Business functional areas 1 pre sales
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Business Functional Areas 1. Pre-Sales. (special thanks to Geoff Leese). Objectives. At the end of this lecture you should be able to… List the main functions of a Purchasing department Explain some of the problems associated with purchasing. List the documents associated with purchasing

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Business Functional Areas 1. Pre-Sales

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Business functional areas 1 pre sales

Business Functional Areas1. Pre-Sales

(special thanks to Geoff Leese)


Objectives

Objectives

At the end of this lecture you should be able to…

  • List the main functions of a Purchasing department

  • Explain some of the problems associated with purchasing.

  • List the documents associated with purchasing

  • Describe the information flow within a Purchasing Department.

  • 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.


Making a profit is easy

Making a Profit is easy….

  • Make something for a LOW cost

  • Sell it for a HIGH cost

  • But is it that simple?


The manufacturing cycle

The Manufacturing Cycle

Raw

Materials

Labour

Work in

Progress

So - what is difficult about that then?

Finished

Goods

Packaging

Storage

Invoicing

Despatch

Receive

Payment !


Let s think about purchasing raw materials

Let’s think about Purchasing Raw Materials

What is the main role of a Purchasing Department ?

  • Make sure the raw materials needed by the production dept are always available

  • Get the right prices

  • Pay your suppliers

Is it that simple?


Let s add a bit more detail

Let’s add a bit more detail…

Sounds like there may be some paperwork involved!

  • 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


Let s add the documentation

Supplier database,

Sales catalogues etc

Job requests,

low stock listings etc

Purchase Orders

(POs)

Goods Received Notes

(GRNs)

Discrepancy Note

Goods Returned /

Credit Request

Purchase Invoice

(Unapproved)

(PIs)

Purchase Invoices

(approved for payment)

(POs)

Supplier

Statements

Payment Authorisation

Payment +

Remittance Advice

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


Purchase order

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


Delivery note

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


Goods received note

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


Credit note

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


Statement of account

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


Remittance advice

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


Check you know

Check you know…


A typical process model

A Typical Process Model….

  • First list your elements…

  • Then assemble your model…


Business functional areas 1 pre sales

P Invoices

GRNs

Statements

P. Orders

Stock Records

Returns

Payments

Credit Notes

Production

Dept

Supplier

Collate +

send orders

Receive +

Check Goods

Handle

returned goods

Receive

Invoices

Credit Notes

Statements

Supplier

Issue stock?

Authorise

Payments


The it system

The IT System

  • Remember most of these data stores will be presented to the user in a combined form – the Purchase Ledger


What does the it system do for the production dept

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.


Management reports

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


What it can t do

What IT CAN’T do

  • Physically handle stock

  • Check goods received for errors etc.


Think about

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?


Summary

Summary

At the end of this lecture you should be able to…

  • List the main functions of a Purchasing department

  • Explain some of the problems associated with purchasing.

  • List the documents associated with purchasing

  • Describe the information flow within a Purchasing Department.

  • 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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