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3. 3 C3. Financial systems, procedures & IT application C4. The relationship between accounting & other business functions Designed to give you knowledge and application of: Section C: History & role of accounting in business

4. 4 C3 and C4: Financial systems, procedures & IT applications and The relationship between accounting & other business functions  Main financial systems and control.  Sales invoicing and credit control  Payroll and working capital management.  Business uses of computers & IT software applications  Relationship between accounting and purchasing / procurement.  Financial considerations in production and production planning.  Financial issues associated with marketing.  Financial costs and benefits of effective service provision. Learning Outcomes

5. 5 Main financial systems & control Purchases invoicing Sales invoicing Payroll Credit control Cash and working capital management Main financial systems Purchases Invoicing  Increases efficiency of payments made for purchases  Finds optimum balance of stretching supplier payments but not letting accounts become overdue Pam’s account shows that I have to pay her by the 20 th. I will pay her on the 19 th. Control system Placing a monetary limit on purchases that can be made by an individual / department

6. 6 Sales invoicing & credit control I need to prepare the age-wise analysis of receivables and give it to the sales staff – this helps them in their collection drive. Sales Invoicing  Process sales orders for goods / services produced  Track all orders the customers have placed and payment status for each order Credit control  Determine credit level or terms to be granted to customers  Credit terms specify equal value of goods / services that can be purchased without paying up-front Control systems Automatically blocking processing of sales orders from customers with overdue accounts Control system Restricting number of employees that can enter / alter a customer limit

7. 7 Payroll & working capital management Cash and working capital management  Maintain an optimum level of working capital  Place unutilised funds into investments Payroll  Produce a cheque (or electronic credit) for each employee  Produce corresponding payslip (details of employee’s gross salary, tax deduction etc) Control system Segregating duties between two employees (one employee enters data, second checks & processes) Control system Restricting number of employees with access to the system Amount of money an organisation needs to finance its day to day activities. Refer to Test Yourself 2 on page 197

8. 8 Business uses of computers & IT software applications Databases Consist of a collection of records stored in a systematic way (information is segregated into different fields) Greatly simplifies retrieving specific sets of / cross referencing data. Allow users to run “queries” (questions for which the computer will scan through all the records to provide the answer). Spreadsheets Consist of a rectangular table or grid of information. Contain rows, columns and cells (points where rows and columns intersect). Process and perform calculations on vast amounts of information extremely quickly. Allow users to run various “what if” scenarios. Example: spreadsheets Marketing departments frequently use spreadsheets: to determine how changing one component of a product’s feature (e.g. its price) might result in change the overall forecasted demand for the product. Refer to Diagram 3 on page 198

9. 9 Relationship between accounting and purchasing / procurement Purchasing department  Procures all goods / services organisation requires at the earliest and at the lowest price (without sacrificing quality ) Accounting department  Ensures all purchases are properly authorised  Makes payment for all purchases  Makes & maintains records of all purchases & purchase related costs  Ensures purchases are within budget

10. 10 Financial considerations in production & production planning Production Involves combining men, machinery, materials and money to produce goods Production Planning Involves setting  The quantity and type of goods to be produced (production)  The type and amount of costs that will be incurred (budgeting) Along with preparing a budget, the other financial considerations involved are: Maintaining appropriate accounting records (e.g. costs of raw materials) Ensuring availability of finance for sufficient production (e.g. working capital) Investigating / correcting any variances that may occur against budget Refer to Test Yourself 2 on page 208

11. 11 The financial issues associated with marketing Financial issues associated with marketing Preparing sales and marketing budgets Obtaining funding for activities (e.g. promotions & advertising) Determining product prices Following up for payments from customers Examining and justifying advertising costs Inputs include market conditions & production costs Typically previous year’s budgets serve as a foundation Determining credit terms The main responsibilities of the marketing department  Ascertain current needs & demands of customers.  Communicate internally the changes needed to products, to increase their sales.  Communicate to the market about organisation’s products & services.  Determine price of the products.  Attend to all activities associated with the sales function. Refer to Test Yourself 3 on page 209

12. 12 Financial costs & benefits of effective service provision Effective service provision involves:  setting up a department dedicated to this function (i.e. client servicing department)  the department then serves as a single point of contact for organisation’s clients &  acts as an intermediary between client and the rest of the organisation Servicing department Clients Department B Department A  Simplifies life for clients who have to deal with multiple departments  Increases customer satisfaction  Increases customer loyalty & business  Salaries of staff of the department  Other direct and indirect expenses of department (e.g. rent, equipment etc.)

13. 13 RECAP  Main financial systems and control.  Sales invoicing and credit control  Payroll and working capital management.  Business uses of computers & IT software applications  Relationship between accounting and purchasing / procurement.  Financial considerations in production and production planning.  Financial issues associated with marketing.  Financial costs and benefits of effective service provision.

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