The ABC Company performs its expenditure cycle activities using its integrated ERP system as follows:• Employees in any department can enter purchase requests for items they note as ei- ther out of stock or in small quantity.• The company maintains a perpetual inventory system.• Each day, employees in the purchasing department process all purchase requestsfrom the prior day. To the extent possible, requests for items available from the same supplier are combined into one larger purchase order to obtain volume dis- counts. Purchasing agents use the Internet to compare prices in order to select sup- pliers. If an Internet search discovers a potential new supplier, the purchasing agent enters the relevant information in the system, thereby adding the supplier to the approved supplier list. Purchase orders above $10,000 must be approved by the purchasing department manager. EDI is used to transmit purchase orders to most suppliers, but paper purchase orders are printed and mailed to suppliers who are not EDI capable.• Receiving department employees have read-only access to outstanding purchase or- ders. Usually, they check the system to verify existence of a purchase order prior to accepting delivery, but sometimes during rush periods they unload trucks and place the items in a corner of the warehouse where they sit until there is time to use the system to retrieve the relevant purchase order. In such cases, if no purchase order is found, the receiving employee contacts the supplier to arrange for the goods to be returned. Receiving department employees compare the quantity delivered to the quantity indicated on the purchase order. Whenever a discrepancy is greater than 5%, the receiving employee sends an e-mail to the purchasing department manager. The re- ceiving employee uses an online terminal to enter the quantity received before mov- ing the material to the inventory stores department.• Inventory is stored in a locked room. During normal business hours, an inventory employee allows any employee wearing an identification badge to enter the store- room and remove needed items. The inventory storeroom employee counts the quantity removed and enters that information in an online terminal located in the storeroom.• Occasionally, special items are ordered that are not regularly kept as part of inven- tory from a specialty supplier who will not be used for any regular purchases. In these cases, an accounts payable clerk creates a one-time supplier record.• All supplier invoices (both regular and one-time) are routed to accounts payable for review and approval. The system is configured to perform an automatic three-way match of the supplier invoice with the corresponding purchase order and receiving report.• Each Friday, approved supplier invoices that are due within the next week are routed to the treasurer’s department for payment. The cashier and treasurer are the only employees authorized to disburse funds, either by EFT or by printing a check. Checks are printed on a dedicated printer located in the treasurer’s department, us- ing special stock paper that is stored in a locked cabinet accessible only to the trea- surer and cashier. The paper checks are sent to accounts payable to be mailed to suppliers.• Monthly, the treasurer reconciles the bank statements and investigates any discrep- ancies with recorded cash balances.REQUIREDa. Identify weaknesses in ABC’s existing expenditure cycle procedures, explain the problem, and suggest a solution. Present your answer in a three-column table with these headings: Weakness, Problem, Solution.b. Draw a BPMN diagram that depicts ABC’s expenditure cycle process redesigned to incorporate your answer to step a.
The ABC Company performs its expenditure cycle activities using its integrated ERP system as follows:
• Employees in any department can enter purchase requests for items they note as ei- ther out of stock or in small quantity.
• The company maintains a perpetual inventory system.
• Each day, employees in the purchasing department process all purchase requests
from the prior day. To the extent possible, requests for items available from the same supplier are combined into one larger purchase order to obtain volume dis- counts. Purchasing agents use the Internet to compare prices in order to select sup- pliers. If an Internet search discovers a potential new supplier, the purchasing agent enters the relevant information in the system, thereby adding the supplier to the approved supplier list. Purchase orders above $10,000 must be approved by the purchasing department manager. EDI is used to transmit purchase orders to most suppliers, but paper purchase orders are printed and mailed to suppliers who are not EDI capable.
• Receiving department employees have read-only access to outstanding purchase or- ders. Usually, they check the system to verify existence of a purchase order prior to accepting delivery, but sometimes during rush periods they unload trucks and place the items in a corner of the warehouse where they sit until there is time to use the system to retrieve the relevant purchase order. In such cases, if no purchase order is found, the receiving employee contacts the supplier to arrange for the goods to be returned. Receiving department employees compare the quantity delivered to the quantity indicated on the purchase order. Whenever a discrepancy is greater than 5%, the receiving employee sends an e-mail to the purchasing department manager. The re- ceiving employee uses an online terminal to enter the quantity received before mov- ing the material to the inventory stores department.
• Inventory is stored in a locked room. During normal business hours, an inventory employee allows any employee wearing an identification badge to enter the store- room and remove needed items. The inventory storeroom employee counts the quantity removed and enters that information in an online terminal located in the storeroom.
• Occasionally, special items are ordered that are not regularly kept as part of inven- tory from a specialty supplier who will not be used for any regular purchases. In these cases, an accounts payable clerk creates a one-time supplier record.
• All supplier invoices (both regular and one-time) are routed to accounts payable for review and approval. The system is configured to perform an automatic three-way match of the supplier invoice with the corresponding purchase order and receiving report.
• Each Friday, approved supplier invoices that are due within the next week are routed to the treasurer’s department for payment. The cashier and treasurer are the only employees authorized to disburse funds, either by EFT or by printing a check. Checks are printed on a dedicated printer located in the treasurer’s department, us- ing special stock paper that is stored in a locked cabinet accessible only to the trea- surer and cashier. The paper checks are sent to accounts payable to be mailed to suppliers.
• Monthly, the treasurer reconciles the bank statements and investigates any discrep- ancies with recorded cash balances.
REQUIRED
a. Identify weaknesses in ABC’s existing expenditure cycle procedures, explain the problem, and suggest a solution. Present your answer in a three-column table with these headings: Weakness, Problem, Solution.
b. Draw a BPMN diagram that depicts ABC’s expenditure cycle process redesigned to incorporate your answer to step a.
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