Premier_Office_Ltd

A PERFORMANCE REVIEW OF PREMIER OFFICE SUPPLIES LTD ACCOUNTING SYSTEM | [Type the document subtitle] | | | | | | | CONTENTS Page Terms of reference 4 Executive summary 5 Methodology 6 Introduction 7 Company background 8 Size and structure Accounting staff 9 Reviewing the competencies of POS’s accounting 10 Staff and analysis of training needs Work planning and coordination 12 Communication 12 SWOT analysis 13 Sales ledger and customer receipts 14 SWOT analysis for POS’s sales ledger 15 Purchases ledger and supplier payments 16 SWOT analysis for POS’s purchase ledger 17 Payroll system 18 SWOT analysis for POS’s payroll 19 The weakest part of the system 20 Fraud 21 Potential for fraud and theft in POS’s Purchase 21 and supplier payment system Explanation of term contingency plan 22 Encouraging colleague to report 23 Recommendations 24 Cost benefit analysis 25 Conclusion 25 Appendix Term of reference The objective of this report is to assess competency in unit 10 of the AAT Technician level, Managing System and People in the Accounting Environment. The report will investigate about any weakness and the need for improvements in POS Ltd accounting system. Methodology Information sources used to write this report are the knowledge gained from the units studied for AAT, internet research and tutor notes. After the introduction for unit 10 I have started reading though the case study several times and identifying problem in POS’s accounting system. Searching in the internet and gathering information. Used the AAT guide for unit 10 and start to write the first draft. Got feedback on the first draft from the tutor then write the final draft and submit it on time. Executive Summary The purpose of this report to examines the current accounting system and staffs performance in POS Ltd. Then look at the areas that need to be improve and any potential of fraud in the system. Finally give recommendation with cost implication. The findings in this report are: * The workflow in the accounting department was not spread evenly between the staff. * The purchases and payment system found to be the weakest part of the system and has high risk of fraud. * There is a lack of staff training. * POS need to establish a contingency plan. The main recommendations are: * Training the staff to multi skill them and rescheduling the work to improve the work flow. * Reviewing the purchases and payments system to eliminate any weakness. * Establish a good contingency plan Introduction This report is based on the relevant case study of POS Ltd, The report will review the company’s accounting system, staff performance and highlight any weaknesses or potential of fraud. Finally give possible recommendations to improve the system The following areas will be examined in this report: * Staff efficiency * Accounting System * Contingency Plan Company background The premier office supplies Limited is an office stationery supplying company that delivers office stationery to customers next day on receipt of their order. The company has been established after a strong believes that there is a real market demand for next day delivery service. It was found ten years ago by three colleagues who previously worked in a similar sector. The company was funded by shareholders. Size and structure POS Ltd has around 320 full time employees, its capital exceeds £5 Millions and the turnover is over £30 Millions. 1.0) Accounting Staff In this part of the report I will be looking at the competencies of POS’s Staff and what is their strengths and weakness, I will also check the areas that need to be improved. First of all, the requirements for effective and efficient accounting staff are; * Ability to be multitasks and adapt new skills * Good communication skills * Flexibility and reliability * Willingness to take part in any training provided to improve their performance * Being aware of their responsibilities and having clear understanding of their job * Committed to achieve goals and meet targets * Working together as a team 1.1) Reviewing the competencies of POS’s accounting staff and analysis of training needs 1.2) Bridget Smith, General Ledger Clerk Bridget has experience from previous work in personnel office before joining POS which means she may be interested in working in the payroll and this will ease the pressure on Sarah More who has a lot to do. Currently Bridget is responsible for making the entries of the general ledgers, maintaining the cash book and petty cash, She has not been in any accounting courses before and would be beneficial to encourage her to take training courses in the payroll. 1.3) James Beck, Purchase Ledge Clerk James is the company purchase ledger clerk and has previously worked as sales ledger clerk for POS It would be ideal to liaise James with Celina khan who is currently working as sales ledger clerk and has too much to do comparing with him. The company should support him to finish his AAT qualification by offering him training in a new accounting area. 1.4) Celina Khan, Sales Ledger Clerk and credit controller Celina has worked as purchases ledger clerk before joining POS and it is sensible to familiarize her with the company’s purchases ledger and benefit from her experience, The company should look for a suitable opportunity for Celina to gain the appropriate qualification which will help in improving her performance. 1.5) Ron Stenway, stock control and costing technician. Ron is an experienced person, he worked as sales ledger clerk and credit controller, now he is the only person responsible of the costing and stock control which is difficult to be efficient and maintaining the ledger at the same time. Ron needs someone to assist him and cover his absence, Also it is logical to benefit from his experience in the sales ledger and credit control by training him in the company sales and credit control department. Ron has no interest in taking part in any personal development courses or training and the reason of that must be discussed with him. 1.6) Sarah more, payroll database clerk. Sarah experience in accounting is very poor and only has worked three months as temporary account clerk before joining POS. now she is responsible for POS’s payroll and maintaining the personal database. She had only two days of intensive training on the new software which is not enough, she is the newest person using the new system in the company and her needs for development is essential and should be discussed with her. The company has to arrange for more training for Sarah to improve her performance. The Gantt Chart of the Accounting Department is Shown in appendix 2 2.1) Work Planning and Coordination Management will need to examine what motivate their staff on an individual basis. The key motivators include achievement, promotion, responsibility content of work and recognition. Manager will need to look at developing and training their employees to maximise efficiency and get the best out of them. The objective of the training for POS’s accounting staff is to multi-skill the department employees and after arranging the training which is needed and rescheduling the work, the staff will be able to help each other. Each employee will be able to work in two different areas and the pressure of the month-end routines will be spread between them. That will make a good use of resources and time. Currently Celina Khan is experiencing difficulties at the end of each month because of the conflict of her responsibility as sales ledger clerk and credit controller whilst the purchases ledger clerk, James Beck is not affected by the month-end routines. After considering the training and rescheduling the work, Celina will be able to fulfil her duties. POS’s accounting department seems not to have a good team work as each individual achieves his/her task without interacting with each other. Arranging the training which is needed and rescheduling the work will encourage more team work and coordination. 2.2) Communication Good communication skill is one of the requirements for effective and efficient accounting staff. Peter Balls already been given disciplinary warning with regards to his poor attendance but he was dismissed in July and the way he got dismissed did not comply with the company’s dismissal and disciplinary procedures. The lack of communication between him and Oliver Mann caused unfair dismissal. 3.0) SWOT Analysis. SWOT is model used in evaluating the strengths, weakness, opportunities and threats in a business, which helps in decisions making. The strengths and weaknesses are internal factors while the opportunities and threats are external factor. The SOWT analysis for POS accounting system is shown below: 3.1) Sales ledger and customer receipts In order to have a good sales ledger control, the following key elements are required. * The way payment is received from customers whether it’s a cash or cheque. * The accuracy of the system used for the accounting, the payment and VAT. * Regular updating for debtors account. * Using appropriate numbering systems for issuing invoices which is easy to follow. * Keep up to date aged debtor reports. * Recording each period sale to see if the sales target has been met. * Produce monthly statements for customers. * Keep regular reconciliations for the sales ledger to avoid any discrepancy. POS ltd sales divided into two categories: * Large corporate customers which account for 30% of the company’s turnover. * Small business customers which account for 70% of the turnover. The company uses two different trading policies with customers. 3.2) SWOT Analysis for POS’s Sales Ledger Strengths: * Dividing the sales force into two groups to help each customer needs. * Daily invoices dispatch. * Banking the cheques in the same day they are received. * Producing monthly aged debtors report and review it. * Checking the customer’s credit before approving the credit. * Regular bank reconciliations to eliminate any errors and that done by two different people. Weaknesses: The length of time to review the overdue payment is a bit long Opportunities: * Three months trail period based on cash could cause losing customers * 30% of the turnover is by the large corporate and 70% is by the small business customers, a profitability analysis need to be done. Threats: * Losing the large corporate customers because of the trail period. 3.3) Purchases Ledger and supplier payments To have a good purchase Ledger control it the following key elements are required. * Accuracy of information * Appropriate accurate system used for accounting, payments and VAT * Show the paid and unpaid invoice clearly. * Comparing actual purchases with the budget. * Control spending. * Keep regular reconciliation to avoid any discrepancy. POS Ltd currently deal with 30 regular suppliers and pay them on time; some of them get paid by BACS and the other by Cheques. 3.4) SWOT Analysis for POS purchase Ledger Strengths; * Experienced Person “Penan Chinn, the company buyer” who worked in this job for the last three years. * Approving the new purchases policy which helps in reducing the number of suppliers and make it easy to deal with. * Using BACS system to make payments all though some suppliers still being paid by cheques. * Paying suppliers on time. Weaknesses; POS purchase Ledger control and supplier’s payment is the weakest part of the system and has high risk of fraud. 1. Negotiating all contracts, prices, checking invoices and goods receipt notes is done by one person only (penan Chinn). 2. The purchase ledger clerk who is responsible for making the entries and the company account that, is responsible for approving the payments and one of the authorised signatories are relative. 3. Directors have no time to check all cheques before signing them. 4. Some of the suppliers are paid by cheques which is time consuming. Opportunities Possibility to replace the current suppliers at the end of their contract with a new one which has better offer and quality Threats The biggest threat for a successful business is fraud, it abuses the resources and could cause loss. The threats for POS are: 1. The company’s buyer could fix high prices with the suppliers 2. Suppliers could increase the prices 3.5) Payroll system The following key elements should provide a good payroll system. * System used for accounting the payroll and how much time spent to operate it * High level of accurate information * The method used for paying the employees whether it is by cheque, cash in hand or through the bank. * Regular system update * Regular reconciliation to prevent any discrepancies * The payroll should be carried out by more than one person and checked, Authorised by senior staff. POS operate two separate payrolls, 1. Monthly for salaried staff 2. Weekly for hourly paid staff Recently the company installed a new integrated payroll and personnel database management system. 3.5) SWOT Analysis for POS payroll Strength * 90% of the staff are paid by BACS * The new system used could provides more accuracy Weaknesses * Inexperienced person is doing the payroll without assistant from any senior staff * The new system has not been monitored by senior staff * Hourly staff are still paid by cash collected weekly from the office and that increase the potential of thefts, Also it’s time consuming * Allowing colleagues to collect the wage for each other increase the risk of fraud and theft Opportunities * Encourage the weekly paid staff to move to BACS payment system to eliminate larger amount of cash being held in the premises. * Another person is required to help with more training on the system. Threats * Directors may not have the time to check the prepared payroll regularly * Holding cash payment in the premises could increase the risk of theft 4.1) The weakest part of the system The SWOT analysis for POS accounting system shows that the purchases and suppliers payment system is the weakest part of the whole accounting system. The following recommendations would help in improving it. * Regular check and reconciliations against the purchases ledger clerk curried out by the sales ledger clerk or the general ledger clerk. * Reviewing all the cheques and BACS payment before authorising them is very important and it should be done by the finance director and another member of the board but not the company account. * Because of the relation between the purchases ledger clerk and the company account it is batter to separate their duties. 5.0)Fraud “Fraud is a type of criminal activity defined as: abuse of position or false representation or prejudicing someone rights for personal gain or to cause a loss to another party”. Google-Serious Fraud Office. At POS Ltd there is one area of high risk of fraud as mentioned earlier, which is the purchases and suppliers payment system. POS’s directors should consider establishing a risk management group to review the risk of fraud, analysis it and take action. The ideal person to chair the RMG is the finance director. Once that has been done then the company should develop a risk management strategy. 5.1)Potential for Fraud and Theft in POS’s Purchase and Supplier Payment System The risk of fraud that has the probability to occur and what the company should be concerned about and its impact is: * Scoping of contract * Paying fake or controlled suppliers * Changing contract * False invoices * Increasing the prices * Changing evaluation criteria * Altered terms for favourable contract The control on the purchases and suppliers payment system is very low. It is operated by three employees in which two of them are relative, the level of fraud risk is very high and can be conspiracy between two or more of them. 6.1)Explanation of the term “contingency plan” A contingency plan is a plan devised for a specific situation when things could go wrong. They are often devised by organisations and business who want to be prepared for any emergencies that could happen, it is also known as a “back up” plan, worse cases scenario or a “plan B”. They are set in place to help the business to recover from serious incidents within minimum time cost and disruption to the general running of the business. Google/ Wikipedia In other word contingency plan is planning how to manage unplanned events which have a probability to happen and have a huge impact on the business. POS Ltd needs to establish a contingency plan to the following key issues: * Staff absences * Computer failure * Power failure 6.2)Staff absences Staff absences could be due to a various reasons and the common ones are sickness, holiday or could be dismissing a member of staff, in POS case. Training employees to be able to operate two part of the system so they can cover each other absence and avoid any delay or putting the work on hold. When more than one employees are absent in the same time it will be essential to hire agency staff to cover. POS has experienced difficulties with their staff absence due to the lack of training. 6.3)Computer failure Computer failure could affect one part of the system or all the system which is the worse. Failure could be caused by a virus destroying the files, system crash down or power cut. To avoid losing work or important data the best way is to back up in regular basis and use a prober anti- virus software. 6.4)Power failure In the event of power cut, planning for potential power failure a head could save time and money when power sources are not available. POS Ltd has been affected by power cut which had an impact on the business ability to function. They had lost the work for that day as there had been no back up made due to the power cut. The back- up takes place at the end of each day but the failure has occurred in the afternoon which means no back up was done at that time of the day. They will need to find more efficient generator which will enable the business to function in the event of power cut. Providing a laptop for some staff will help in backing up the work has been done in the event of power cut as they are battery operated. 7.0)Encouraging colleagues to report issues and referring problems to the appropriate person Having problems at work are commune but the way how to deal with it makes big difference in solving it. Usually employee tries to solve it in their own way but that could complicate the matter. Reporting issue and queries to the appropriate person who has the authority and expertise is the best way to solve the problem. Problem like fraud could rise at work and it is important to report it but before reporting it is good to investigate first to avoid any complication between colleagues. The appropriate person to refer a problem like fraud is the finance director and in her absence the managing director. 7.1)Recommendations I would recommend to the board the following to improve the system performance: 7.2)For staffing issues : 7.2a)Bridget Smith As stated in the “new right to request changes to the terms and conditions of employment” I recommend that Bridget’s request for change of hours be approved due to the fact that her child is under 5 years of age. A flexible working agreement should be drawn up which stipulate exactly what hours she needs to do for the particular period. Staff should draw up a user manual of exactly what their job consists in case of unplanned absences. 7.2b)For purchases and suppliers payment system: This part of the system should be reviewed to eliminate the weaknesses and make fraud more difficult. Checking prices, invoices and goods receipt notes could be done by another member of staff probably Ron Stenway the stock control and costing technician. A director should check all cheques before signing them. 7.2c) Updating the payroll system Another member of staff should deal with personnel issues probably Bridget Smith. Payroll should be done once a month to save time and weekly paid employee should be given incentive to move paid monthly. Also a director should review the payroll once it has been prepared to reduce the risk of fraud. 8.0)Cost Benefit Analysis Training existing staff would cost the company but will make them more efficient at their own jobs and multi task. Money will need to be spend to recruit a temporary agency’s staff to cover the company’s staff during their training time but that will ensure the work is completed on time. Using more efficient generator will be costly but will enable the business to continue in the event of power cut. 8.1)Conclusion This report has reviewed POS Ltd’s accounting system and looked at its strengths, weaknesses, opportunities and threats. In POS’s staffing arrangements was not operating at its fullest also there was a potential of fraud. A recommendation for improvements was suggested. Appendix 1 The Premier Office Supplies Limited Organisation The Board Peter Holmes Anne Milner Jennifer Eccles Graham Pugh Managing Director Finance Director Sales Director Operations Director Oliver Mann Caroline Bell Chief Account Accounting Technician Bridget Smith James Beck Celina Khan Ron Stenway Sarah More General Ledger Purchases Ledger Sales Ledger Stock Controller Payroll & Clerk Clerk Clerk & Credit & costing Personnel Controller Technician Data Base Clerk Penan Chinn The company’s Buyer Appendix 2 | Week 1 | Week 2 | Week 3 | Week 4 | Bridget SmithGeneral Ledger Clerk Data input into general ledger,Producing the end of month trail balance,Maintaining cash book and the petty cash | | | | | James BeckPurchase Ledger ClerkData input into purchase ledger | | | | | Celina Khan Sales ledger clerk and credit controller Data input into sales ledger and credit control | | | | | Ron StenwayStock control and costing technicianStock control Costing | | | | | Sarah More Payroll and Personnel Database ClerkPayroll and personnel database | | | | | Gantt Chart of Accounting Department Appendix 3 Risk analysis of potential fraud in the purchases and supplier payments system Details of risk | Employees | Collusion by third parties | scoping of contract | POS buyer | Buyer &suppliers | Paying fake or controlled suppliers | POS buyer & PL clerk | Co. Accountant | Changing contract | POS buyer | Co. Accountant | False invoices | POS buyer & PL clerk | Suppliers | increasing the prices | POS buyer | Suppliers | Changing evaluation criteria | POS buyer | Buyer & suppliers | altered terms for favourablecontract | POS buyer | Buyer & suppliers | Appendix 4 Fraud Matrix Details of risk | Probability | Controls Impact | scoping of contract | High | Low High | Paying fake or controlled Suppliers | Low | Low High | Changing contract | High | Low Medium | False invoices | Medium | Low High | increasing the prices | High | Low High | Changing evaluation criteria | High | Low High | altered terms for favourablecontract | High | Low High |