In order to assist in the set up of Riordan Manufacturing’s revenue cycle, some changes are needed. Riordan Manufacturing is going to incorporate the systems development life cycle to their system. Along with this, some detail on how participants in the accounting function will assist in the development of the system will be mentioned as well. There will be information on how the changes have impacted the areas of measure and control that tie to operational performance.
Riordan Manufacturing sells plastic bottles, fans, heart valves, medical stints and custom plastic parts. The company’s clientèle include automotive parts manufacturers, The Department of Defense and appliance manufacturers. This paper will outline how to integrate the cycle into an enterprise-wide accounting information system, the hardware needed and show how the accounting system flows through Riordan Manufacturing.
Riordan Manufacturing is owned by Riordan with annual revenue in excess of one billion dollars. Riordan uses the income statement to show investors what the income is, and how management is controlling expenses.
Riordan Manufacturing does not have an integrated accounting system at this time. All locations have separate systems and the information is sent to headquarters. The company admits that the current accounting system fails in many areas and needs to be replaced.
In regard to cost of goods, the company has a common set of procedures for inventory management. Each process is explained thoroughly to insure everyone involved understands. A common set of procedures is necessary to guarantee that all cost of goods is reported properly.
A main weakness for Riordan is many portions of the accounting process are still manual where electronic devices could be used. Another weakness is one throughout the entire company. The locations are not interconnected and headquarters rely on specific locations to send in the proper information and they combine the data into one system.
Riordan Manufacturing currently provides its F and A data from the different locations by a data file. Some of the files is reported by hard copy and has to be converted to the proper account codes. All these reports are then combined into one financial report. The company needs to come up with one global accounting system.
The SAP software is one of the highest recommended international accounting software that is used and has the strongest international features call SAP. It provides multiple currency support. From a balance sheet perspective, accounting for fluctuations in exchange rates has become easier. This software is also in compliance with FASB 52 (Collins, J., 1999-2003).
There will need to be global implementation of the software from our I/T department, and training done on the accounting software however, this will save time in compiling reports and the reports will be more accurate.
Many different types of information systems exist that will be needed in order to integrate supply and demand into the enterprise wide accounting information system. The first system would be Management Information System (MIS) which would collect information for monitoring the performance and maintaining coordination between purchasing and accounts payable (Introduction of Information Systems, n.d.) Another information system that would be beneficial to Riordan would be the Office Automation System (OAS).
The OAS would be beneficial to Riordan because this system is useful for general office work when handling and managing documents. OAS also assists in improving communication within the workplace. Finally, transaction processing systems (TPS) are also an excellent system to have within a company. “TPS records daily routine transactions such as sales orders from customers, or bank deposits and withdrawals” (Introduction of Information Systems, n.d.). Most organizations have these three types of information systems in place, even though others that could be used.
A way to make the revenue cycle run smoothly is by integrating hardware and software to assist in the setup of the various systems. This section of the paper will discuss what hardware and software is needed, and will go on to identify who accesses this information.
In order to integrate cost of goods into the accounting process Riordan Manufacturing will need a system that works for all locations. This would require software that is compatible for all locations. This would also make it possible to share reports such as the income statement and balance sheet.
There should only a select few that should have access to the information in the database. These people would include the database designer, the persons installing the hardware or software and database management. This will keep the information contained in the database as secure as possible. This would be the first area of internal controls. The second area deals with transactions and is known as an application control. Application controls are vital to ensure accuracy and legitimacy of the data. Two common input internal controls that would be required are feedback mechanism and edit tests. Processing data controls deals with the data after input. The first internal control needed is an audit trail. This control allows a person to follow the route the data has taken.
The final step in application control is the output controls. One area of concern in this area is control of company forms. In the area of revenue specifically, cost of goods sold, the forms that should be managed are purchase orders and inventory control sheets.
As a way to make the accounting process easier for all involved, Riordan Manufacturing must brainstorm on how to provide information through the corporate intranet or Internet. In order to decide on where to list information, some details on the meaning of the intranet and Internet are provided. “The intranet is for internal communications purposes. These computer networks use the same software as the Internet, but are internal to the organization that created them” (Bagranoff, 2008, p. 7). A good way to use the intranet would be to have all locations connected.
This would allow all information to be accessible to each location. At the same time, it saves time trying to get information forwarded to corporate. “The Internet is a collection of local and wide area networks that are now connected together via the Internet backbone – that is, the main electronic connections of the system” (Bagranoff, 2008, p. 5). The internet is a good place to provide customers with information on the history of Riordan Manufacturing. Another area of interest is listing some information on the products that are being sold.
Integrating a new accounting system into the company will greatly improve internal controls for Riordan Manufacturing. With hardware and software implemented, the company will have more consistent and accurate financial reports. Riordan Manufacturing will always know where they stand financially if the new system is implemented.
The goal is to change the current process for maintaining, recording, and billing of inventory as related to cost of goods sold (COGS). An entire new accounting information system is not required only additional software program in this one area. Waterfall is the oldest form of systems development life cycle (SDLC) and is the one that is used for this project. The waterfall SDLC includes multiple steps in the life of a project. The steps include: project planning with feasibility study, systems analysis that defines the projects goals, system design, implementation, integration and testing, acceptance, installation and deployment and finally maintenance of the accepted system (Kay 2002).
The system is already proposed so the first two steps of the waterfall SDLC have already occurred in some form. The SDLC will be used as check list to ensure all the proper processes are completed when implementing the new system. The steps in the waterfall SDLC should be followed with the creation of a system design as the next step. Once the system design is created with all the required features including operational details the next step can be started. This step is the implementation of the system design into the current accounting system.
Once the code is written for this step integration and testing will be required to ensure that the new work is compatible with the old system. In this step the company should also test the hardware involved so when the system is live all is in order. Finally the last step is installation and deployment if the new design has been accepted. Once the new system and hardware are in place the company can begin replacing the old processes. Maintenance is included in the Waterfall SDLC but as a company maintenance is automatic to ensure good life of the company’s assets.
The participants to contribute to the system design of the systems development life cycle would be the database designers. This enables the system to have the needed logical and physical design to have an operational database. In order to make this process successful, one must determine the data to be stored, and determine the relationships of the different data fields. Review the way the old system is set up and see if improvement is needed to make the new system better.
The implementation stage would probably involve database management. It means that testing has been done and implementing the system is the next step. Some comparisons have been made with the old and new systems and things are being documented where possible issues may occur later.
With the installation and deployment step, the departments involved would be IT and accounting. This step occurs because the system has been approved to go live. IT is assigned to installing the system. It would involve installing the software applications as well.
The accounting department’s job would be to make sure after IT installs everything to test their processes now that the system is up and running. This would involve doing actual work and reviewing the results of the work. Make comparisons to how the results of the processes of the old system worked versus the new system. Accounting would be required to review the software applications as well. Again, testing would be needed to see if the applications are running smoothly.
The improvements for Riordan if they implement a new accounting system are vast. Some of those include; less clerical errors, more efficient for keeping track of inventory, faster because after initial set up everything goes quicker, better tracking of access to information and no papers to lose because all the work is done electronically.
Bagranoff, N. A., Simkin, M. G., and Strand, C. (2008). Core Concepts of Accounting Information Systems (10th ed.). [Electronic Version]. New York: Wiley. Retrieved July 10, 2008 from University of Phoenix, ACC/340, rEsource Web site: https://mycampus.phoenix.edu/login.aspBagranoff, N. A. (2008). Accounting on the Internet. [University of Phoenix CustomEdition e-text].John Wiley & Sons, Inc. Retrieved July 12, 2008, from University ofPhoenix, ACC340 Web site.
Collins, J. CPA (1999-2003). Accounting Software Advisor: Foreign Currency. Retrieved July 6, 2008 from: http://www.accountingsoftwarenews.com/charts/currency.htmlIntroduction to Information Systems (n.d.). Types of Information Systems. Chapter 2.
Retrieved July 5, 2008 from http://www.ii/metu.edu.tr/~ion501/demo/index.htmlKay, Russell (2002). Quickstudy: System Development Life Cycle. ComputerWorld. May 14, 2002. Retrieved July 24, 2008 from the World Wide Web at: http://www.computerworld.com/developmenttopics/development/story/0,10801,71151,00.htm