Presentation on theme: "Structured Analysis & OE/S Alternatives, specifications Focusing on the revenue cycle."— Presentation transcript:
Structured Analysis & OE/S Alternatives, specifications Focusing on the revenue cycle
Learning Objectives Know goals, plans, tasks, tools, & results of systems analysis Understand/appreciate costs of developing, maintaining, operating information system Perform some analysis tasks on the Revenue Cycle. Identify controls.
SDLC – Structured System Analysis
4 Systems Analysis Goals Define problem precisely (make all mistakes early!) Devise alternative designs (solutions) Choose & justify one of the alternatives Develop logical specifications for selected design Develop physical requirements for selected design Develop budget for next two SD phases (systems design; systems implementation)
Systems Analysis Plans & Documents
6 Accountants Involvement in Systems Analysis Systems specialist or consultant Staff accountant User/requester member of analysis team interviewee by analysis team Internal auditor consultant to analysis team agent of management/board of directors
7 Systems Analysis Document (1) Executive summary Project summary Summary of proposed system Summary of impact of new system Summary of cost/effectiveness & recommendations Systems analysis summary facts gathered analysis performed
8 Systems Analysis Document (2) User requirements for new system Operating requirements Information requirements Control requirements Description of future logical system DFDs, data dictionaries, narrative description Summary of improvements from new system
9 Systems Analysis Document (3) Description of future physical system DFDs, flowcharts, narrative Summary of cost/benefit improvements - new system New system constraints Hardware & software constraints Interface constraints Contractual/legal requirements
10 Systems Analysis Document (4) Design phase budget & schedule Design phase personnel/computer requirements Development schedule Physical requirements Workload & volume Response times Functional layouts of screens & reports System growth
13 Future logical system from current Add new activities Remodel existing activities Add or change control activities (Compare changes 16.6 vs. 16.7
14 Prioritizing User Requirement Priorities Critical : if this requirement is not met the entire process or, worse, company is jeopardized. Important: If this requirement is not meet, the company, department, team or person will be negatively affected, but system is still useful and useable. Useful: If this requirement is not met, users may be less than satisfied, but impact is minimal.
15 Future Physical from Future Logical Decide which processes will be manual/automated Decide which would be immediate processing and which would be batch Complete specifications for new system alternative technologies (EDI, mail) alternative modes (immediate/batch)
16 Select Best Alternative Physical System Analysis team recommends IT steering committee ratifies - or sends back Analysis team conducts cost/effectiveness study cost/benefit analysis (efficiency criteria) effectiveness analysis
17 Cost/Benefit Analysis Estimate costs of new system direct costs - equipment, personnel, site, materials, supplies indirect costs - overhead-type costs, utilities Estimate benefits of new system direct benefits - reduced personnel/hardware costs indirect benefits - improved revenue from improved customer support; reduced inventory &/or accounts receivable
18 Cost / Benefit Analysis (2) Do not apply sunk costs. Money already spent cannot be recovered. Make decision looking ahead. Do include differential cost analysis Impact of increasing production, revenue. Requires accurate estimating.
19 Effectiveness Analysis Analysts & user list all relevant criteria, including costs & benefits and intangibles Users & analysts jointly assign subjective rankings for each criterion for each alternative Team ranks alternatives by summarizing ratings Team recommends best alternative to steering committee
20 Logical Specifications Will be used in systems selection or design Executive summary - DFD & narrative for major features, objectives, benefits & constraints Application description - DFD & narrative for each system function Information requirements - each input, output, & file: purpose, description, origin, major elements, frequency, volume, distribution Miscellaneous functions
21 Physical Requirements Used in systems selection to acquire equipment Items to be specified Data storage File size, growth, activity, access requirements Transaction volume/expected growth Peripherals - printers, PCs, plotters Communications Backup & security Processing approaches Reliability Output distribution Response time requirements
22 Budget & Schedule Budget - from cost/benefit analysis - update of projections made during systems survey Schedule - update of preliminary schedules made during systems survey Finally, the document should have the proper approvals
23 The Order Entry/Sales (OE/S) Process
Learning Objectives Understand OE/S process and its environment. Appreciate potential of OE/S process to assist management decision making. Examine how systems integration can improve effectiveness and efficiency of OE/S process.
Learning Objectives (2) Understand logical and physical characteristics of OE/S. Establish familiarity of CRM and ERP. Know operations & information process control goals and control plans for OE/S.
26 Revenue Cycle (merchandising)
28 OE/S Horizontal Information Flows Customer places order S.O. dept. requires CR approval from CR dept. CR dept. informs S.O. dept. of decision S.O. dept. acknowledges customer order S.O. dept. notifies shipping dept. of S.O. S.O. dept. notifies warehouse, B/AR/CR process, payroll process, & General ledger Cont…..
29 OE/S Horizontal Information Flows (2) Warehouse sends completed picking ticket to shipping department Shipping dept. informs S.O. dept of shipment Shipping dept. informs carrier & B/AR/CR process of shipment
30 Vertical perspective of the OE/S system
31 OE/S Context Diagram
OE/S Level 0 DFD
OE/S Level 1 DFD
34 Level 1 DFD narrative Verify inventory available inquiry of inventory master file to check reject or make backorder if not available; send to next process if available record demographic and other info in marketing file Check credit check to see if valid customer check A/R master file to see if credit limit is ok if invalid or over limit, reject; if not, send to next process
35 Level 1 DFD narrative (2) 1.3 Complete sales order add pricing info from inventory file update inventory file - reduce quantity on hand notify GL inventory has been reduced and cost of goods sold increased update Sales Order master file to show completed order Notify P/AP/CD that commissions are due disseminate sales order
36 Dissemination documents Picking ticket - authorizes warehouse to pick goods, send to shipping. Has warehouse location. Packing slip - attached to outside of carton; identifies customer and goods. Customer acknowledgement - notifies customer of acceptance of order; shipping date. Sales order notification - internal form sent to billing department re pending shipment Bill of lading - contract between shipper & carrier; carrier gets copy, shipper keeps copy.
37 OE/S Files Marketing file - sales-oriented data, some from OE/S, other from Marketing information system Customer master file - data about customer characteristics: name, address, credit limit, etc. Sales order master file - file of open sales orders; can be checked periodically/follow up. Completed picking ticket file - used for follow up and audit purposes. Shipping notice file - used for follow up and audit purposes
OE/S ERD p.331
39 In Class Assignment Prepare complete invoice from data available on 10.11
40 OE/S Data Entry
41 System Flowchart 1
42 System Flowchart 2
43 System Flowchart 3
44 Six Process Controls Transaction authorization – valid and in accordance with management objectives. Segregation of duties – authorization separate from processing; asset custody separate from record- keeping; structure for two party approval. Supervision – compensate for segregation limits. Accounting records – audit trail obligation. Access – prevent unauthorized or unintended destruction, alteration, misuse. Independent verification – after the fact check on correctness, integrity, and performance. Note: applicable to all cycles
45 Authorization Controls Proper authorization of transactions (documentation) should occur so that only valid transactions get processed. Within the revenue cycle, authorization should take place when: a sale is made on credit (authorization) a cash refund is requested (authorization) posting a cash payment received to a customers account (cash pre-list)
46 Segregation of Functions Three Rules 1. Transaction authorization should be separate from transaction processing. 2. Asset custody should be separate from asset recordkeeping. 3. The organization should be so structured that the perpetration of a fraud requires collusion between two or more individuals.
47 Segregation of Functions Sales Order Processing credit authorization separate from SO processing inventory control separate from warehouse accounts receivable sub-ledger separate from general ledger control account Cash Receipts Processing cash receipts separate from accounting records accounts receivable sub-ledger separate from general ledger
48 Supervision Supervision of employees serves as a deterrent to dishonest acts and is particularly important in the mailroom(!?!).
49 Accounting Records With a properly maintained audit trail, it is possible to track transactions through the systems and to find where and when errors were made: pre-numbered source documents special journals subsidiary ledgers general ledger files
50 Access Controls Access to assets and information (accounting records) should be limited. Within the revenue cycle, the assets to protect are cash and inventories and access to records such as the accounts receivable subsidiary ledger and cash journal should be restricted.
51 Independent Verification Physical procedures as well as recordkeeping should be independently reviewed at various points in the system to check for accuracy and completeness: shipping verifies the goods sent from the warehouse are correct in type and quantity warehouse reconciles the stock release document (picking slip) and packing slip billing reconciles the shipping notice with the sales invoice general ledger reconciles journal vouchers from billing, inventory control, cash receipts, and accounts receivable
52 Control Considerations for Computer-Based Systems Authorization - in real-time systems, authorizations are automated: programmed decision rules must be closely monitored. Segregation of Functions - some consolidation of tasks by the computer; protect the computer programs--coding, processing and maintenance should be separated.
53 RFID – Radio Frequency ID tags Unique identifier with read/transmission capabilities for any item (living or manufactured). Unit cost to drop to pennies. Improving read and transmission capabilities. Wal-mart requiring major supplier use by Wal-mart requiring major supplier use by 2005
54 Control Considerations for Computer-Based Systems Supervision - in POS systems, the cash registers internal tape or database is an added form of supervision. Access Control - magnetic records are vulnerable to both authorized and unauthorized exposure and should be protected. Must have limited file accessibility Computer programs must be safeguarded and monitored
55 Control Considerations for Computer- Based Systems Accounting Records - rest on reliability and security of magnetically stored data. The accountant should be skeptical about accepting the accuracy of hard-copy printouts of journals and ledgers. Backup is a concern for direct access files, and the system needs to ensure that backup of all files is continuously kept.
56 Microcomputer-Based Accounting Systems Used by small firms and some large decentralized firms Allow one or few individuals to perform entire accounting function Most systems are divided into modules general ledger inventory control payroll cash disbursements purchases and accounts payable cash receipts sales order
57 Microcomputer Control Issues Segregation of Duties - tend to be inadequate and should be compensated for with increased supervision, detailed management reports, and frequent independent verification Access Control - access controls to the data stored on the computer tends to be weak; methods such as encryption and disk locking devices should be used Accounting Records - computer disk failures cause data losses; external backup methods need to be implemented to allow data recovery
Control Goals of the Business Process Ensure effectiveness of operations by achieving the following process goals Ensure efficient employ- ment of resources Ensure security of resources Control Goal of the Operations Process Control Goals of the Information Process For sales order inputs, ensure: For sales order and inventory master data, ensure: For shipping notice inputs, ensure: For sales order master data, ensure: ABCDIVICIAIVICIAUCUAUCUA P-1 P-2 P-3 P-4 P-5 P-6 P-7 Recommended Control Plans P-1: Independent customer master file maintenance P-1 P-2: Enter data close to location where customer order is prepared P-2 P-3: Customer credit check P-3 P-4: Independent pricing daa P-5: Independent shipping authorization P-6: Packing slip tickler file P-7: Completed picking ticket file Key: possible system goals: A - Provide timely responses to customer inquiries B - Provide timely acknowledgement of customer orders C - Provide assurance of customers creditworthiness D - Provide timely shipment of goods to customers IV = input validity IC = input completeness IA = input accuracy UC = update completeness UA = update accuracy Control Matrix (1)
Control Goals of the Business Process Ensure effectiveness of operations by achieving the following process goals Ensure efficient employ- ment of resources Ensure security of resources Control Goal of the Operations Process Control Goals of the Information Process For sales order inputs, ensure: For sales order and inventory master data, ensure: For shipping notice inputs, ensure: For sales order master data, ensure: ABCDIVICIAIVICIAUCUAUCUA P-8 P-9 P-10 P-11 P-12 P-13 P-14 Recommended Control Plans Key: possible system goals: A - Provide timely responses to customer inquiries B - Provide timely acknowledgement of customer orders C - Provide assurance of customers creditworthiness D - Provide timely shipment of goods to customers IV = input validity IC = input completeness IA = input accuracy UC = update completeness UA = update accuracy P-9 P-14 P-8: 1 for 1 checking of goods, picking ticket and packing slip P-9: Populate inputs with master data P-9 P-10: Online prompting P-10 P-11: Preformatted screens P-11 P-12: Interactive feedback checks P-13: Programmed edit checks P-14: Compare input data with master data Control Matrix (2)
60 Key Terms Structured systems analysis Approved systems analysis document Alternative future physical systems Cost/benefit analysis Cost/effectiveness study Order/entry sales (OE/S) process Picking ticket Packing slip Data mining Data warehousing Data marts Customer acknowledgement Bill of lading Customer relationship management (CRM) systems Sales order
61 Solution P ProcessSubsidiary FunctionsInputsOutputs 1.0Respond to customer requests 1.1Edit and routeCustomer inquiry Customer order Edited inquiry Edited order Marketing data 1.2Respond to inquiryEdited inquiry Customer master data Inventory master data Sales order master data Customer reply Marketing data 2.0Validate sales order2.1Check creditEdited order Customer master data Accounts receivable master data Sales order master data Credit-approved order 2.2Verify inventory availabilityCredit-approved order Inventory master data Accepted order
62 Solution P10-8 cont. 3.0Complete picking ticket3.1Match goods with picking ticket Picking ticketMatched picking ticket 3.2Enter quantities pickedMatched picking ticketCompleted picking ticket 4.0Execute shipping notice4.1Match ordersPacking slip Completed picking ticket Matched sales order Completed picking ticket data 4.2Produce shipping noticeMatched sales order Sales order master data Shipping's inventory notification Shipping's billing notification Bill of lading Completed packing slip Shipping notice data Sales order master data
63 Recommendations Ch. 5: RQ 1,2,3,6,7d,9; DQ 1,3 Using Access to generate queries Exporting Access data to XL for reporting.