Accounting, Financial, Taxation

Are you the one who assigned to do order entry? Consider this checklist to make sure order entry task has been completed properly. If you are a controller or an accounting manager and haven’t had order entry control on place, you may consider to include this checklist in your accounting manual book. Of course you are free to simply modify or alter at any part to get the most out of it.

The controls for a basic order entry system are centered on data accuracy verification, and are as follows:

1. Verify approved buyer for customer - The order entry staff will contact the customer and verify that the buyer who signed a received purchase order exceeding $ is approved to do so by the customer.
2. Verify price against price book - The order entry staff will compare the prices listed on each customer purchase order to the official prices listed in the latest version of the company price book and contact the customer for resolution if any discrepancies are found.
3. Contact customers regarding significant freight charges - The order entry staff will notify customers if anticipated freight charges are expected to exceed $ .
4. Pre-number sales orders - The order entry staff will order all new sales order forms with sequential numbers that are in sequence from the last set of sales orders purchased.
5. Review the sales order for accuracy - The order entry staff will compare the sales order to the originating customer purchase order to ensure that all information has been accurately transferred to the sales order.

Computerized Order Entry Controls

The controls for a computerized order entry system mostly involve data accuracy verification, and are as follows:

1. Control access to the order entry system - Access to the order entry software will be password protected.
2. Maintain a transaction log - The computer system automatically creates a keystroke log for every order entry transaction.
3. Data entry validation checks - The computer system automatically performs data entry validation checks, including addresses, delivery dates, and part or product numbers that do not exist.
4. Check on-hand inventory status - The computer system automatically compares the amount of unallocated on-hand inventory to the customer order, and notifies the customer if there is insufficient inventory to fulfill their order.
5. Automatic price matching - The computer system automatically sets up product prices from the standard corporate price book.
6. Supervisory override of special pricing - The computer system routes all nonstandard pricing to the order entry supervisor for manual override authorization.
7. Set up complex billing terms - The order entry staff enters complex billing terms into the order entry database on the order placement date and routes the billing terms to the controller for review.

Electronic Order Entry Controls

The controls for electronic order entry involve having the computer conduct all aspects of the order entry process, and are as follows:

1. Automated payment processing - The computer system will automatically process payments using the customer’s credit card, or notify the customer that there is insufficient credit remaining on the card.
2. Automated credit review - The computer system will automatically match customer orders against a table listing available credit, and notify the credit staff if the credit level has been exceeded.
3. Flag order as approved for shipment - The computer system will automatically flag customer orders as approved for shipment, once either a credit card payment has been processed or an automated credit review has been conducted.
4. Communicate order status to customer - The computer system will automatically issue a confirmation message to the customer, stating that the order has been processed.

Accounting mistakes happen but when they happen, they need to be addressed promptly before they become a dead issue. If you or someone from your company has overpaid a vendor, it is best to address the problem by asking for a reimbursement in writing.

Format: Simple format for letters and memos, Typed/word-processed, Business or personal letterhead.

Style/Tone/Voice: Can be informal or formal. Active tone or voice.

Structure:

1. Describe the error.
2. Explain what you’re going to do or what you want the vendor to do.
3. Close on an upbeat note.

Handy Phrases: Accidentally overpaid you; I’ve found a mistake in; Please contact our billing department; Please acknowledge and correct the error; I appreciate your time to resolve this; Send me a check for the additional amount; Call if there are further problems; Thanks for your understanding.

Overpayment Notice Letter Example:

Dear Isaac,

As I reviewed my payments for this past month, I realized that I wrote the wrong amount on the check I sent to cover my July charges. I paid $870 for a billing of $370. Rather than crediting my account, please refund the $500 as soon as possible. If you have any questions, please call me at 021-8888-8989.

Thank you for your prompt attention to this matter.

Sincerely,
Irene Wong

Tips for Writing Overpayment Notices - Request To Submit Reimbursement

1. Send overpayment notices promptly. The longer you delay, the less likely you are to get money back.
2. Explain why the overpayment was made. Did you pay the same invoice by accident twice? Or did the vendor double bill you accidentally? Did a bill paid in over-amounted?
3. Let the reader know you consider this a serious matter and expect prompt action.

The accounts payable process is one of the most complex of all the processes where accounting staff spent most their time. It requires the collection of information from multiple departments; purchase orders from the purchasing department, invoices from suppliers, and receiving documents from the receiving department, that is first. The process then involves matching these documents, which almost always contain exceptions, and then tracking down someone either to approve exceptions or at least to sign the checks, which must then be submitted to suppliers. The key to success in this area is to thoroughly reengineer the entire process by eliminating the paperwork, the multiple sources of information, and the additional approvals. The only best way that truly addresses the underlying problems of the accounts payable process is paying based on the receipt.

To pay based on receipt, one must first do away with the concept of  “having—an—account payable—staff—that—perform—the—traditional—matching process“.

Instead, the receiving staff checks to see if there is a purchase order at the time of receipt. If there is, the computer system automatically pays the supplier. Sounds simple? It is not. A company must have several features installed before the concept will function properly. The main issue is having a computer terminal at the receiving dock.

When a supplier shipment arrives, a receiving person takes the purchase order number and quantity received from the shipping documentation and punches it into the computer. The computer system checks against an on-line database of open purchase orders to see if the shipment was authorized. If so, the system automatically schedules a payment to the supplier based on the purchase order price, which can be sent by wire transfer. If the purchase order number is not in the database, or if there is no purchase order number at all, the shipment is rejected at the receiving dock.

Note: the accounts payable staff takes no part whatsoever in this process—everything has been shifted to a simple step at the receiving location.

Before laying off the entire accounts payable staff and acquiring such a system, there are several problems to overcome. They are as follows:

[A]. Train Suppliers

1. Every supplier who sends anything to a company must be trained to include the purchase order number, the company’s part number, and the quantity shipped on the shipping documentation, so this information can be punched into the computer at the receiving location.
2. The information can be encoded as bar codes to make the data-entry task easier for the receiving employees.
3. Training a supplier may be difficult, especially if the company only purchases a small quantity of goods from the supplier. To make it worthwhile for the supplier to go to this extra effort, it may be necessary to concentrate purchases with a smaller number of suppliers to give each one a significant volume of orders.

[B]. Alter the Accounting System

The traditional accounting software is not designed to allow approvals at the receiving dock. Accordingly, a company will have to reprogram the system to allow the re-engineered process to be performed. This can be an exceptionally major undertaking, especially if the software is constantly being upgraded by the supplier—every upgrade will wipe out any custom programming that the company may have created.

[C]. Prepare for Miscellaneous Payments

The accounts payable department will not really go away because there will always be stray supplier invoices of various kinds arriving for payment that cannot possibly go through the receiving dock, such as subscription payments, utility bills, and repair invoices. Accordingly, the old payments system must still be maintained, though at a greatly reduced level, to handle these items.

[D]. Pay Without a Supplier Invoice

One of the key aspects of the reengineered process is paying based on the information in the purchase order, rather than the information in the supplier’s invoice. To do so, one must have a database of all the tax rates that every supplier would charge, so that the company’s computer system can automatically include these taxes in the invoice payments.

Note: There will sometimes be discrepancies between the purchase order prices and quantities paid, versus those expected by suppliers, so an accounts payable staff must be kept on hand to correspond with suppliers to reconcile these issues. Warning: Make sure you haven’t adopt this way yet, until this note is strictly followed.

There are wide arrays of problems that must first be overcome before the dramatic improvements of this new process can be realized. However, for a company with a large accounts payable staff, this can be a highly rewarding system to adopt, for the savings realized can be the elimination of the majority of the accounts payable department.