Question

Discuss the objective of eliminating the receiving function. What accounting/audit problems need to be resolved? give me an example too.

Answer 1

First of all we need to understand the problems with the Receiving Function

The receiving function is responsible for reviewing incoming goods to ensure that they match authorization documents and that their quality and quantities are correct. The receiving staff also enters receipts into the inventory database. These steps can take quite a bit of time, which can delay the flow of goods from the receiving dock to the production area.

Eliminating Receiving

It is possible to eliminate the delays caused by the receiving function by eliminating receiving entirely. While the result can yield a very streamlined process flow, getting there is not easy. The following steps must be completed:

1. Reduce the number of suppliers, in preparation for the next step.

2. Certify suppliers to ensure that they can accurately ship goods in the correct quantities and at the right times, with specified quality levels.

3. Link the certified suppliers to the company's scheduling system, so they will know when to deliver goods, and in what quantities.

4. Train suppliers in how to deliver goods directly to the company's production line.

5. Set up the accounting system to pay suppliers automatically, based on the number of units manufactured by the production department. Supplier invoices are not needed. This is called an evaluated receipts system.

6. Create a system to account for all goods delivered by a supplier that are scrapped in the production process, and for which the company must pay the supplier.

These steps are not easy to complete, and should not be attempted unless the pool of available suppliers is of a sufficiently high quality to ensure that there will be cooperation with the implementation and maintenance of this system.

Eg.This is an extremely difficult best practice to implement. The concept that only a relatively small number of companies have fully implemented is to fully qualify suppliers in terms of their ability to ship goods of high quality, precisely on time, and to do so directly to the production process. This requires a great deal of advance work by the purchasing staff to find suppliers that are willing to do this, as well as supplier inspections by company engineers to ensure that supplier quality standards match or exceed those of the company. Only after this work has been done can a company convert to the direct delivery of goods to the production department, bypassing the receiving area.For example, the late or inaccurate data entry of receiving information can lead to inaccurate financial statements, as well as inaccurate information for the production planning and purchasing staffs to procure and assemble materials for the production department to use.