Chapter 8

1. Procurement and Human Resource Business Processes Chapter 8

2. Describe the procurement business process. Learning Objective 1

3. Overview Procurement is the business process of selecting a source, ordering, and acquiring goods or services. Obtained internally Purchased

4. Issue purchase order Selection of source Receipt of the goods Request for quotation Invoice verification Selection of a vendor Vendor payment The Procurement Business Process Requirement determination

5. The Procurement Business Process ERP (enterprise resource planning) systems are capable of storing and processing a vast amount of information pertaining to the procurement business process.

6. The Procurement Business Process SAP R/3 supports procurement in its materials management module. Documents in R/3 are “online documents.” Documents may also be printed and exchanged manually.

7. The Procurement Business Process Procurement Documents Available in R/3 Purchase requisition Request for quotation Quotation Purchase order Contracts Outline agreements Scheduling agreements Purchasing information records

8. The Procurement Business Process All procurement documents are assigned a document type code. This code determines the fields that are displayed on video screens. It also controls the range of unique numbers that are assigned to particular document types.

9. Master Records Master records are created in R/3 for the “objects” that reflect the organizational structure and business processes of the company. The coding system incorporates fields that identify company, plant, storage location, purchasing organization, and purchasing group.

10. Inventory Management The IM component of R/3 records both the value and quantity of inventory. Enter and check goods movement. Manage inventory stocks. Take a physical inventory.

11. Illustrate controls that apply to procurement. Learning Objective 2

12. Receiving report Purchase database Delivery Requisition processing Goods receipt processing Receiving Purchase requisition Receiving report Accounts payable Purchasing Stores (Requisitioning) Prepare requisition Verify goods

13. Competitive bidding Vendor Purchase requisition Select vendor Invoice Purchase database Prepare order Order processing Invoice verification Purchase order invoice Accounts payable Vendor Purchasing

14. Purchase database Vendor Delivery Match to purchase order Blind count Enter receipt Order processing Delivery Receiving report Stores Stores Receiving

15. Purchase requisition Prepare voucher On due date Accounts payable Purchase order Voucher register Voucher processing Receiving report Invoice Voucher check Voucher Journal voucher Retrieve documents Purchase database Cash disbursements General ledger Accounts Payable

16. Voucher check Sign checks Cancel voucher after signing check Voucher Accounts payable Voucher check Voucher Post Check register Forward direct to payee Voucher check Control total General ledger Cash Disbursements

17. Control total Journal voucher Compare post Accounts payable Cash disbursements General ledger processing Control total Journal voucher General ledger General Ledger

18. Cancelled checks Independent of cash disbursements Bank reconciliation Bank Bank statement Check register Bank reconciliation Internal Audit

19. Additional Control Features Purchasing does not control the actual goods. Receiving is separate from final custody of the delivery. Accounts payable handles only documents. Purchase requisitions should be independently reviewed.

20. Integrity of the Procurement Business Process Purchase orders and receiving reports control individual purchases. They do not directly exercise control over the procurement business process. Control centers on the integrity of the buyer-vendor relationship.

21. The Attribute-Rating Approachto Vendor Selection The attribute-rating approach to vendor selection is appropriate whenever an objective evaluation of the opinions of several independent evaluators is desired.

22. Identify and list the attributes to be included in the evaluation. 1 Assign a weight to each attribute, based on relative importance and objectivity. 2 The Attribute-Rating Approachto Vendor Selection Steps:

23. Total the individual evaluations. 4 The Attribute-Rating Approachto Vendor Selection Steps: Have individual evaluators rank each vendor on each attribute. 3

24. Describe the cash disbursements business process. Learning Objective 3

25. Cash DisbursementsBusiness Process The CDBP Controls... Check disbursements Cash disbursement

26. Cash DisbursementsBusiness Process What is an imprest fund? It is a fund maintained at a specified, predetermined amount. The imprest fund concept is not restricted to petty cash control. Imprest payroll funds and imprest charge or expense funds are common in systems design.

27. Voucher Systems The major control features over disbursements are the use of a voucher system. It supports the drawing of checks, the separation of approval from payment, and an independent bank reconciliation.

28. Voucher Systems Accounts payable Cash disbursements General ledger Internal audit

29. Voucher Systems The real control over disbursements is a final review of documents evidencing the entire transaction prior to the authorization for payment.

30. Voucher Systems Authorization: Physically signing off on a voucher package Preparing a document to authorize an entry in the voucher register Entering data into a computer device

31. Voucher Systems Accounts payable generally refers to trade accounts. A vouchers payable system encompasses all expenditures. Vouchers can take several forms, ranging from a simple form or envelope to a voucher-check combination.

32. Voucher Systems When are invoices to be posted to vouchers payable? After invoices have been approved for payment, they may be held until the due date. They may be booked at the time of approval.

33. Voucher Systems What are built-up voucher systems? These systems accumulate several invoices from the same vendor and pay them with a single check. Three files are necessary to maintain useful information.

34. Voucher Systems What are these files? 1. a file of approved but unpaid invoices 2. a file of paid invoices 3. a vendor file showing both paid and unpaid amounts, ordered by vendor ID

35. Describe the human resource business process. Learning Objective 4

36. Human Resource Management Business Process The HR system should provide tools for the setup and maintenance of information pertaining to the organizational structure. A listing of jobs that exist in an organization A listing of job descriptions A listing of any qualifications that are required for a job

37. HR Processing in SAP R/3 HR data is immediately available to anyone who has authorization to use it because HR data is online. The HR component can be implemented standalone or it can be integrated with other modules.

38. Personnel Administration module (HR-PA) 1 Personnel Planning and Development module (HR-PD) 2 HR Processing in SAP R/3 Modules:

39. HR Processing in SAP R/3 Components: Time Management Payroll Travel Expense

40. HR Data Structure The HR data structure contains three elements. HR master data HR data organization HR objects

41. Illustrate controls that apply to payroll accounting. Learning Objective 5

42. Transaction Cycle Controlsin Payroll Processing Payroll processing is very complex. Why? All levels of government impose payroll taxes. Regulations and rates are constantly changing. The payroll system requires frequent modifications.

43. Transaction Cycle Controlsin Payroll Processing Payroll processing is one area in which the law imposes not only a fine but a jail sentence for willful negligence in maintaining adequate records.

44. Transaction Cycle Controlsin Payroll Processing Timekeeping Payroll Personnel Job time summary Authorization, notification Authorization, notification Reconcile Employee hiring, terminations, raises, and deductions Employee time cards Employee time cards Payroll register Paychecks

45. Transaction Cycle Controlsin Payroll Processing What is an independent paymaster? The person who distributes the pay is independent of personnel, timekeeping, and payroll preparation.

46. Payroll Processing Requirements Numerous files must be maintained in a payroll system. What are some examples of these files? Basic employee information Government reports Payroll register or journal Tax tables

47. Payroll Processing Requirements Social security and other tax legislation impose several taxes based on payrolls. (FICA) old-age, survivors, disability, and hospital insurance Federal unemployment insurance State unemployment insurance Income taxes withheld

48. End of Chapter 8