Mooremans Hardware B

1
Mooremans Hardware (B)
University of Illinois Accountancy 304 Professor
Perkins

• Team 3
• Shaunak Ahuja
• Brian Durbin
• Melanie Garleb
• Eddie Salcedo

2
Agenda

• Return Control Objectives
• Assets
• System
• Compare (MH) to a fashion retailer
• Identify risks
• Control System
• Functional Process Chart

3
OVERVIEW OF CASE

• John Mooreman, owner
• Henry Mooreman, brother/VP
• Hardware store with 6 stores across 2 states
• Has problems with Customers Merchandise Return

4
Control Objectives for Assets

• Returns Made in Timely Manner
• Must be Returned within 30 days
• Return Payments Must be Valid
• Refund Same as Original Sale
• Easy Exchange of Defective Merchandise
• Must be Returned within 30 days
• Have to fill out a note explaining the defection

5
Control Objectives for the System

• Keep Track of Defective Products
• Use Database to Store Information
• Fast Process of Returning Inv. To Shelves
• Enter Returned Inventory into the System
• See What Items are Continually Returned
• Shows which Products are Selling Better

6
Mooremans Hardware
Fashion Retailer

• Guarantees everything it sells
• Timely
• 30 Day return policy
• Specifications
• None within 30 days
• Defective products can be returned

• Purchase at your own risk
• Not Timely
• 12 month policy
• Specifications
• Visual inspection during return
• Defective products usually not returnable

7
Risks

• MHs Guarantee
• Customer misuse of items, increasing returns
• Little to guard against
• Example of a Tradeoff MH is taken to attract
  customers
• MHs Computer System
• System crash can erase inventory data
• Lack of backup hard drive
• Suggest investing in one

8
Control System for Returns

• Current policy needs clearer standards
• Focus on Mooremans objectives
• Make profits
• Satisfy customers

9
Issues with Current Policy

• Allows for possible fraud
• Allows for abuse of policy
• Timeline may dissatisfy customers
• No attempt to remedy returns

10
Prevent Fraud/Abuse

• Check for original receipt
• Verify that purchaser is the same as returner
• With Credit/Debit cards
• Item inspection
• Define Resalable
• Define Defective

11
Timeline

• Extend timeline for returns to 90 days for
  defective items
• Make sure defective is defined
• Keep at 30 days for all other returns

12
Decrease Returns

• Keep tally on how many defective items come from
  each vendor
• Drop vendor is of returns to sold items is
  above pre-defined limit
• Make sure employees are trained properly so they
  sell the correct item to customers

13
Functional Process Chart
14

• QUESTIONS?