Chapter 8 Procurement and Human Resource Business Processes

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Chapter 8Procurement and Human Resource Business
Processes
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Presentation Outline

• Expenditure Cycle Concepts
• The Expenditure Cycle
• Payroll Concepts
• The Payroll Application System

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I. Expenditure Cycle Concepts

• Purchase Requisitions
• Purchase Orders
• Receiving Reports
• Voucher Systems
• Invoice Verification

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A. Purchase Requisitions
We better order these!

• A purchase requisition is an internal document
  created to request the procurement of something.
• They originate in stores or other departments
  within an organization.

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B. Purchase Orders
We will get these from Acme, Co.

• Purchasing selects a vendor, then prepares a
  purchase order for the requisitioned goods.
• The purchase order identifies the vendor,
  confirms the goods ordered, quantity, price,
  delivery date, and payment terms.

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C. Receiving Reports

• Purchase orders authorize the receiving
  department to accept delivery from a vendor.
• Blind counts help ensure that receiving actually
  count the goods received.
• A receiving report summarizes the goods received
  and accompanies them to stores.

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D. Voucher Systems

• The real control over disbursements is a final
  review of documents evidencing the entire
  transaction prior to authorization of payment.
• In a strict voucher payable system, individual
  accounts for creditors need not be kept. Several
  vouchers may relate to the same creditor, as
  opposed to a single account in an accounts
  payable system.
• A voucher shows, among other things, the name and
  address of the vendor, a description of the
  invoice, total or net amount due, and accounts to
  be charged (distribution).
• Built-up voucher systems accumulate several
  invoices from the same vendor and pay these
  invoices with a single check.

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E. Invoice Verification

• Invoices must be checked against receiving
  reports and original purchase orders prior to
  payment.
• Payment should only be approved when the above
  documents match, or the invoice has been
  satisfactorily reconciled to the other documents.

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II. The Expenditure Cycle

• Requisitioning in Stores
• Order Processing in Purchasing
• Receiving
• Delivery Acknowledgement in Stores
• Invoice Verification in Purchasing
• Accounts Payable Prepares the Voucher Package
• Cash Disbursements
• General Ledger
• Internal Audit

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A. Requisitioning in Stores

• Requests for purchases originate outside the
  purchasing department.
• Purchase requisitions arise in stores or other
  departments.
• Requisitions should be approved in the
  originating department.
• Purchasing has access to the requisition thru the
  purchase database.

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B. Order Processing in Purchasing

• Purchase requisitions may be overridden due to a
  lack of funds, improper authorization by the
  requesting department, etc.
• Purchasing selects a vendor using an approved
  vendor list or a bidding process.
• Accounts payable, the requesting department, and
  receiving all have access to the purchase order
  through the purchase database.

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C. Receiving

• Receiving accesses the purchase order and matches
  it with the vendor delivery.
• Receiving only accepts deliveries for which there
  is an existing purchase order.
• Blind counts are often used to force counters to
  actually count the items received.
• A receiving supervisor later verifies the
  quantity against the purchase order.
• Stores has access to this report thru the
  purchase database.

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D. Delivery Acknowledgement in Stores

• The stores department acknowledges receipt of the
  delivery on the receiving report in the purchase
  database.
• Purchasing and accounts payable have access to
  the acknowledged report thru the purchase
  database.

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E. Invoice Verification in Purchasing

• Purchasing uses the purchase database to compare
  the purchase order, acknowledged receiving
  report, and vendor invoice for any discrepancies.
• Purchasing authorizes the invoice for payment
  once they are satisfied that the invoice is
  correct per the order and what was received.

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F. Accounts Payable Prepares the Voucher Package

• The purchase requisition, purchase order,
  acknowledged receiving report, and approved
  vendor invoice provide the support for the
  preparation of a voucher.
• The voucher serves to summarize the purchase for
  entry on the records as a liability.

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G. Cash Disbursements

• Cash disbursements received the voucher package
  and check for signing.
• Cash disbursements maintains a check register and
  forwards a journal entry to general ledger.

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H. General Ledger

• General ledger receives the journal entry from
  accounts payable (Debit Accounts payable and
  Credit Cash) and compares it to the control
  total for cash disbursements.
• The journal entry is then posted into the general
  ledger.

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I. Internal Audit

• An independent reconciliation of the bank account
  is performed by internal audit.

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III. Payroll Concepts

• Personnel
• Timekeeping
• Payroll
• Other Payroll Features
• Tax Forms

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A. Personnel

• Personnel is responsible for placing people on
  the payroll, specifying rates of pay, authorizing
  deductions, and any changes payroll items.
• The personnel function is distinct from
  timekeeping and payroll preparation.

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B. Timekeeping

• Timekeeping is responsible for the preparation
  and control of time reports and job time tickets.
• Timekeeping reconciles employee hours to job time
  summary reports received from production.

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C. Payroll

• The payroll department is responsible for the
  actual computation and preparation of payroll.
• It should be noted that payroll is independent of
  timekeeping and personnel.

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D. Other Payroll Features

• Separate imprest payroll account to facilitate
  reconciliations.
• Independent reconciliation of payroll bank
  account.
• Independent paymaster distributes checks (i.e.
  independent of personnel, timekeeping, and
  payroll).

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E. Tax Forms

• Form 941 Quarterly filing summarizing federal
  withholding, social security, and medicare taxes.
• Form W-2 On or before Jan 31 an employee must
  provide employees with this wage and tax
  statement.
• Form W-3 Summary form that accompanies copies
  of Forms W-2 sent to the federal government on or
  before Feb. 28.
• Form 1099 Misc Documents contract services over
  a certain amount in a given year.
• Earnings statement Statement summarizing
  payroll computations for an employees pay check.

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IV. The Payroll Application System

• The Role of Personnel
• Payroll Processing
• Internal Audit and the Bank Reconciliation

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A. The Role of Personnel
The authorization for placing people on the
payroll should be separated from the record
keeping that payroll performs.
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B. Payroll Processing
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C. Internal Audit and the Bank Reconciliation
Internal audit received information directly from
the bank and performs an independent
reconciliation of the payroll bank account.
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Summary

• Forms used in the expenditure cycle
• Steps of the expenditure cycle
• Payroll duties
• Possible Payroll Features
• Payroll Forms
• Steps in the payroll cycle