Question

What are the activities of sales order entry? Give four of the threats that may face and what could be the possible controls for those threats

Answer 1

Sales order entry process contains four steps:

1.Taking the customer’s order

2. Checking and approving customer credit,

3. Checking inventory availability

4.Responding to Customer Inquiries

These are explained as follows:

Taking Customer’s Order :-

This is the first Step in Sales order Entry. There are many different ways for taking customer Orders like Phone, mails, etc. The Order must contain information like quantity ordered, Item Description, prices etc. Software can be used for properly taking customer order.

Checking and approving customer credit :-

Before processing any order which is on credit, it should be approved by the authorized person. This authorized person should check the Creditworthiness of the person. This credit authorization can be of two types

General Authorization- For existing customers below their credit limit who don’t have past due balances General authorization involves checking the customer master file to verify the account and status.
Special Authorization- It is for the Customers who are new, have past balances and are placing orders that would exceed their credit limit

Checking inventory availability :-

The next step is to ensure there is sufficient inventory to fill the order and advise the customer of the delivery date.The sales order clerk can usually reference a screen displaying:

–Quantity on hand

–Quantity already committed to others

–Quantity on order

If there are enough units to fill the order, complete the sales order and send the Acknowledgement to Customer.

Responding to Customer Inquiries :-

Another step in the sales order entry process is responding to customer inquiries. It may occur before or after the order is placed.The quality of this customer service can be critical to company success. Many companies use CRM (Customer Relationship Management) Systems to support this process.

Threats and Applicable Controls in Sales Order Entry:

Sr. No.	Possible Threats	Controls
1	Incomplete or inaccurate customer orders	Various data entry edit controls may be used to avoid incomplete or inaccurate orders
2	Credit sales to customers with poor credit	Credit approval should be properly done before delivering any products or services
3	Legitimacy of order	Customer’s purchase order should be duly authorized. Digital signatures can also be used
4	Lost sales due to stockouts or Excessive Inventory Carrying	The organization should have Inventory control systems and Periodic Stock Counting