The Acquisition/Payment Business Process

1. The Acquisition/Payment Business Process Chapter 9

2. Chapter Learning Objectives • Identify activities and documents common to acquisition/payment business processes for various enterprises • Identify the components of the REA ontology in the acquisition/payment business process • Explain how the acquisition/payment business process fits into an enterprise’s value system • Explain how the acquisition/payment business process fits into an enterprise’s value chain • Create a REA business process level model for an enterprise’s acquisition/payment business process • Identify common information needs within the acquisition/payment process • Create queries to meet common information needs in the acquisition/payment process

3. Acquisition/Payment Process in an Enterprise Value System

4. Acquisition/Payment Business Process in Enterprise Value Chains Partial value chain for a manufacturer Partial value chain for a distributor

5. REA Acquisition/Payment Business Process Level Pattern

6. REA Acquisition/Payment Business Process Level Pattern: Operating Assets

7. Acquisition/Payment Process Events • Instigation Events in the Expenditures • Usually internally instigated; triggered by an identified need • Internal agents -- department supervisors and purchasing agents • External agents -- suppliers • Resources -- type

8. Purchase/Requisition Event • Purchase Requisition Event • Internal agent -- department supervisor • Resources - type

9. Acquisition/Payment Process Events • Mutual Commitment Events in the Acquisition/ Payment Process • Involve the enterprise and an external business partner agreeing to exchange resources at a defined future time • Internal agents -- purchasing agents • External agents -- suppliers • Resources -- type

10. Acquisition/Payment Process Events • Economic Increment Events in the Acquisition Cycle • Represent the receipt of goods or services for which the enterprise will give up some other resource • Resources vary for different types of businesses • Inventory, Services, Temporary use of asset • Internal Agents -- purchasing agents and receiving clerks • External Agents -- suppliers or vendors

11. Acquisition/Payment Process Events • Economic Decrement Events in the Acquisition Cycle • Almost always is a Cash Disbursement event • An economic decrement event whereby the enterprise transfers ownership of cash (or equivalent) to a supplier • Resource is typically cash • Internal agents -- cashiers, accounts payable clerks, or other financing personnel • External agents -- suppliers or vendors

12. Acquisition/Payment Process Events • Economic Increment Reversal Events • Events in which previous economic increment events are reversed or negated • Resources, Internal Agents, and External Agents are the same as those for economic increment events

13. Acquisition/Payment Process Relationships • Fulfillment relationships • Between Purchase Requisition and Purchase Orderevents • Between Purchase Orderand Purchase(or Rental or Service Acquisition) events • Duality relationships • Between Purchase (or Rental or Service Acquisition) and Cash Disbursement (or Disbursement of Bartered Goods/Services) events • Reversal relationships • Between Purchase and Purchase Return events • Participation relationships • Between each event and each internal and external agent

14. Acquisition/Payment Process Relationships • Proposition relationships • Between Purchase Requisition event and Inventory (or Inventory Type or Service Type) • Reservation relationships • Between Purchase Order, Rental Contract, or Service Contract and Inventory (or Inventory Type or Service Type) • Also between Purchase Order, Rental Contract, or Service Contract and Cash • Stock flow relationships • Between Purchase (or Rental or Service Acquisition) and Inventory (or Inventory Type or Service Type) • Between Purchase Return and Inventory (or Inventory Type) • Between Cash and Cash Disbursement

15. Resource Query Types • Detailed status information at one or more points in time for each resource instance • Detailed status information at one or more points in time for only those resource instances meeting specified criteria • Summarized status information at one or more points in time for all resource instances • Summarized status information at one or more points in time for only those resource instances meeting specified criteria

16. Event Query Types • Detailed information about each event instance • e.g., what happened, when and where did it happen, etc. • Detailed information about each event instance that meets specified criteria • e.g. events of a specified type that occurred during a specified time period or that occurred at a specified location • Summarized information for all instances of an event type for a specified time period • e.g. total of the event instances during a specified time period • Summarized information for only those instances of an event type for a specified time period that meet specified criteria • e.g. average dollar value of the event instances for a specified location during a specified time period

17. Agent Queries • Detailed status information at one or more points in time for each agent instance • Detailed status information at one or more points in time for only those agent instances meeting specified criteria • Summarized status information at one or more points in time for all agent instances • Summarized status information at one or more points in time for only those agent instances meeting specified criteria

18. Duality Relationship Query Types • Identification as to whether a specified exchange is completed • Identification of completed exchanges for a specified time period • Identification of incomplete exchanges for a specified time period • Calculation of the amount of claims, e.g. prepaid expenses, payables, unearned revenues, or receivables, either in total or for a specified exchange event • Calculation of the total or average length of the timing difference(s) between the events involved in one or more exchanges

19. Querying for Accounts Payable • Conceptually • Dollar value of acquisitions of goods and services (except employee labor) not yet paid in full • Practically • Total of acquisitions through balance sheet date minus total of cash disbursements through balance sheet date that applied to acquisitions. Also minus purchase returns/discounts through balance sheet date. • MUST include ONLY ending date constraint (balance sheet items reflect cumulative data from beginning of company through balance sheet date). • Use acquisition date to determine which acquisitions to include. • Use cash disbursement date and duality relationships to determine which cash disbursements to include. Be sure to aggregate cash disbursements that apply to the same purchase before subtracting from purchase amount • Note: Acquisitions – Cash disbursements from Vendors is not acceptable as it is theoretically less sound than using the duality relationships • Likely need for outer join and Nz function in Access (for acquisitions with no matching cash disbursements)

20. Stockflow Relationship Query Types • What resources or resource types were increased or decreased by an economic event? • What quantity of a resource or resource type was increased or decreased by an economic event? • What dollar value of a resource or resource type was increased or decreased by an economic event? • When did an event increase or decrease a specific resource or resource type? • Where did an event increase or decrease a specific resource or resource type?

21. Fulfillment Relationship Query Types • Identification of unfulfilled commitments or instigation events • Identification of fulfilled commitments or instigation events • Identification of commitment events that were not preceded by instigation events, or identification of economic events that were not preceded by commitment events • Calculation of length of time between instigation and commitment events or between commitment and economic events • Identification of causes of commitments and/or of economic events • Identification of results of instigations and/or of commitment events

22. Proposition Relationship Query Types • What resources or resource types does the instigation event propose to increase or decrease? • What quantity of a resource or resource type is the proposed increase or decrease for an instigation event? • When did an instigation event propose to increase or decrease a specific resource or resource type?

23. Reservation Relationship Query Types • What resources or resource types is a commitment event agreeing to increase or decrease? • What quantity of a resource or resource type is a commitment event agreeing to increase or decrease? • What dollar value of a resource or resource type is a commitment event agreeing to increase or decrease? • When did an event commit to increase or decrease a specific resource or resource type? • Where did an event commit to increase or decrease a specific resource or resource type?

24. Participation Relationship Query Types • Which agent(s) participated in a specified event? • How many events of a specified type has a specified agent participated? • What is the total dollar value of events of a specified type in which a specified agent has participated for a specified time period? • When did a specified event in which a specified agent participated occur? • Where did a specified event in which a specified agent participated occur?

25. Multiple-Relationship Acquisition Cycle Queries • Which purchase orders have been partially filled? • requires stockflow, reservation, and fulfillment-purchaseorder-purchase relationships • What is the total dollar value of accounts payable for a specified supplier at a point in time? • requires duality, participation-supplier-purchase, and participation-supplier-cash disbursement relationships • On which requisitions has a specified vendor been recommended as the recommended supplier? • requires proposition and participation-purchaserequisition-supplier relationships

26. Multiple-Relationship Acquisition Cycle Queries • Which purchase agent ordered a specified inventory type from a specified supplier? • requires reservation, participation-supplier-purchaseorder, and participation-purchaseagent-purchaseorder relationships • What is the total dollar amount of purchases of a specified inventory type that have been made from suppliers in a specified region? • requires stockflow-purchase-inventory and participation-supplier-purchase relationships

27. Summary • We discussed the acquisition/payment process and how it fits in at the value system and value chain levels • We discussed the extended REA pattern at the business process level • We examined documents typically used to represent events and discussed related resources and agents • We examined examples of relational database tables for the acquisition cycle and discussed data input into those tables • We systematically discussed types of queries for the acquisition/payment process that may be needed to support decision-makers in various functional areas • We provided selected examples of queries of various types