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Learn about the relationship between the Order Entry/Sales process and its business environment, and how to prepare control matrices for OE/S operations and information process control goals.
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1 ACC 3320 Accounting Information System
Topic 6 The Order Entry/Sales OE/S
Learning Objectives • Describe the relationship between the OE/S & B/AR/CR process and its business environment. • Depict the typical logical and physical characteristics of the OE/S & B/AR/CR process. • Prepare a control matrix for some typical OE/S processes, including explanations of how business process control plans can accomplish OE/S & B/AR/CR operations and information process control goals.
Introduction: Order Entry/Sales OE/S • The order entry/sales (OE/S) process includes the first four steps in the order-to-cash process. 1- pre-sales activities 2- sales order processing 3- picking and packing the goods 4- shipping • Billing and processing the customer payment, are included in the billing/accounts receivable/cash receipts (B/AR/CR) process.
Process Definition and Functions • Order entry/sales (OE/S) process: The primary function of the OE/S process is to create information flows that support the following: 1- Repetitive work routines of the sales order department, credit department, and shipping department 2- Decision needs of those who manage various sales and marketing functions. .
Management Questions • Where is sales volume (quantity and dollars) concentrated? • Who are the specific major customers (by sales and by profitability), both present and potential? • What opportunities exist to sell after-sales services; to cross sell and to up-sell? • What types of advertising and promotions have the greatest influence on customers?
Using Data Mining to Support Marketing • Data mining intended to allow the use of sophisticated statistical and other analytical software to help an organization’s members develop insights about customers, processes, and markets. • When the marketing department is armed with this massive array of data from which customer buying habits, characteristics, and addresses can be analyzed and linked, extensive study can be undertaken.
Global e-business • Two categories of E-business systems: 1- Buy Side A. Systems use the Internet to automate and manage purchases and vendors. B. The predominant technology in this area EDI, SCM. 2- Sell Side A. Systems allow a company to market, sell, deliver, and service goods and services to customers throughout the world via the Internet. B. Can handle both B2B and B2C business transactions. C. One facet is known as CRM applications.
CRM Systems • Designed to manage all customer-related data. • Cultivate customer relationships by prospecting, acquiring, servicing, and retaining customers. • Features include: 1- Contact management. 2- Organizing and retrieving information on historical sales activities and promotions. Uses “Segmentation,” the grouping of customers into categories based on key characteristics. 3- Sales-force automation to, for example, support call centers. 4- Customer self-service systems.
Process 1.1: Verify Inventory Availability • Inquiry of inventory master file to check inventory availability. 1- “Available to promise (ATP)” can be complicated. 2- Facilitated by an enterprise system that can look worldwide and up and down the supply chain to determine when goods can be delivered. • If inventory is on hand, order is forwarded for further processing. If not, a back order routine. • Demographic and other info is recorded in the marketing data store.
Process 1.2: Check credit • Establishes the customer’s existence and then evaluates credit. • Need to know amount of credit available to a customer worldwide. • Comprehensive credit check looks at: 1- Amount of order. 2- Amount of open orders (sales order master data). 3- Amount of open accounts receivable (AR master data. 4- Available credit (customer master data).
Process 1.3: Complete sales order • Process 1.3 performs the following activities simultaneously: 1- Updates the inventory master data to allocate the quantity ordered to the sales order (or reduce inventory balance). 2- Updates the sales order master data to indicate that a completed sales order has been created. 3- Disseminates the sales order.
Process 1.3: External Data Flows • Picking ticket: authorizes the warehouse to “pick” the goods from the shelf and send them to shipping. Identifies the goods to be picked and usually indicates the warehouse location. • Customer acknowledgement: notifies the customer of the order’s acceptance and the expected shipment date. • Sales order notification: document or computer message sent to the billing department to notify them of a pending shipment.
Process 3.2: Produce Shipping Notice • Disseminates notices of the shipment. • The sales order master data is updated to reflect the fact that the goods have been picked, packed, and shipped. • The inventory master data is updated to change the quantity allocated for the sales order to an actual shipment, thus reducing the quantity of inventory on hand (unless the balance had been reduced and not allocated in process 1.3).
Process 3.2: External Data Flows • Shipping’s billing notification: notifies billing. • Bill of lading: contract between the shipper and the carrier in which the carrier agrees to transport the goods to the shipper’s customer. • Packing slip: sent with the package to identify the customer, destination, and contents. • General ledger inventory sales update: notifies the general ledger process that inventory has been sold and that cost of goods sold has increased.
OE/S Data Stores • Customer master data: record of every authorized, regular customer. • Inventory master data: record of each item that is stocked in the warehouse or regularly ordered from a vendor. • Marketing data: repository of a variety of sales-oriented data from presales or sales activities. • Sales order master data: created on completion of a sales order and updated when goods have been shipped. • Accounts Receivable master data: To record all accounts receivable that can be made with the customers.
Electronic Data Capture • Bar code readers: devices that use light reflection to read differences in bar code patterns in order to identify a labeled item. • Optical character recognition (OCR): similar to bar code readers, but recognize a pattern of handwritten or printed characters. • Scanners: input devices that capture printed images or documents and convert them into electronic digital signals that can be stored on computer media.
Digital Image Processing • Digital image processing systems: computer-based systems for capture, storage, retrieval, and presentation of images of objects, such as pictures and documents. • Major steps : 1- Scanners capture documents. Key additional data as needed. 2- Documents are organized and filed. 3- Documents may be made available worldwide.
Digital Image Processing (cont’d) • After input, additional processing may take place. 1- Additional data might be added, or someone might act on data contained in the document. 2- Documents might be routed using workflow. 3- Retrieval and processing capabilities may be incorporated into existing applications. 4- Linking images in an enterprise system makes accessibility easier. Information can readily be distributed throughout the organization to where it is needed.
Validity for the OE/S Process • Sales order input validity: order is from an existing, authorized customer—one contained in the customer master data (i.e., authorized customers that have passed initial credit investigation)—whose current order falls within authorized credit limits. • Shipping notice input validity: shipping notice input is one that is supported by both an approved sales order and an actual shipment of goods.
Key OE/S Controls • Customer credit check: performed to ensure that an organization does not extend more credit to a customer than is prudent. • Compare picking ticket to picked goods: an example of one-for-one checking that ensures that the correct goods are picked from the shelf and that any errors are detected and corrected in a timely manner. • Independent shipping authorization: establishes, for the shipping personnel, that someone other than the warehouse personnel authorized the shipment.
Key OE/S Controls (cont’d) • Compare shipment to sales order and picking ticket: example of one-for-one checking that ensures that the shipment will be authorized and accurate. Any discrepancy among these items might indicate an unauthorized or duplicate shipment (no open sales order) or an inaccurate shipment (quantities to be shipped do not agree with the picking ticket or open sales order).
Key OE/S Controls (cont’d) • Independent customer master data maintenance: assumes that there is a segregation of duties between the personnel who create the customer record (to authorize sales to the customer) and the personnel who create the sales order (execute the sale). • Review file of open sales orders (tickler file): to detect any shipments that should have taken place. This will ensure that all shipments are made in a timely manner.
