Question

Explains how IT can be used to change expenditure cycle activities.

Answer 1

Expenditure Cycle: Generally known as Purchase to Pay cycle. Earlier a company's expenditure cycle used to involve number of man hours but with the advent of IT there has been a dramatic change in the way the processes are being performed. Let us skim through all the stages in expenditure cycle and decide how IT can change the way of performing activities.

Stage 1:Purchasing decisions

Earlier production manager decides the requirement of materials and then passes on information to stores manager. Now with the help of IT we have an ERP in the form of Material Requirement Planning which communicates the requirement of materials in real time basis without the need of man hours and lot of time saving to the company.

Stage 2: Ordering decisions

Orders are earlier placed by purchase manager by visiting or mailing the vendors palce of business. Now the ERP places quotations for supply and mostly it also helps us in deciding the cost effective quote and accordingly places an order.

Stage 3: Receiving Materials

Receiving the physical materials involves man power and IT helps as a great advantage to the manager for quality check purpose and also authenticity.

Stage 4: Storage of Materials

Storage of materials requires lot of thinking as to where is the best place in factory to store so that the remaning materials stored or to be stored are not affected. Now IT helps in determining the best way possible to store the materials.

Stage 5: Payment

Payment in earlier days are bound to be delayed but due to advent of IT softwares like National electronic fund transfer(NEFT), Real time gross settlement(RTGS) it has been very easy and secure for the companies to either pay the dues or receive their dues immediately.

Thus IT changed substantially changed the way in which activities in expenditure cycle are carried out.