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Acquisition Payment Process
- 1. Acquisition/Payment Process ACC202 Kateri Manglicmot BSIT – IV
- 2. The acquisition / payment process is most closely related to the following elements of the value chain: • Primary: Inbound Logistics • Support: Procurement Value Chain
- 3. 1. Request goods / services based on monitored need • EOQ (Economic-Order-Quantity) • Economies of Scale 2. Authorize a purchase 3. Purchase goods / services • Purchase Order (PO) 4. Receive goods / services • Verification 5. Disburse cash • PO → Receiving Reports → Vendor Invoice 6. Process purchase returns as necessary Process Steps
- 4. Acquisition / Payment Process Start End Request Goods / Services Prepare Purchase Order Purchase Requisition Purchase Order Notify Department Fill Purchase Order Authorize ? Requisition Database No Yes Requesting Department Purchasing Department Vendor
- 5. Sales / Collection • Take customer order • Ship the product • Collect payment Compare Two Major Processes Acquisition / Payment • Purchase goods and services • Receive goods and services • Disburse cash
- 6. AIS Elements (Input / Output) Purchase Requisition • Requests that the purchasing department order goods / services • Originates in an operating department • Terminates in the purchasing department Purchase Order • Specifies items ordered, shipping terms and other information about the purchase • Originates in the purchasing department • Terminates with vendor Receiving Report • Ensures that ordered goods have been received in good condition • Originates in receiving department • Terminates in various departments
- 7. AIS Elements (Input / Output) Vendor Invoice • Requests payment from buying organization • Originates with vendor • Terminates in accounting department of buyer Check • Pays the vendor • Originates in accounting • Terminates with vendor
- 8. AIS Elements (Process) (1) Purchase Requisition (2) Purchasing (3) Receiving/ Inspection (4) Accounts Payable (5) Cash Disbursements • Six generic steps (refer to slide 3) • Accounting cycle steps, including the following journal entries: • Purchase on credit/cash • Payment of inbound freight charges • Cash Payments • Purchase returns as needed
- 9. AIS Elements (Storage) Mater Files • Vendor • Inventory • Employee • A/P, Cash Transaction Files • Purchases • Cash Payments Junction Files • Purchases / Inventory • Purchases / Cash Payments
- 10. • Ordering unneeded goods • Institute a system for monitoring inventory levels. • Require justification for unusual orders or orders over a specified dollar amount. • Specify the business purpose for ordered goods. • Purchasing goods from inappropriate vendors • Develop and enforce a conflict-of-interest policy. • Establish criteria for supplier reliability and quality goods. • Create strategic alliances with preferred vendors. • Receiving unordered or defective goods • Match receiving reports with approved purchase orders. • Inspect goods before accepting a shipment. • Insure products en-route. AIS Elements (Risks and Internal Controls)
- 11. • Experiencing theft of inventory and/or cash • Establish an internal audit function. • Reconcile bank statements promptly. • Separate authorization, custody, and usage functions for both inventory and cash. • Install employee monitoring systems. • Bond employees who handle high-value goods. • Making errors in paying invoices • Additionally, many internal controls from the sales / collection process can be applied to the acquisition / payment process. • Inventory monitoring • Purchase approvals • Conflict of interest policy • Supplier qualifications • Strategic alliances AIS Elements (Risks and Internal Controls)
- 12. • Matching the shipment with am existing purchase order. • Requiring the receiving department to count the items received. • Establishing responsibility for the receiving transaction by including the Employee ID in the form. • Having one centralized location for receiving all shipments. Internal Control of Handling Receiving Transactions