Develop a process map for the Accounts Payable process described below: The Acco
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Question
Develop a process map for the Accounts Payable process described below:
The Accounts Payable process at FrizzBusters Beauty Products begins when one or more individuals in the various departments of the organization ask to purchase certain products or equipment. Only one department is chosen as the “owner” of the purchase request if the request involves individuals across more than one department. The manager of the owning department then approves the request so that the buyers in the Purchasing department may purchase the requested materials or products for the specific department(s) initiating the request.
Once the necessary products or equipment have been bought and a paper invoice has been generated, the paper invoice is sent to the Accounts Payable department for payment. The Accounts Payable tasks are divided between two individuals. One clerk handles paper invoices for companies with names that start with the letters A through M while the other clerk handles paper invoices for companies with names that begin with N through Z. This has sometimes resulted in an unbalanced amount of work between the two clerks in the past. Each Accounts Payable clerk opens each paper invoice and sorts them according to the department responsible for the payment. All invoices that involve overhead, and therefore do not get directed to a specific department (such as utility and shipping invoices), are coded by the Accounts Payable clerk and entered into the Accounting system for payment. All other paper invoices are sent by intercompany mail to their respective departments. Paper invoices for amounts under $1,000 are forwarded to the individual who requested the purchase while paper invoices over $1,000 are sent directly to the manager in charge of the specific department where the request originated, i.e. the “owning” department. Once the originator or department manager approves the paper invoice, it is sent back to the Accounts Payable clerk who enters it into the Accounting system.
At the end of each week the Accounts Payable clerk selects all approved paper invoices that have been entered into the Accounting system and prints them as a list for the Accounting Manager who marks the list to show which invoices are to be paid during the current check cycle. The Accounting Manager gives the annotated invoice list back to the Accounts Payable clerk who reports to the company Accountant to retrieve a special disk that allows access to the check-printing system. The disk must be kept under lock and key which is the responsibility of the company Accountant. This has also presented problems in the past as the company Accountant is frequently on travels to other company facilities. The Accounts Payable clerk uses the disk to connect to the check-printing system and print paper checks to be mailed to the vendors, along with a copy of the corresponding invoice. The Accounts Payable clerk must keep written records of both the check numbers and the dollar amount of each check that is printed and mailed. Finally, the Accounting Manager double-checks the weekly check run for errors and signs off on the check number and dollar amount of each check after each check run.
Once you have created a process map for the Accounts Payable process, analyze the various steps in your process map to determine whether the step adds real (external) value, business (internal) value, or no value. Using the knowledge that you have gained thus far regarding ERP systems, develop a new and improved process map for the Accounts Payable process and discuss your improvements.
Explanation / Answer
Accounts payable process should have steps that always add value. There should not be step which do not add value.
In the given process there are 2 accounts payable clerks. The utilization rate of both the clerks will be different if number of invoices of vendor differ from A through M and N through Z vendors. Segregation of invoices as per the alphabets is time taking task which adds no value.
Correspondingly sending the invoice to purchase requestor or manager of request department and getting them verified is unnecessary process .Because details of purchase request along with cost of purchase request must be verified at the time of raising the request and not after receiving the stock . Correcting the error in invoice will be difficult.
Double check of checks and invoices by Account manager is not required if there is proper ERP or reconciliation process is implemented and followed.
Below us the best possible accounts payable process
1) purchase request has to be raised in ERP by planning team.
The value has to be checked and approved by Planning team manager.
The accounts payable team or a purchase team has to raise the P.O according to the purchase request.
Once stocks reach the warehouse along with hard copy of invoce . Then details of quantity and cost must be captured in ERP by warehouse team.
Warehouse team will put a seal on hard copy of invoice send to Accounts payable team. Warehouse team can also scan the copy of invoice or confirm to Accounts payable team.
There should be auto reconciliation ( three way) should be possible in ERP. I.e details of the invoice , P.O. and goods receipt done in WH must match. If there is any discrepancy, ERP should not allow warehouse team to receive stock in WH.
Once reconciliation is done in ERP, accounts payable team must download the details of invoices that are reconciled ( data is matched in system) to Accounts manager . Accounts manager must confirm the list of invoices for which amount can be released. The accountant is suppose to receive the list and the checks must be released for those invoices.
Accountant will enter the check number in the ERP against the pending invoice number. Value of check should be match with value of invoices for which the check is released.
Then details of check and invoices must be shared to account payable clerks. Clerks will download the 'checks and invoices' and mail to vendors.
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