Question

O’Brien Corporation is a midsize, privately owned, industrial instrument manufacturer supplying precision equipment to manufacturers in the Midwest. The corporation is 10 years old and uses an integrated ERP system. The administrative offices are located in a downtown building and the production, shipping, and receiving departments are housed in a renovated warehouse a few blocks away.

Customers place orders on the company’s website, by fax, or by telephone. All sales are on credit, FOB destination. During the past year sales have increased dramatically, but 15% of credit sales have had to written off as uncollectible, including several large online orders to first-time customers who denied ordering or receiving the merchandise.

Customer orders are picked and sent to the warehouse, where they are placed near the loading dock in alphabetical sequence by customer name. The loading dock is used both for outgoing shipments to customers and to receive incoming deliveries. There are ten to twenty incoming deliveries every day, from a variety of sources.

The increased volume of sales has resulted in a number of errors in which customers were sent the wrong items. There have also been some delays in shipping because items that supposedly were in stock could not be found in the warehouse. Although a perpetual inventory is maintained, there has not been a physical count of inventory for two years. When an item is missing, the warehouse staff writes the information down in log book. Once a week, the warehouse staff uses the log book to update the inventory records.

The system is configured to prepare the sales invoice only after shipping employees enter the actual quantities sent to a customer, thereby ensuring that customers are billed only for items actually sent and not for anything on back order.

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? [3 points]

Answer 1

MEANING OF SALES ORDER ENTRY-

Sales order entry is a process which sets a guidelines for sale order process and ensures from the beginning, from obtaining the sales order through shipping and billing to customers.The sales order entry process ensure the accurate shipments through efficient and organised sales order process and it is the responsibility of all individual employee, who is involved in sales order entry process.

The main objectives of Sales order entry process are -

1. Accurate shipments.

2. Efficient and organised sales order entry.

3. All the paperwork and preparation of documents is properly completed.

THE ACTIVITIES OF SALES ORDER ENTRY ARE -

• Sales representative.

• Internet orders.

• Credit department.

• Sales administration

• Shipping

• Customer service

• Billing

• Changes to order

• Additional information Resources

EXPLANATIONS for the activities-

• Sales representative :- Sales representative ensures all the activities related to sales, it's shipping, billing etc activities are performed systematically and effectively.

• Internet orders - This activity ensures that all the internet orders taken or shipped must shipped at the or before the delivery date accurately and satisfy the customer's with it's services.

• Credit department- This department take care of all the credit orders and should take care of all the credit orders, and about its payment and it should be recorded.

•Sales administration- All the sales activities are administrated under this, about the shipmemt orders, its quality etc And all about the sales order.

• Shipping-This activity ensures or administrate the shipping orders and its quantity in godown. So, that it can be shipped at the date or before delievery date.

• Customer Service- This activity take care about the customer services from taking the shipment, delievery the order to satisfy the customers and taking all the greviances if any.

•Billing -This activity take care of bill of accounts of each and every customers accurately, and records each and every deatils so, it can give accurate and reliable reports.

• Changes to order- This activity is related to the orders, if there is any few quantity of stock left, when that stock is in demand and needed. So, to maintain level of quantity of stocks or orders.

These step by step activities completes the sales order entry and take care of all the requirements and process must taking effevtively and accurately.

Threats that is facing -

● Incomplete And inaccurate orders - As we know, due to all orders are credit sales and had to be written off as uncollectible but not recorded as resulted in number of errors, in which customers are delievred wrong item.As the orders are incomplete and inaccurate, the sales order entry process doesn't work properly and may be result in wrong reports which can harm the future reports.

● Invalid orders - As sometimes, invalid orders are also placed as they are different sources. So, some people also place orders by mistake etc. So, this is also one of the threat which problems the sales order entry process.

● Uncollectible accounts- As some of the accounts details, order details are not recorded time to time which results in error and less order quantity in godown.

● Billing- As, Corporation doesn't record time to time billing of accounts, that is about which customer is shipped and which item is shipped etc.

POSSIBLE CONTROLS FOR THESE THREATS-

•Data entry edit controls - This control will help the inaccuracies and incomplete records of inventory and accounts. This will help the entry process to ensure correct details about all the accounts and stock.

• Digital signatures- For the invalid orders, this control would be very effective because when the website and any source will demand for digital signature, the invalid orders will not be placed. The order will placed only because of digital signature which act as a security system for the process.

• Credit limits and Specific authorisation to approve sales to new customers- This control will definitely help the corporation to get rid of uncollected accounts by aging of accounts receivable and setting a credit limit and most important, specific authorisation to sales of new customers, So the new.customers will not give harm to the accounts.

• Periodic physical counts and training - From periodic physical count, there should be accurate knowledge of stocks and the accounts of customers who are really sent item and training for the employees is must as these updates the knowledge of employees of how to do work more efficiently and accurately. So, that he/she can update the billing status of each accounts correctly.