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Business Functional Areas 1. Pre-Sales (special thanks to Geoff Leese)

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Presentation on theme: "Business Functional Areas 1. Pre-Sales (special thanks to Geoff Leese)"— Presentation transcript:

1 Business Functional Areas 1. Pre-Sales (special thanks to Geoff Leese)

2 Objectives At the end of this lecture you should be able to… 1.List the main functions of a Purchasing department 2.Explain some of the problems associated with purchasing. 3.List the documents associated with purchasing 4.Describe the information flow within a Purchasing Department. 5.Describe the role of IT within a Purchasing Department These objectives relate to LO 1 – Concepts, theories and principles related to the use of computing in business, and Indicative content – Functional areas of business, marketing sales and production etc.

3 Making a Profit is easy…. Make something for a LOW cost Sell it for a HIGH cost But is it that simple?

4 The Manufacturing Cycle Raw Materials Labour Work in Progress Finished Goods Packaging Storage Invoicing Receive Payment ! Despatch So - what is difficult about that then?

5 Let’s think about Purchasing Raw Materials What is the main role of a Purchasing Department ? 1.Make sure the raw materials needed by the production dept are always available 2.Get the right prices 3.Pay your suppliers Is it that simple?

6 Let’s add a bit more detail… 1.Deal with Suppliers 2.Collate Materials requests 3.Produce Purchase Orders 4.Check what the supplier sends 5.Record omissions, faults, errors 6.Return goods and request credit 7.Receive Invoices from suppliers 8.Check paying for what was received 9.Receive statements monthly 10.Pay suppliers – usually after 30 days credit Sounds like there may be some paperwork involved!

7 Let’s add the documentation… Deal with Suppliers Collate Materials requests Produce Purchase Orders Check what the supplier sends Record omissions, faults, errors Return goods and request credit Receive Invoices from suppliers Check paying for what was received Receive statements monthly Pay suppliers – usually after 30 days credit Supplier database, Sales catalogues etc Job requests, low stock listings etc Purchase Orders (POs) Goods Received Notes (GRNs) Discrepancy NoteGoods Returned / Credit Request Purchase Invoice (Unapproved) (PIs) Purchase Invoices (approved for payment) (POs) Supplier Statements Payment Authorisation Payment + Remittance Advice

8 Purchase order Used to order goods or services Completed by the buyer of the goods or services Sent to the seller Contains –A specific reference number –Product code –Quantity –Signature of person in charge of purchasing

9 Delivery note States what goods are being delivered Completed by seller of goods Sent to the buyer Contains –Numerical reference –Purchase order number –Details of goods supplied –Signature of person receiving goods

10 Goods received note Records what goods have been delivered Sent by the buyer of the goods Kept by the buyer Contains –Details of the goods received –Condition of the goods

11 Credit note A refund document that reduces the amount owed by the buyer Sent by the seller of the goods Kept on file by the buyer Contains –Buyer details –Seller details –Amount of credit –Reason for credit

12 Statement of account Normally issued at the end of each month to inform buyer how much is owed Sent by the seller Checked by the buyer against invoices and credit notes Contains –Seller details –Buyer details –Invoice numbers –Credit note numbers

13 Remittance advice A document sent to the buyer stating that payment is being made Contains –The account number of the buyer –The invoice number –The credit note number –The payment amount

14 Check you know… Document produced by? Sent to? Purpose? Supplier catalogues / price lists Materials requests Purchase Orders Goods Received (added to Stock Records) Discrepancy notes Goods Returned Credit notes Purchase Invoices Supplier Statements Payment Authorisations Remittance Advice Stock issues (deleted from Stock Records)

15 A Typical Process Model…. First list your elements … Then assemble your model… External EntityProcessData FlowData Store

16 Collate + send orders Production Dept Receive + Check Goods Supplier Handle returned goods P. Orders Stock Records ReturnsP InvoicesCredit NotesStatements Receive Invoices Credit Notes Statements Supplier Authorise Payments GRNsPayments Issue stock?

17 The IT System Remember most of these data stores will be presented to the user in a combined form – the Purchase Ledger

18 What does the IT system do for the Production Dept? Holds stock records – produces routine re- order lists Holds copies of orders sent Allows GRNs to be matched against orders Automatically updates stock with GR Hold records of all transactions on each account – invoices, credit notes, payments etc. Allows payments to be matched to account Can produce management reports – routine and ad-hoc.

19 Management Reports Lists purchases by time period, by supplier, by category, by production job, etc. Lists accounts for payment, in due date order Shows total value of stock held Produces budget forecast – help with cash flow planning

20 What IT CAN’T do Physically handle stock Check goods received for errors etc.

21 Think about…. Where is the purchasing department in your organisation? What extra issues are there for a global company – like MacDonalds Tesco has a centralised purchasing function. Give 3 advantages and 3 disadvantages. What information would the purchasers need from the local store managers? What sort of computer system might support the Tesco Purchasing Dept?

22 Summary At the end of this lecture you should be able to… 1.List the main functions of a Purchasing department 2.Explain some of the problems associated with purchasing. 3.List the documents associated with purchasing 4.Describe the information flow within a Purchasing Department. 5.Describe the role of IT within a Purchasing Department These objectives relate to LO 1 – Concepts, theories and principles related to the use of computing in business, and Indicative content – Functional areas of business, marketing sales and production etc.


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