1. The Acquisition / Payment Process
Chapter 7
The Acquisition / Payment Process

2. 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.

3. 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.

4. 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

5. Traditional Automated Acquisition/Payment Process Flowchart - Part 1
Inventory master file
May be done at time of updating
Initiate purchases
Step 1 - Extract data and print report
Inventory reorder list
Supplier reference & history file
Supplier evaulation data display
Select supplier & note on list
Inventory reorder list
Performed by purchasing department buyers
Enter purchase order data A

6. Traditional Automated Acquisition/Payment Process Flowchart - Part 1
Exception and error display
Step 2 - Edit purchase order data & store in file A
Purchase transaction data
Supplier master file
Inventory master file
Open purchase order file
Step 3 - Update files & print updates
Listing of purchase orders
Purchase orders
Inventory status report
Printed at end of day
Review and sign
Performed by purchasing manager
To purchasing manager
To inventory manager
To supplier

7. Traditional Automated Acquisition/Payment Process Flowchart - Part 2
Count & inspect received items; compare to packing slip
Initiate supplier
Packing slip
Performed by receiving clerk
Enter receipt on CRT terminal
Open purchase order file
Edit receipt data & prepare receiving report
Exception and error display B

8. Traditional Automated Acquisition/Payment Process Flowchart - Part 2B
Receipt transaction
Receiving report
Inventory master file
To stores & accounts payable
Supplier history file
Update master files
Open purchase order file
Receiving report file
Back-order file
To supplier

9. Traditional Automated Acquisition/Payment Process Flowchart - Part 3
From suppliers
Supplier’s invoice
Receiving reports
Receiving report
Batch total
Performed by accounts payable clerk
Verify check & prepare batch total
Supplier’s invoice
Exception and error display
Enter invoiced amounts & total
Edit entered data
Open purchase order file
Supplier’s invoice D
Receiving report
Unpaid vouchers
Approve for payment C

10. Traditional Automated Acquisition/Payment Process Flowchart - Part 3
Payables data from invoices
Supplier accounts payable master file
Stored until end of day
Supplier history file
Open purchase orders file
Update payables & other files & prepare vouchers
Voucher registry & summary
Open vouchers file
General Ledger C
Disbursement voucher
Display of batch totals & errors
To cost control or other resource management department
To accounts payable department
To report preparation procedure
To accounting clerk

11. Traditional Automated Acquisition/Payment Process Flowchart - Part 4
From accounts payable procedure
Disbursement vouchers
Prepare batch total
Batch total
Disbursement vouchers
Vouchers file
Exception & summary report
Key-to-disk and edit
Disbursement data
A similar report is an output of each computer run
Run 1 - Sort by supplier account number A

12. Traditional Automated Acquisition/Payment Process Flowchart - Part 4
Sorted disbursement data
Open vouchers file A
Run 1 - Update accounts payable file; print checks & other outputs
Supplier disbursement payables master file
Supplier history file
Checks
Vouchers file
(with vouchers)
Summary of cash disbursements
Journal voucher transaction file
Check number
Review and sign
Disbursement vouchers
To cash disbursements
To financial management
To general ledger procedure
To suppliers

13. Traditional, Manual Acquisition/Payment Process Flowchart
Accounts
Payable
Control
Inventory
Purchasing
Receiving
General
Ledger
Dr/Cr to
G/L
Post to F
A= Alphabetical
C= Chronological
N= Numerical
Review,
sign ck,
post G
Controller
Cashier /
Purchase
Requisition 1 2 3 4 5
Order I
Acct. Pay H A B C
Prepare
Orders
To vendor
P/O
Blind
Copy
Goods
Report N D E
Update
Inv.
Records
Vendor’s
Invoice
Compare
& Post
Purchases
Journal
When
Payment
Is Due
Purch. Order
Receiv. Report
Vendor’s Invoice
Check
Pull and
Cash
Disburs.
Prepared with the assistance of Dr. William Hillison,
Arthur Andersen Alumni Professor, Florida State University.

14. Traditional Reimbursement Process

15. IBM’s NEDS (National Employee Disbursement Solution)
Business-
Event
Processor
(business
and
information
process
rules)
Business
Data
Repository
Reporting
Facility
Management
approvals
EFT
Employee
deposit
Travel
information
Impact:
393 headcount reduction
$291 million savings (10 years)
Decreased processing time
Increased controls
Better management information
New role for the accountant

16. Christopher, Inc. Aquisition/Payment REAL Model
Authorizing
Agent
(1,1)
Order
Request
& Review
(0,*)
(0,*)
(0,*)
(1,1)
Inventory
Clerk
(1,1)
(0,*)
(1,1)
Purchasing
Clerk
(0,*)
Order Goods from Vendor
(0,*)
(1,*)
(0,*)
(1,1)
(1,*)
(1,1)
Inventory
Vendor
(1,*)
(1,1)
(0,*)
(1,1)
(1,*)
(0,*)
(1,1)
Receiving
Clerk
(0,*)
(0,*)
Receive
Goods
(0,*)
(0,*)
(1,1)
Warehouse
Clerk
(0,*)
(1,*)
(1,1)
(0,*)
Accounts Payable Clerk
(1,1)
(1,1)
(0,*)
(0,*)
(1,1)
Disburse
Payment
Bank
Cash
(0,*)
(0,*)
(1,1)
(0,*)
Cashier

17. EDI ELECTRONIC DATA FLOWS
CUSTOMER (PURCHASES CYCLE)
SELLER (REVENUE CYCLE)
Internal Data Flows
External Data Flows
External Data Flows
Internal Data Flows
Purchase
Order
Customer
Order
Sales
Order
Receiving
Report
Goods
Shipping
Documents
Vendor’s
Invoice
Sales
Invoice
Check
or EFT
Check
or EFT

18. Acquisitions/Payment Process Sample Information Customers
Top Management
Purchasing Personnel
Receiving Clerks
Accounting
Treasury and Finance
Vendors

19. Christopher, Inc. Acquisition/Payment Process
Event Logical Structures:
(used to store documentation data about events)
PURCHASE REQUEST
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 [
], [
Inventory Item #
], Quantity requested,
Product specifications
ORDER/INVENTORY
Purchase Order #
], Quantity ordered,
Negotiated Cost each
RECEIVE/INVENTORY
], Quantity
received, Cost each, Condition comments
RECEIVE/PAYMENT
], Amount applied
to this invoice, purchase discounts applicable, purchase
discounts taken

20. Christopher, Inc. Acquisition/Payment Process