1. PowerPoint Presentation by Charlie Cook Copyright © 2004 South-Western. All rights reserved. Chapter 12 The “Purchase-to-Pay” (PtoP) Process

2. Copyright © 2004 South-Western. All rights reserved.12–2 Learning Objectives To describe the business environment for the Purchase-to-Pay (PtoP) process To analyze the effect of enterprise systems and other technologies on the PtoP process To describe the PtoP process logic, physical characteristics, and support of management decision making To describe and analyze the controls typically associated with the PtoP process

3. Copyright © 2004 South-Western. All rights reserved.12–3 The Purchase-to-Pay Process FIGURE 12.1

4. Copyright © 2004 South-Western. All rights reserved.12–4 A Vertical Perspective of the PtoP Process FIGURE 12.2 NOTES: 1.This figure represents a partial organization chart for the finance and logistics functions. 2.The broken lines represent vertical information flows (often in the form of management reports) based on data captured or generated by the PtoP process.

5. Copyright © 2004 South-Western. All rights reserved.12–5 Horizontal Information Flows Purchase requisition from inventory control to purchasing Requisitions from other departments to purchasing Purchase order (PO) to vendor PO notification to other departments or inventory PO notification to receiving PO notification to accounts payable Goods/services received from vendor

6. Copyright © 2004 South-Western. All rights reserved.12–6 Horizontal Information Flows (cont’d) Receiving notification to accounts payable (AP) Receiving notification to purchasing Invoice received from vendor Approved voucher to cashier AP notification and inventory cost information to general ledger (GL) Check to vendor by cashier Paid voucher to accounts payable Notification of cash disbursement to GL

7. Copyright © 2004 South-Western. All rights reserved.12–7 A Horizontal Perspective of the PtoP Process FIGURE 12.3 NOTES: 1.The information flows are representative of those related to the PtoP process. The figure, however, does not show all information flows. For example, purchase returns are not shown. 2.See Table 12.1 for a description of information flows 1–15.

8. Copyright © 2004 South-Western. All rights reserved.12–8 Description of Information Flows* TABLE 12.1 Flow No. Description 1Purchase requisition sent from inventory control department to purchasing department 2Purchase requisitions from various other departments sent to purchasing department 3Purchase order sent to vendor 4Purchase order notification sent to various other departments or to inventory control department 5Purchase order notification sent to receiving department 6Purchase order notification sent to accounts payable department 7Goods and services received from vendor 8Receiving notification sent to accounts payable department 9Receiving notification sent to purchasing department 10Invoice received from vendor 11Approved voucher sent to cashier 12Accounts payable notification and inventory cost information sent to general ledger 13Check sent to vendor by cashier 14Paid voucher returned to the accounts payable department 15Notification of the cash disbursement sent from the cashier to the general ledger * Many of these steps may be automated. See Technology Insight 12.1 for a description of these steps in an enterprise systems implementation.

9. Copyright © 2004 South-Western. All rights reserved.12–9 FIGURE 12.4 The PtoP Process— Level 0 Diagram

10. Copyright © 2004 South-Western. All rights reserved.12–10 Sample Purchase Requisition Screen (JD Edwards) FIGURE 12.5

11. Copyright © 2004 South-Western. All rights reserved.12–11 Sample Purchase Order Release Screen (JD Edwards) FIGURE 12.6

12. Copyright © 2004 South-Western. All rights reserved.12–12 FIGURE 12.7a PtoP Process— Systems Flowchart

13. Copyright © 2004 South-Western. All rights reserved.12–13 PtoP Process— Systems Flowchart (continued) FIGURE 12.7b

14. Copyright © 2004 South-Western. All rights reserved.12–14 FIGURE 12.7c PtoP Process— Systems Flowchart (continued)

15. Copyright © 2004 South-Western. All rights reserved.12–15 FIGURE 12.7d PtoP Process— Systems Flowchart (continued) RA = Remittance Advice

16. Copyright © 2004 South-Western. All rights reserved.12–16 TI 12.3a Enterprise System Support for the PtoP Process

17. Copyright © 2004 South-Western. All rights reserved.12–17 TI 12.3b Enterprise System Support for the PtoP Process (cont’d)

18. Copyright © 2004 South-Western. All rights reserved.12–18 FIGURE 12.8a Key: possible system goals: A – Select vendor – best quality, lowest price by promised delivery data B – Ensure that right goods in acceptable condition received C – Optimize cash discountsD – Ensure sufficient but not excessive cash E – Comply with corporate code of conduct IV = input validityIC = input completeness IA = input accuracyUC = update completeness UA = update accuracy Explanation of cell entries – see Exhibit 12.1. Control Matrix for the PtoP Process

19. Copyright © 2004 South-Western. All rights reserved.12–19 FIGURE 12.8b IV = input validityIC = input completeness IA = input accuracyUC = update completeness UA = update accuracy Control Matrix for the PtoP Process (cont’d) Key: possible system goals: A – Select vendor – best quality, lowest price by promised delivery data B – Ensure that right goods in acceptable condition received C – Optimize cash discountsD – Ensure sufficient but not excessive cash E – Comply with corporate code of conduct Explanation of cell entries – see Exhibit 12.1.

20. Copyright © 2004 South-Western. All rights reserved.12–20 PtoP Process—Diagram 1 FIGURE 12.9

21. Copyright © 2004 South-Western. All rights reserved.12–21 PtoP Process—Diagram 2 FIGURE 12.10

22. Copyright © 2004 South-Western. All rights reserved.12–22 PtoP Process—Diagram 3 FIGURE 12.11

23. Copyright © 2004 South-Western. All rights reserved.12–23 PtoP Process—Diagram 4 FIGURE 12.12

24. Copyright © 2004 South-Western. All rights reserved.12–24 Entity-Relationship (E-R) Diagram (Partial) for the PtoP Process FIGURE 12.13

25. Copyright © 2004 South-Western. All rights reserved.12–25 Selected Relational Tables (Partial) for the PtoP Process FIGURE 12.14