Slide 1Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Slide 16Slide 17Slide 18Slide 19Slide 20Slide 21Slide 22Slide 23Slide 24Slide 25Slide 26Slide 27Slide 28Slide 29Slide 30Slide 31Slide 32Slide 33Slide 341IM341 Spring 2014Module 2: Transaction Processing Example 2 – Procurement (aka Order to Pay, Procure to Pay, Expenditures)REQUIRED READING FOR THIS MODULE:IM341sp14OrdertoCash.pdfIM341sp14Procurement.pdfThe content presented in the required reading is not summarized in its entirety in these slides.Other assessment material sources:Slides and class discussionOBJECTIVESTo Learn •Typical business events associated with Procurement process•Transaction processing steps (and sub steps) typically associated with these business events (I,P,O)•Business Risks and Controls•Transaction Processing Risks and Controls•Terminology associated with the process•Typical Source Documents/Data flows•Typical data stores (files)3Examples of Typical Procurement Process Events --Not intended to be an exhaustive list. (Acquiring and paying for resources)•Effectively monitor organizational resources in an effort to identify the need for goods or services in a timely manner.•If applicable, internally request goods or services (after identifying valid need).•Negotiate order of goods or services with selected vendor.•Receive and inspect goods or services, then store and/or maintain goods.•Pay for goods or services.•Return goods (and possibly receive refund).4•A primary objective of the procurement process:-provide needed resources for the organization’s order to cash and conversion processes at an optimal time (at the point when they are needed in an effort to reduce waste and costs). •Can you list other (sub)objectives?5•Examples of strategic and operational decisions to be made:–What level of inventory and supplies should we carry?–When and how much inventory should we order?–What vendors provide the best price and quality?–Where should we store the goods?–Can we consolidate purchases across units?–How can IT improve inbound logistics?–How can we manage payments to maximize cash flow?–Is there enough cash to take advantage of early payment (purchase) discounts? –Is adequate cash available to meet current obligations?–Are vendor invoices /statements valid and accurate?•Can you name additional decisions key to effective procurement processes?Business Event (discussed in Module 1) Key Information/Transaction Processing Associated with the Business Event-Monitor resource levels and, if applicable, internally request goods or services (based on valid identification of need).-Record, maintain and report data about inventory levels, and needs of products or services.-Record, maintain and report data to facilitate and document internal requests for goods or services.-Negotiate the order of goods or services with a vendor.-Record, maintain and report data to facilitate and document placing purchase orders with vendors for goods or services.-Receive and inspect goods or services (then store and/or maintain goods).-Record, maintain and report data to facilitate and document the receipt of goods or services ordered (the point of purchase) and the storage/ maintenance of goods.- Record, maintain and report data about the liability that arises due to the procurement of goods or services (and financial measurement of that liability). -Pay for goods or services.-Record, maintain and report data to facilitate and document payment for goods and services purchased (and financial measurement of that payment). -Return goods (or request refund for services received).-Record, maintain and report data to facilitate and record activities associated with returning goods and receiving refunds or liability reductions (and financial measurement of the return and refund or amount due adjustment).6Notice this one business event triggers TWO potential information processing responses.7•The primary external exchange of information is with vendors.•The organization plays the role of the buyer.Information Processing of Procurement Transactions8Data Flow Diagrams (DFDs)•In this module we will use data flow diagrams to graphically show key components of the order to cash process. For the module, you should be able to read DFDs. In Module 3, you learn to create them based on written narratives.•A data flow diagram (DFD) is composed of the following four basic elements:1Data sources or destinations(outside scope of system)2Data flow lines with data flow labels3Transformation processes4Data stores (files)Data Source or DestinationInformationProcessData store sales invoice9Steps in the identify need and request purchase transaction processing include:•Identify need•Record (and submit) requestTransaction Processing Associated with Identifying Need and Generating Internal Purchase RequestsRecord, maintain and report data to facilitate and document about inventory levels, needs of products or services, and internal requests for goods or services.1011Transaction Processing Associated with Identifying Need and Generating Internal Purchase Requests•What are some of the threats/risks associated with identifying need and requesting goods or services and how can organizations use information technology to reduce these risks?•What are some key files used during identifying need and requesting goods or services?•What are key inputs, processing steps and outputs? (Including the names of key source documents associated with identifying need and requesting goods or services) Where does the data originate and go?(REAL) Business Process Events (business activities that occur) Module 1Transaction Information Processing (inputs, process, outputs) needed to support business process events – Module 2Module 1 event--- Monitor need and make internal requestTriggers Module 2Transaction information processing – Record purchase request.(I,P,O)Id or confirm need;Record RequestNeed notification from Inventory Management System or Supply Chain management function, or need identified by other personnelPossible Purchase request to Order goods/services Process (if Order goods/services does not access data directly from new request transaction records);New request record in Request transactions fileSample Inputs and points of originationSample Outputs and destinationsKey Information ProcessingAND not explicit on chapter DFDS ….