Accounting

Information Systems
Week 9:
Expenditure cycle

Jim Lim
Assistant Professor

UBSS Sydney CBD Campus

Level 10 & 11 233 Castlereagh Street
Sydney NSW2000

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Revenue cycle (Ch 11)

1. Expenditure cycle overview

2. Expenditure cycle technology

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1. Expenditure Cycle overview
Expenditure control is key to business success.

Poor expenditure control leads to cash flow problems, lifeblood of business success!

Expenditure cycle, therefore, important to business success.

Controlled expenditure cycle creates competitive advantage i.e. cost effective!

Is tracking expenses important to you?

Question?
Is cashflow management important to you?

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1. Expendture Cycle overview
Back Office: Front Office

• Expenditure cycle “non Customer facing” “Customer facing”

begins with a need

to purchase goods
and / or services

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1. Expenditure Cycle overview
Strategic Implications of Expenditure Cycle
• Ensure supply of goods balances demand – too much or too little a problem!
• Controlled expenditure cycle provides competitive advantage i.e. pursue cost
leadership or differentiation strategy!
• Failure to manage purchasing/suppliers impacts revenue, production & stock
management.
• Accounts Payable management important – possible fraud can damage cash
flow and supplier relationships.

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1. Expenditure Cycle overview
Expenditure cycle requires following data:
• Inventory data
❖ Demand forecast/pipeline
❖ Availability of stock
• Supplier details
• Purchase order history/status
• Accounts payable status

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1. Expenditure Cycle overview
• Strategic Level business decisions: (Top Management)
➢Purchasing – Central or decentralised purchasing?
➢How can IT improve efficiency & accuracy?
➢Where inventories should be held i.e. onsite warehouse?

Trivia note: *Originally used with reference to miners i.e. those who remove coal from the 'face' of the mine, its now more commonly used to mean any work
closest to the frontline

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1. Expenditure Cycle overview
• Operational Level business decisions: (Worker level)
➢Determining optimal inventory level – understand lead times/sales
orders
➢Supplier selection (quality, service & price)
➢Cash flow considerations– pay upfront now, take advantage of
discounts?? (Anyone buy lots at half price at Coles/Woolworths?)

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1. Expenditure Cycle overview

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1. Expenditure Cycle overview

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1. Expenditure Cycle overview

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1. Expenditure Cycle overview

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1. Expenditure Cycle overview

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1. Expenditure Cycle overview

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1. Expenditure Cycle overview

Systems
flowchart:
Determine
demand for
goods

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2. Expenditure Cycle -Technology
Integration of enterprise linking modules in expenditure
ERP (Enterprise Resource Planning)
cycle i.e. purchase, accounts payable, stock, sales

Exchange data between two separate computer

EDI (Electronic Data Interchange)
systems (including external vendor).

RFID (Radio Frequency ID) High volumes require hand-held scanners or barcodes.

SCM (Supply Chain Management software) Improves planning & execution of supply chain.

Efficient & safe, no cash handling + reconciliation easier

Bpay & online Payment
(very transparent – no side pockets!)

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Case Study

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Case Study

Class Discussion:
Why is supply chain management important?
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1. Expenditure Cycle overview
Discussion in class

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Weekly Question
❑ See question in Moodle.
❑ Do question in class.
❑ This is Assessment 1.

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