Internal controls at Bucks Phyz
Accounting and finance report is important for every company. Accounting and financial reporting is a major responsibility of a company’s Finance Director and through the report The CEO of the company undertakes necessary steps to implement necessary changes in the sales process of the company. This financial report attempts to shed light on the sales process of Bucks Phyz. Along with that, this report also identifies the internal control weaknesses of the sales process of the company and in accordance with the weaknesses the possible measures that the CEO can undertake. The report also identifies the benefits and risks that are associated with introducing corporate credit cards in the organization and recommend the CEO accordingly.
Overview of the sales process of Bucks Phyz
It is a well known fact that Bucks Phyz has gone through significant changes within the operating environment of the company (De Simone, Ege & Stomberg, 2014). As a result of the new implemented changes and restructuring programs several new employees are assigned with new tasks. As the company has already experienced fraudulent in the accounting department in the previous years, it is important to focus on implementing changes in the sales process of the company. As per the current organization structure, Lucinda is appointed with the sole responsibility for the sales and finance function of the company. Apart from taking care of the fact that the strategic goals of the company are met successfully she also concern herself with the fact that the write offs are properly approved that indicates that the write offs are having authorization of the Finance Director. As per the statement of Barry who is the head of the sales department a new pricing tool has been introduced that can be used in calculating the prices more effectively by the managers. There is also a policy that ensures that actual contracts are signed by Barry or the Finance director. Barry, however, is not entirely satisfied by the current state of legal terms and the customers have also demanded necessary significant changes to the contract drafts of the company.
Identification of issues
In the process of conducting any business, it is important to ensure the reliability, efficiency and security towards its managers, stakeholders and customers as well. Financial transaction is one of the chief areas that require attention in this case (Brehaut et al, 2016). In order to implement necessary changes it is important to identify the weaknesses within the internal control set up. Relevantly, the securities and the Exchanges Commissions have issued guidelines for the monitoring purpose of the internal controls (Osadchy & Akhmetshin, 2015).
Internal control weaknesses
The internal control weaknesses that have been identified are listed below.
- Insufficient communication: According to Lucinda there are recent cases where the credit process failed due to insufficient instructions to Sales Staff. Therefore, it shows that the communication is not effective among the management team and the sales staff. The problem of insufficient instructions is because of lack of communication among the management and the staff of the sales department (Xu & Tang, 2015).
- Lack of monitoring of the transactions: As per the information from Lucinda, there have been several instances where credit checks had been performed on new customers after the agreement had already been signed and issuing the invoices. Therefore, lack of monitoring and keeping account of the transaction has not been done efficiently.
- Lack of training: In accordance with implementing new systems, it is important to train the employees accordingly. The company has introduced a new pricing tool that the sales managers could not grasp initially. It indicates that the sales managers needed to go through necessary training process in order to work with the new pricing tool (Prabowo, Christy & Nitasari, 2014).
- Problem with the contract drafts: The customers are not entirely happy with the contract drafts and they expect significant changes. Along with that it is true that the company needs to follow a particular policy regarding sending offers to the customers.
Impact of the weaknesses
The identified weaknesses are affecting the client satisfaction of the company as they are not entirely happy with the dealings of the company. Apart from that it is also true that standard process is not followed. Because of the mismanagement of the processes and failure in implementing a specific policy for signing the agreements and sending offers to the customers. Therefore the customers are being subjected to discrimination and it has the potential to affect the productive outcome of the company. With the required entry for processing the receipts, the AR team is often frustrated, as because of lack of monitoring in the allocation process it has been difficult for them to match the invoices and the payments (Balsam, Jiang & Lu, 2014).
Specific internal controls
- Cataloguing the internal control procedures including the documentation of the financial transaction and internal auditing is significant. It is important to identify the areas of the organization that are more to prone to risk than other areas (Feng, Li, McVay & Skaife, 2014).
- It is important to assess the design of the control procedure.
- Conducting risk assessment for the control procedures can be helpful in identifying possible failures of the organization.
- It is important to have effective communication among the management team and the staff in order to avoid the issues of lack of instructions.
- Another important factor is to provide necessary training for the modern internal control processes and methods.
- Monitoring the internal control staff on a regular basis is significant for improvement.
- Another important factor is to evaluate the customer feedbacks as well as the feedback of the employees and implement new procedures accordingly.
Review of impact of introducing corporate credit cards
Corporate credit cards enables the their employees for the payments of approved business related transactions and it is chiefly used for the travel expenses. Before implementing Corporate credit cards in the internal system of this company it is important to assess the advantages and the risks that are associated with introducing corporate credit cards into the organization and it is important to evaluate that.
Detailed review of benefits and potential risks
Corporate credit cards come with several benefits. Corporate credit cards based on the mode of payment can be classified into two distinct groups and they are individual payment cards and company payment cards.
- It add to the value proposition of not only the company but for the employee as well. It can be helpful in encouraging employee motivation that is can improve employee morale.
- As the employers do not take money out of the corporate card, employees enjoy benefits at the time of payment.
- It saves the time of the employees and they can incorporate the time in organizational activities ( MoreBusiness.com. 2018).
- It also offers the employees with reward option.
- It helps in the purpose of business travel. Business expenses are lessen with business expenses and it is also safer proposition than implying personal card.
1. Even with the approved spending categories the employees can misuse the card.
2. It can also become a threat to the title of the company if the card is used for improper purposes ( MoreBusiness.com. 2018).
3. There are several breaches that can take place with the card.
4. Personal credit issues is the major disadvantage of corporate card. Most of the corporate cards require personal guarantee that includes the social security number as well.
5. Without implementing proper policies and monitoring the spending categories chances of debauchery are increased with corporate credit cards.
5. It can also create security issues for the company. Fraudulent charges can be increased as it opens to the risk of stolen card number.
Specific internal controls
- It is important to implement necessary policies in particular to the travel and other business expenses for which the corporate card can be used.
- It is important to train the employees regarding the usage criteria of the card.
- It is important to implement the restrictions to the company’s card, travel policies and spending limit.
- It is important to implement proper management in order to monitor the expenses of the corporate card in order to avoid any possible fraudulent ( MoreBusiness.com. 2018).
Along with the mentioned internal control, it is also important for the company to arrange in person training courses for the new cardholders.
Recommendation to the CEO
Evaluating the risks and the benefits that can be gained from introducing corporate card in the company, it is important to educate the employees accordingly to avoid the pitfalls. Corporate cards in many ways simplify the process of payment ( MoreBusiness.com. 2018). It is important for the company to post the credit card related company policies in the website of the company in order to inform the aspirant applicants of the organization about the rules and regulations of the company.
As far as Bucks Phyz Company is concerned, it is important to have a proper assessment process of the internal control in order to identify the potential of introducing corporate credit card in the payment system of the company. Along with that another important fact is that the company needs to take necessary legal advice and upgrade the payment policies of the company likewise before implementing corporate cards for the benefit of the employees.