EXPENDITURECYCLE

Purchasing&CashDisbursements
Recurringsetofbusinessactivitiesandrelateddataprocessing
operationsassociatedwiththepurchaseofandpaymentfor
goodsandservices.
IT(opportunitiesforuseof):
Onlinedataentrywitheditcontrols.
OnlineprocessingwithanintegrateddatabaseforJITor
MRPsystem.
Barcodinggreatlyreduceshumanerrors.
Electronicdatainterchange(EDI)fortransmittingP.O.sto
vendors.
Procurementcardsforsmaller$purchases.
Useofinternetforpurchasingfunctions.
Vendersuseofbarcodingreducesreceivingtime.
Passiveradiofrequencyidentificationtagsmakereceiving
moreefficient.
Satellitetechnologyimprovesefficiencyofinboundlogistics.
EDIeliminatesneedtoenterinvoicedataandmatchingof
paymentdocumentdonebycomputer.
Payvendorsthroughelectronicfundstransfers(EFT)
IntegratingEFT&EDIFinancialElectronicData
Interchange(FEDI)

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ExpenditureCycleControlObjectives:
Alltransactionsareauthorized.
Allrecordedtransactionsarevalid.
Allvalid,authorizedtransactionsarerecorded.
Alltransactionsareaccuratelyrecorded.
Assetsaresafeguardedfromlossortheft.
Somestepstohelpachieveobjectives:
Simple,easytocompletedocumentswithclearinstructions.
Applicationcontrolssuchasvalidityorfieldchecks.
Signaturesofpeopleresponsibleforcompletion/reviewof
documents.
Prenumberingofdocuments.

Whatisavendoraudit?

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TheAISisessentialinprovidinginformationforthefollowing
operatingdecisions:
Whenandhowmuchadditionalinventorytoorder.
Theappropriatevendorsfromwhomtoorder.
Howaccuratearevendorinvoices?
Shouldpurchasediscountsbetaken?
Howefficient/effectiveisthepurchasingdepartment?
Whichvendorshavethebestperformance(e.g,quality,ontime
delivery,cost)?Evaluationofquality/performancealwaysrequiresabenchmark.
Howlongdoesittaketomovegoodsfromthereceivingdock
intoproduction?
Percentageofpurchasediscountstaken.
Amountofdollarslostbecauseofdiscountslost(nottaken).
DATAMODEL
REAdatamodelonpage624ofAIStext.
Resourcescashandinventory
Events
Requestgoods
Ordergoods
Receivegoods
Approvevendorinvoicesforpayment
Payforgoods
Agentsvendors&banks(external)andvariousinternalparties.
Inarelationaldatabase,atableforeachentityandeachMM
relationshipwouldberequired.

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Pleasenotehowstandardandactualcostsarestored.Standard
costisafieldintheInventorytableandactualcostisafieldinthe
InventoryOrder_Goodstable.Thisallowsacompanyto
calculatethevalueofendinginventoryandCOGSusingvarious
methodsandtoalsocalculatevariousperformancemeasuresand
variances.
CardinalitiesintheREAdiagramreflectbusinesspoliciesofthe
particularcompany.
DataModelbenefits:
Traditionalaccountinginformation(date&amountofpurchase)
andoperationaldata(vendorperformance)canbeeffectively
integrated.
Externalandinternalinformationcanbeeasilylinked(e.g.,
vendorcreditratings).
Arelationaldatabaseallowsuserstodirectlyaccessand
manipulatedatausingSQL.
TheDataModelandInternalControl
REAdiagramcanhighlightviolationsofsegregationofdutiesand
thesystemcanbeprogrammedtopreventthesamepersonfrom
performingincompatibleduties.

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WithaDBMSaccesscontrolsareveryimportant.Youcan
controlwhichviewsusergroupshaveaccessto.Readonlyversus
Read&Writeability.
Relationaldatamodelprovidessomebuiltincontrolsfordata
accuracy(i.e.,referentialintegritypreventscashpaymentstoa
vendornotintheapprovedvendortableforeignkey(vendor
number)incashdisbursementtablewouldnotmatchtheprimary
keyinthevendortable.
AsalwaystheuseofDBMSrequiresadequatebackupand
disasterrecoveryprocedures.

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