Analysis of Business Systems and Risks

The provided assignment is a detailed report on various types of business systems used by companies to conduct operations. These include purchase, cash disbursement, and payroll systems. The report identifies weaknesses and risks associated with each system, such as inaccurate vouchers and stockout risks in procurement. It emphasizes the need for companies to address these issues to ensure smooth business operations. The assignment also mentions the importance of maintaining soft copies instead of hard copies to reduce unnecessary expenses.

Case Study- Bell
Studio

EXECUTIVE SUMMARY
This report is based upon different types of diagrams and flow carts that are formulated
by Bell Studio in order to execute business operations. These are formulated for three different
system such as purchase, cash disbursement and payroll system. Each and every system is having
weaknesses and all of them are having risks. It is vital for Bell Studio to take all the weaknesses
in to consideration to formulate strategic decisions for betterment of organisation.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Purchase and cash disbursement system......................................................................................1
Payroll system..............................................................................................................................6
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Flow charts are the graphical representation of a process in which each and every step is
represented with the help of different symbols that contains brief summary of the step. All the
stages are linked with each other with the help of arrows which show process flow direction.
There are various types of charts such as purchase, cash disbursement, payroll systems flow and
data diagrams that are generated by business entities to analyse different procedures of
organisation (Chalmers and et.al., 2016). The enterprise which is selected for this report is Bell
Studio which is a wholesaler of art supplies.
This report covers various topics such as data flow diagram and system flow charts of
purchase, cash disbursement and pay roll systems. Apart from this internal control weakness in
each system and risk associated with it are also discussed under this assignment.
MAIN BODY
Business analyst of Bell Studio which is an Adelaide based wholesaler of art supplies is
being asked to prepare a report covering evaluation of processes, risk and internal controls for its
expenditures cycle. The organisation source its inventories from manufactures in Australia,
China, Japan and New Zealand. It has a centralised accounting system with networked terminals
at different locations. The report which is going to be presented in front of chief operating officer
covers different types of data flow diagrams and system flow charts with their weaknesses and
risk associated with it.
Purchase and cash disbursement system
Data flow diagram of purchase and cash disbursements system: For Bell Studio the
diagram which shows data flow of purchase and cash disbursement system is as follows:
1

The above data flow diagram of purchase and cash disbursement system depicts that
purchasing clerk analyse inventory subsidiary to check valid vendor file. From this file best
vendor is being selected to place order if quantity in the ledger is seems to be low. After this
procedure an order is being placed to the vendor which is known as digital purchase order. A
receipt of it is provided to vendor as well as purchasing department. When goods arrive in the
organisation's receiving department then the clerk reconcile information with purchasing order.
A hard copy of receiving report is created by receiving division of company which is provided to
inventory warehouse and account payable department (Kranacher and Riley, 2019). At the end a
purchase order copy is provided to cash disbursement department from account receivable
department in order to settle the payment of purchased goods. The funds are transferred to
creditor on the due date in the form of cheque which is prepared by clerk for invoiced account. It
is sent to treasurer to take signature and at the end it is mailed to vendor.
System flow chart of purchase system: A flow chart of purchase system of Bell Point is
as follows:
2

The above flow chart of purchase system depicts that clerk of the organisation analyse
inventory subsidiary for the purpose of analysing that quantity of items is low within the
enterprise or not. The diamond shape in the flow chart shows decision statement. If quantity is
not low then no action is taken by the clerk but if it is low then next steps are taken. In this
situation valid vendor file is checked and best vendor is selected (Gallien and et.al., 2017). After
this stage digital purchase order is placed and a receipt of it is provided to the purchasing
department. Same receipt is provided to the receiving division of the company and a hard copy
of the receiving report is supplied to the accounts payable department. At the end all the detailed
are transferred to cash disbursement division for the settlement of payment.
3

System flow chart of cash disbursement system: A flow chart for cash disbursement
system of Bell Studio is as follows which shows all the steps from start to end that are followed
by organisation to settle a payment.
The above system flow chart of cash disbursement system shows that account receivable
department receives detailed information regarding purchases from purchase system. Clerk of
cash disbursement division file documents until the payment is due. After this process cheques
are prepared that are sent to treasurer for the purpose of signature on them. When cheques get
signed then these are mailed to vendor in order to settle up the payment. At the end different
types of documents are updated and filled by clerk (Turner, Weickgenannt and Copeland, 2016).
These are cheque register, accounts payable subsidiary ledger, account payable control account,
purchase order copy, receiving report, cheque copy in the department and invoice.
4

Weaknesses of purchase system: The purchase system of Bell studio is very complex
because clerks of the organisation are required to check the processes again and again. It results
in increased work load of them and reduced engagement in the operational activities. Computer
terminal is used for the purpose of checking inventory. For this purpose the company is required
to hire skilled employees who can use computers and determine actual status of inventory. Hard
copies are printed for vendor and purchasing department which increases cost to enterprise.
Risks associated with purchase system: There are various weaknesses of purchase
system which an result in different types of risks. All the risks that may affect Bell Studio are as
follows:
 As procedure of purchase system is complex so it is not easy to understand for staff
members. It can affect accuracy of information which is used to determine that
organisation requires inventory for conducting operational activities.
 Computer terminal is used by clerks of Bell Studio which requires employees with
technical knowledge and if business entity is not having such staff members then it will
become difficult to analyse inventory status (Tetteh, 2014).
 Cost of hiring skilled staff members will be very high for the company because they will
ask for high amount of salaries.
 As hard copies of purchase order are printed by clerk of organisation which is provided to
vendor and purchasing department. It can create risk of increased cost of the company
because printing hard copies again and again will result in raised expenses.
Weaknesses of cash disbursement system: In the cash disbursement system of Bell
studio there is no decisions factor which creates difficulties for clerks to keep detailed
information. Timely up-gradation is required for different documents and some times it become
difficult for clerk of cash disbursement department to update them on time. On the other hand
clerk is also responsible for the filing work of other documents and reports. It results in various
responsibilities of clerks and sometimes they may make mistake while performing their jobs. All
the clerks who are related to the system require knowledge of computer (Gallien and et.al.,
2014).
Risks associated with cash disbursement system: In cash disbursement system various
weaknesses are identifies by business analyst which can result in different risks for Bell studio in
future. All the risks that are associated with this system are as follows:
5

 As there is not decision element in cash disbursement system which can affect clerks to
analyse that what is right for the organisation and what is wrong.
 Sometimes it becomes difficult to update documents in system on time and if it is not
done then it can result in improper records of organisation. There are various documents
such as cheque register, accounts payable subsidiary ledger and accounts payable control
account that requires timely up-gradation. If these are not updated on time then top
executives will not be able to analyse actual position of company and funds which is
required to be paid to suppliers, employees and to make other payments.
 Work load of clerk in cash disbursement system is very high because they have to file
different types of information and documents. The receiving clerk is responsible for the
filing work of invoice, purchase order copy, receiving report and copy of cheques in
order to ignore issues that may take place in future. It creates risks for organisation
because if they avoid a single document then it can result in huge losses.
 It is not possible for all the employees to have knowledge of computer and if they are not
having proper knowledge of it then it will become difficult for them to update
information in organisation's system (Valacich, George and Valacich, 2017).
Payroll system
Data flow diagram of payroll system: A diagram which shows data flow of payroll
system is as follows:
6

The data flow diagram of payroll system depicts that all the workers of organisation add
their working hours in a time card which is analysed by supervisors with the help of computer
terminal connected to the central payroll system. The checked time cards are submitted to the
payroll department. Two copies of each employee's cheques are printed and provided to
supervisors to cross check records of their department. This procedure is conducted with the help
of digital employee record. The payroll register is provided to account payable department from
payroll division. Accounts payable department transfer the register and disbursement voucher to
the general ledger department in order to make payments of employee's salaries (Dennis and
Wixom, 2018).
System flow chart of payroll system: A well justified flow chart for payroll system of
Bell Studio is as follows which depicts all the steps of procedure which is used by organisation:
7

The above flow chart of payroll system shows that all the employees formulate time card
for working hours of them. The time cards that are prepared by workers are checked by
supervisors that the information which is added to the cards is appropriate or not. If the data is
8

correct then time card's data is processes to central payroll system with the help of computer
terminal which is located in the data processing department. Hard copies of cheques and payroll
are also printed by clerk in order to post them in to digital employee record. After this step clerk
files time cards in payroll department and send compensation cheques of employees to the
supervisors of respective division. Afterwards a copy of payroll register is sent to accounts
payable department. Clerk in this department check registers and prepare disbursement vouchers
manually and send these vouchers and payroll register to general ledger department. At the end
cheques are filed in the account payable department by clerk.
Weaknesses of payroll system: Payroll system is highly dependent upon employee's
time cards. Procedure of setting up payment of employees is time taking and there are also some
unnecessary costs associated with this system which is related to printing hard copies of
documents. Cheques of employees are provided to supervisors rather than themselves which also
increases the time for them to get salaries on time. Disbursement voucher is prepared manually
which can affect accuracy of information. Payroll department receives time cards every week
that creates end number of responsibilities for the division.
Risks associated with payroll system:
 All the employees have time cards which is used by them to add their working hours in it.
Payroll system of Bell studio depends upon it and if organisation is not having detailed
information regarding working hours then workers can provide false data to employers.
 Each and every week payroll department receives time cards of workers which increases
liabilities of the whole division because it has to finish its work in one week as next weak
new information regarding working hours of employees will be received.
 Time associated with the payment system of salaries is very high because firstly the
cheques of employees are provided to the supervisors and if they forget to provide them
to workers on time then it will result in decreased productivity and work quality.
 Clerks manually prepares the disbursement voucher which can affect accuracy of
information as it is possible that mistake could be made by clerk in the vouchers. If a
single error is made in this voucher then it can affect whole payroll system because it is
provided to general ledger department where information of all transactions is kept
(Newman, 2015).
9

 There are various types of unnecessary expenses that are faced by organisation and there
is no requirements of them. One of them is taking hard copies because they can keep soft
copies rather than hard one's because it results in additional expenses for Bell Studio.
CONCLUSION
From the above project report it has been concluded that there are various types of
systems that are followed by business entities in order to execute business operations. These are
purchase, cash disbursement and payroll system. Purchase system is mainly used for ordering
and buying of inventory to conduct selling activities. Cash disbursement system is associated
with settling all the cash payments to vendors, employees and suppliers of goods. Payroll system
is used by companies to keep detailed information regarding compensation which is provided to
clients according to their working hours. All these system have their own weaknesses and risk
associated with those weaknesses. In order to operate all the business activities appropriately it is
vital for them to deal with them appropriately and find solutions to resolve them.
10

REFERENCES
Books and Journals:
Chalmers, J. and et.al., 2016. Following the money: Mapping the sources and funding flows of
alcohol and other drug treatment in A ustralia. Drug and alcohol review. 35(3). pp.255-
262.
Dennis, A. and Wixom, B. H., 2018. Systems analysis and design. Wiley.
Gallien, J. and et.al., 2014. National Drug Stockout Risks in Africa: Analysis of the Global Fund
Disbursement Process for Procurement from 2002 to 2013. Ross School of Business
Paper, (1241).
Gallien, J. and et.al., 2017. National drug stockout risks and the global fund disbursement
process for procurement. Production and Operations Management. 26(6). pp.997-1014.
Kranacher, M. J. and Riley, R., 2019. Forensic accounting and fraud examination. Wiley.
Newman, S., 2015. Building microservices: designing fine-grained systems. " O'Reilly Media,
Inc.".
Tetteh, E., 2014. Causes and effects of delays in procurement of works at pre-tender stage in
Upper Denkyira East Municipal Assembly (Doctoral dissertation).
Turner, L., Weickgenannt, A. B. and Copeland, M. K., 2016. Accounting information systems:
the processes and controls. John Wiley & Sons.
Valacich, J. S., George, J. F. and Valacich, J. S., 2017. Modern systems analysis and design.
Pearson Education Limited.
11