The Bondstreet Company sells medical supplies to hospitals, clinics, and doctors' offices. Harris & Carnahan uses an ERP system for all of its business processes.
The billing process begins each morning when a clerk in the billing section of the accounts receivable department requests that the ERP system display the billing due list on their computer screen. These are the shipments made the previous day from the warehouse at Harris & Carnahan's customer fulfillment center. At the bottom of the list, the computer displays the total number of records in the billing due list, the total number of items that were shipped, and a hash total of the customer numbers. The clerk records these onto a batch total sheet.
The clerk then requests that the ERP system execute the billing program. This program prepares invoice records by accessing the customer data to get the routing information for the electronic invoice and the payment terms to be given to the customer. The program also obtains the prices from the inventory data. Finally, the program examines the sales order data to determine how the shipment was routed so that shipping costs can be added to the invoice. At the end of this process, the computer calculates and displays a total of the number of invoices, the total items being billed, and a hash total of the customer numbers in the batch of invoices.
The billing clerk reconciles the invoice totals with those obtained from the billing due list. If the totals agree, the clerk accepts the batch of invoices. In response, the ERP system updates the sales order to show that the shipment has been billed, closes the billing due list, creates an accounts receivable record, updates the general ledger for the sale, sends an electronic invoice to the customer, and displays a job completed notice on the billing clerk's screen.
The cash receipts process begins each morning when the lockbox at Harris & Carnahan's bank sends a file of remittance data processed the previous day. Harris & Carnahan's ERP system automatically saves this file. For each payment, this file contains a customer number, invoice number, and amount paid. Totals in this file include hash totals for customer number and invoice number and the total payments. The bank also sends an e-mail containing these same totals. A clerk in the cash applications section of the accounts receivable department requests that the ERP system display the totals in the remittance file and manually compares those totals to those in the e-mail.
If the totals agree, the clerk requests that the ERP system apply the payments to the accounts receivable data. The computer examines the terms on the invoice record, calculates the amount that should be paid, and records the payment (again, assuming that the amounts are all correct). The computer displays the totals recorded to accounts receivable and discounts, and the total amount paid. The clerk compares these totals to those obtained from the e-mail and remittance file. If these agree, the clerk requests that the ERP system update the general ledger (cash, accounts receivable, discounts) for this batch.
Documentation for Harris & Carnahan's billing and cash receipts process is provided below.
REQUIREMENTS:
- Complete the control matrix, including explanations of how each control plan helps to accomplish each related control goal.
- Indicate three missing plans, numbered M-1, M-2, and M-3, on the control matrix. Include explanations of how each of these recommended control plans helps to accomplish each related control goal.
- Annotate the flowchart provided in part a to indicate the points where the control plans are being applied or the points where you are recommending control plans be added.