the credit. However, if the rating is C then a different payment method has to be negotiated (Wen caes et l., 2015). 

Internal control weakness

The sales process has been effectively reviewed and a number of weaknesses that is reflected in the business operation of Bucks Phyz have been identified.

Sales Process

Internal control weakness

Impact

Recommendation

Data entry process

Implementation of the new customers into the operative system of the company is handled by Alfred and Joy. The particular area of concern in entering the data related to the new customers is the creation of a pricing template. The review of the customer data that is entered into the price template as it according to the management would be irrational in terms of cost-benefit ratio. Moreover, there is no certain information in regards to whether the access to the ERP system is restricted or not. Even the billing system that is available to the staff does not provide any guidance to the user in terms of the irrelevant fields.

The particular impact that lack of review of the pricing template may lead to is that data as crucial as customer information may be wrongly entered into the system hampering the entire process of business and in turn affecting the total revenue. The access to the ERP system should also be restricted. This is because unrestricted access to the ERP may result in fraudulent activities by the alteration of potential customer data. The billing system should also be designed in a particular way that provides enough guidance to the user so that no entry that does not correspond to the particular field is entered as that may hinder the process of effective billing which in turn may impact the revenue incurred by business (Yang, & Koo, T. L. 2014).  

Segregation of duty in reviewing the customer data that is entered into the pricing template will also improve the cost benefit ratio and remove the chances of wrong input of customer data. Thus, other than Alfred and Joy another employee should be trained in the particular data entry process. Moreover, the access to the ERP system should be restricted or controlled and the particular billing software should be updated in order to aid the user

New pricing tool

The particular new pricing tool that has been implemented in business requires the managers to be properly trained for the efficient utilization of the sales tool.

The lack of proper training may result in the wrong calculation of the prices to the offers that are sent out. This may impact business drastically (Cao, Chychyla & Stewart, 2015).

Proper training in the utilization of the new pricing tool should be provided

Authorization Policy

The standardized process that has been established by the management in regards to the authorization policy is not mandatorily followed by all the mangers. The Head of Sales even supports this fact as according to him there are times and other constraints that may hinder the process of following the standardized procedure.

The non compliance to the standardized process in case of the authorization policy effectively widens the scope for the managers to commit fraudulent activities by sending offers to the customers at prices that are greater than real value of such offers (Goetsch & Davis, 2014).

A new and modified standardized process should be established and strict adherence to such a process should be ensured in order to avoid fraudulent activities 

Credit Check Process

The credit check process that has been adopted by the company does not have any area of concern. However, it has been accepted by Lucinda that there had been several instances in which the credit checks had been performed on new customers after the sales contract was signed by the both the parties and that the invoices had been issued.  Thus, lack of strictly adherence to the credit heck process may result in the huge credit loss by the firm.

The particular impact that the avoidance of the credit check process, before signing up a particular customer may be drastic and may lead to potential loss of business (Lam, 2014).

The checking of the credit worthiness of a customer should be made mandatory. The system should be designed in such a way that without checking the credit worthiness of a particular customer no deals would be permitted.

Employee code

The non-existence of a potential employee behavioral code may result in the generation of personal relationships between the employees. For instance, the marriage of the Accounts Receivable manger with the Head of Sales might not be healthy for business.

The non-existence of an employee code may result in the growth of personal relationships within the organization that may effectively result in the conflicts of interest that will potentially increase the occurrence of frauds within the organization (Kuratko, Hornsby & Covin, 2014).

An establishment of a proper employee code may mitigate the occurrence of conflicts of interest thus, lessen the chances of occurrence of fraud in the organization

Next, the introduction of the corporate credit cards might be hugely profitable for business provided that the particular transactions executed or the products or services purchased with the corporate credit cards are really needed by business. Moreover, the providence of corporate credit cards increases the risk factor of business by leaps and bounds. The numerous advantages however, provided by these corporate credit cards cover for the risks that the business is exposed to due to this facility. The corporate credit cards will reduce the hassle of transferring the payments by business to the particular account of a supplier. Moreover, the process of reimbursement will be hugely simplified thus, reducing the cost of operations incurred by business (Gallemore & Labro, 2015).

The specific internal control that should be implemented by Bucks Phyz in order to minimize the impact and occurrence of the risks is that a particular team should be created in order to authorize the transactions before real cash is debited from the business account. The finance department personnel may be delegated with the task of authorizing the transactions that are incurred with the corporate credit cards so that misuse or fraudulent activities are minimized (Doppelt, 2017).

The particular recommendation to the CEO in regards to the issuance of the corporate credit cards is that the corporate credit cards should only be issued to those key personnel who are involved with the core processes of business. For instance, the situation in regards to the booking of the training course must be particularly handled by purchasing the course by using the corporate credit card that is allotted to the key human resource personnel after the proper authorization by the finance team. 

References

Almeida, H., KIM, C. S., & Kim, H. B. (2015). Internal capital markets in business groups: Evidence from the Asian financial crisis. The Journal of Finance, 70(6), 2539-2586.

Bernstein, M. H. (2015). Regulating business by independent commission. Princeton University Press.

Cao, M., Chychyla, R., & Stewart, T. (2015). Big Data analytics in financial statement audits. Accounting Horizons, 29(2), 423-429.

Doppelt, B. (2017). Leading change toward sustainability: A change- management guide for business, government and civil society. Routledge.

Gallemore, J., & Labro, E. (2015). The importance of the internal information environment for tax avoidance. Journal of Accounting and Economics, 60(1), 149-167.

Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence. Upper Saddle River, NJ: pearson.

Harmon, P. (2015). The scope and evolution of business process management. In Handbook on business process management 1 (pp. 37-80). Springer, Berlin, Heidelberg

Kuratko, D. F., Hornsby, J. S., & Covin, J. G. (2014). Diagnosing a firm's internal environment for corporate entrepreneurship. Business Horizons, 57(1), 37-47.

Lam, J. (2014). Enterprise risk management: from incentives to controls. John Wiley & Sons.

Sadgrove, K. (2016). The complete guide to business risk management. Routledge.

Wen, M., Gao, J., Liang, L., & Lu, Q. (2015, June). Study on the moderating effect of top management team characteristics on the relationship between equity incentive and internal control quality. In Service Systems and Service Management (ICSSSM), 2015 12th International Conference on (pp. 1-6). IEEE.

Yang, M. H., & Koo, T. L. (2014). The impact of information technology adoption on internal controls adaptation. International Journal of Business and Systems Research, 8(1), 14-33.

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