Accounting, Information Technology,
and Business Solutions, 2nd Edition
By Hollander, Denna, Cherrington
Chapter 7
PowerPoint slides by:
Bruce W. MacLean,
Faculty of Management,
Dalhousie University
The Acquisition / Payment Process
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc., 2000
Chapter Objectives




Identify the characteristics of the traditional
acquisition/payment process and related IT
applications.
Describe the criticisms of the traditional
acquisition/payment process and the
IT application architecture.
Develop a REAL model of the
acquisition/payment process.
Identify opportunities to improve the
acquisition/payment process and IT applications.
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The McGraw-Hill Companies, Inc., 2000
Strategy and Scope

To provide needed resources for the organization’s
conversion processes when they are needed. This can be
broken into several sub-objectives:








Purchase items from reliable vendors.
Purchase high quality items, or at least items of the desired quality.
Obtain the desired items at the best possible price.
Purchase only those items that are properly
authorized and are for legitimate company purposes.
Have resources available and in useful condition
when they are needed by the company.
Receive only those items ordered, and receive all the items ordered.
Control items received so they are not lost, stolen, or broken.
Pay for the items received in a timely manner to the appropriate party.
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The McGraw-Hill Companies, Inc., 2000
Overview of Acquisition/Payment
Process






Request for goods/services (monitor need) event
Authorize purchase event
Purchase good/service event
Receive goods/services event
Disburse cash event
Purchase return event
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The McGraw-Hill Companies, Inc., 2000
Traditional Automated Acquisition/Payment
Process Flowchart - Part 1
May be done
at time of
updating
Initiate
purchases
Step 1 - Extract data
and print report
Inventory
master file
Inventory
reorder list
Supplier
reference &
history file
Supplier
evaulatio
n data
display
Select
supplier &
note on
list
Inventory reorder
list
Performed by
purchasing
department buyers
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Enter purchase
order data
A
The McGraw-Hill Companies, Inc., 2000
Traditional Automated Acquisition/Payment
Process Flowchart - Part 1
A
Step 2 - Edit purchase order data
& store in file
Supplier
master file
Purchase
transaction data
Step 3 - Update files &
print updates
Open purchase
order file
Purchase orders
Performed by
purchasing
manager
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Listing of
purchase orders
Review and
sign
To supplier
To purchasing
manager
Exception
and error
display
Inventory
master file
Inventory status
report
Printed at
end of
day
To inventory manager
The McGraw-Hill Companies, Inc., 2000
Traditional Automated Acquisition/Payment
Process Flowchart - Part 2
Initiate
supplier
Count & inspect
received items;
compare to
packing slip
Packing slip
Performed by
receiving
clerk
Open purchase
order file
Enter receipt on
CRT terminal
Edit receipt data
& prepare
receiving report
Exception
and error
display
B
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc., 2000
Traditional Automated Acquisition/Payment
Process Flowchart - Part 2
B
Receiving report
Receipt
transaction
Inventory
master file
Update master
files
Open
purchase
order file
Receiving
report file
To stores & accounts
payable
Supplier
history file
Back-order
file
To supplier
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The McGraw-Hill Companies, Inc., 2000
Traditional Automated Acquisition/Payment
Process Flowchart - Part 3
From suppliers
Supplier’s invoice
Performed by
accounts
payable clerk
Verify check
& prepare
batch total
Receiving
reports
Receiving
report
Supplier’s invoice
Exception
and error
display
Enter invoiced
amounts & total
Edit entered data
Supplier’s invoice
Receiving report
Approv
e for
paymen
t
Irwin/McGraw-Hill
Open
purchase
order file
D
Unpaid
voucher
s
C
The McGraw-Hill Companies, Inc., 2000
Traditional Automated Acquisition/Payment
Process Flowchart - Part 3
D
Supplier accounts
payable master file
Open purchase
orders file
C
Disbursement
voucher
To cost control or other
resource management
department
Irwin/McGraw-Hill
Stored until
end of day
Payables data
from invoices
Update payables & other files &
prepare vouchers
Voucher
registry &
summary
Open
vouchers file
To accounts
payable
department
To report
preparation
procedure
Supplier
history file
General
Ledger
Display of
batch totals
& errors
To accounting
clerk
The McGraw-Hill Companies, Inc., 2000
Traditional Automated Acquisition/Payment
Process Flowchart - Part 4
From accounts
payable procedure
Disbursement
vouchers
Batch
total
Prepare
batch total
Disbursement
vouchers
Voucher
s file
Exception &
summary report
Key-to-disk and edit
A similar report is
an output of each
computer run
Disbursement data
Run 1 - Sort by
supplier account
number
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A
The McGraw-Hill Companies, Inc., 2000
Traditional Automated Acquisition/Payment
Process Flowchart - Part 4
A
Sorted
disbursement data
Supplier disbursement
payables master file
Run 1 - Update
accounts payable file;
print checks & other
outputs
Checks
Check
number
To cash
disbursements
Irwin/McGraw-Hill
Summary of
cash
disbursements
To financial
management
(with
vouchers)
Journal voucher
transaction file
To general
ledger
procedure
Revie
w and
sign
Open vouchers
file
Supplier history
file
Voucher
s file
Disbursement
vouchers
To
suppliers
The McGraw-Hill Companies, Inc., 2000
Traditional, Manual Acquisition/Payment Process Flowchart
Inventory
Control
Purchasing
General
Ledger
Accounts
Payable
Receiving
F
1
A
Purchase 2
Requisition
Purchase 2
Requisition
B
3
Purchase
Order
Receiving3
Report
Goods
Purch. Order 3
Vendor’s
Invoice
Dr/Cr to
G/L
C
Compare
& Post
Prepare
Receiving
Report
Purchases
Journal
Vendor’s Invoice
Post to
General
Ledger
5
Review,
sign ck,
post
4
3
E
3
Purchase 1
Order
2
To vendor
N
Pull and
Prepare
Check
Purch. Order 3
Receiv. Report 3
Check
Vendor’s Invoice
G
Dr/Cr to
G/L
C
C
Cash
Disburs.
Journal
General
Ledger
I
D
A
F
When
Payment
Is Due
Receiving1
Report
E
B
Dr/Cr to
G/L
C
4
2
Inventory
Ledger
Receiv. Report 3
Check
Prepare
Purchase
Orders
Update
Inv.
Records
G
D
2
P/O
Blind
Copy
Cashier /
Controller
C
H
To vendor
H
A= Alphabetical
C= Chronological
N= Numerical
A
Prepared with the assistance of Dr. William Hillison,
Arthur Andersen Alumni Professor, Florida State University.
Irwin/McGraw-Hill
Post to
General
Ledger
Acct. Pay
Ledger
Dr/Cr to
G/L
I
General
Ledger
The McGraw-Hill Companies, Inc., 2000
Traditional Reimbursement Process
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The McGraw-Hill Companies, Inc., 2000
IBM’s NEDS (National Employee
Disbursement Solution)
Management
approvals
Travel
information
BusinessEvent
Processor
(business
and
information
process
rules)
Business
Data
Repository
Reporting
Facility
EFT
Employee
deposit
Impact:
393 headcount reduction
$291 million savings (10 years)
Decreased processing time
Increased controls
Better management information
New role for the accountant
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The McGraw-Hill Companies, Inc., 2000
Christopher, Inc.
Aquisition/Payment
REAL Model
Order
Request
& Review
Authorizing
Agent
(0,*)
(1,1)
(1,1)
(0,*)
Purchasing
Clerk
Order Goods
from Vendor
Inventory
(1,*)
(1,1)
(0,*)
(1,*)
(0,*)
(1,1)
Bank
(0,*)
Cash
(1,1)
(0,*)
Disburse
Payment
Vendor
(0,*)
(0,*)
Receive
Goods
Inventory
Clerk
(0,*)
(0,*)
(1,1)
Receiving
Clerk
(1,1)
Warehouse
Clerk
(1,1)
Accounts
(1,1)
Payable Clerk
Cashier
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc., 2000
EDI ELECTRONIC DATA FLOWS
CUSTOMER (PURCHASES CYCLE)
Internal Data Flows
SELLER (REVENUE CYCLE)
External Data Flows
External Data Flows Internal Data Flows
Purchase
Order
Customer
Order
Sales
Order
Receiving
Report
Shipping
Documents
Goods
Vendor’s
Invoice
Check
or EFT
Irwin/McGraw-Hill
Sales
Invoice
Check
or EFT
The McGraw-Hill Companies, Inc., 2000
Acquisitions/Payment Process
Sample Information Customers
Top Management
Purchasing Personnel
Receiving Clerks
Accounting
Treasury and Finance
Vendors
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The McGraw-Hill Companies, Inc., 2000
Christopher, Inc. Acquisition/Payment Process
Event Logical Structures:
PURCHASE REQUEST
(used to store documentation data about events)
Purchase Request #
, [Inventory Control Clerk Employee #],
[Reviewing Supervisor Employee #], Date, Time, Special
requests or comments
PURCHASE ORDER
Purchase order #
, [Vendor #], [Purchasing Clerk Employee #],
[Purchase Request #], Date, Time, Shipping instructions,
Cancel by date, Location of order (e.g., phone, fax, or mail),
Shipping expenses, Sales tax, Order confirmation number
RECEIVE GOODS
Receipt #
, Vendor's Invoice #
, [Employee # of Accounts
payable clerk who compares vendor's invoice and receipt
information], [Purchase Order #], [Receiving Clerk Employee
#], [Vendor #], [Warehousing Employee #], Date, Time
received, Shipping cost, Sales tax, Time transferred to
Warehousing
DISBURSE PAYMENT
Check #
, [Cash account #], [Cashier employee #], [Vendor #],
[Accounts Payable Clerk Employee #], Date, Time, Amount
disbursed
REQUEST/INVENTORY
[ Purchase Request #
Product specifications
ORDER/INVENTORY
[ Purchase Order #
Negotiated Cost each
RECEIVE/INVENTORY
[ Receipt #
], [ Vendor's Invoice #
received, Cost each, Condition comments
RECEIVE/PAYMENT
[ Receipt #
], [ Vendor's Invoice #
], [ Check #
to this invoice, purchase discounts applicable, purchase
discounts taken
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], [ Inventory Item #
], [
], Quantity requested,
Inventory Item #
], Quantity ordered,
], [ Inventory Item #
], Quantity
], Amount applied
The McGraw-Hill Companies, Inc., 2000
Christopher, Inc. Acquisition/Payment Process
Resource Logical Structures: (used to store reference data about resources)
INVENTORY
Inventory item #, Description, Product specification, Reorder
point, Current Price, Beginning Quantity, Beginning Quantity
date
CASH
Cash Account #, [Bank #], Type of account (e.g., checking,
savings, CD, etc.), Beginning Balance, Beginning Balance date
INVENTORY/VENDOR
[Inventory item #], [Vendor #]
Agent Logical Structures: (used to store reference data about agents)
EMPLOYEE
Employee #, Name, Street address, City, State, Zip,
Telephone #, Birth date, Marital Status, Job code (e.g.
inventory control clerk, purchase request review supervisor,
receiving clerk, accounts payable clerk, warehousing clerk,
cashier, etc.), Start date, Salary, Comments
VENDOR
Vendor #, Name, Street address, City, State, Zip, Telephone
#, Contact person, Comments
BANK
Bank #, Bank name, Contact person, Bank street address, City,
State, Zip, Bank phone #
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The McGraw-Hill Companies, Inc., 2000