Comparison of Controls in Traditional and Automated Systems Discuss the differences between a traditional receiving system and an automated integrated receiving system

Answer 1

Traditional Receiving System
? Purchase orders are prepared and sent to vendors.
? Purchase orders are based on projected sales or production, or current inventory levels.
? Price is either negotiated or competitively bid among a number of vendors.
? Independent receiving function exists.
? Independent, sequentially numbered receiving documents are prepared.
? Accounts payable department matches purchase order, receiving document, and invoice and accrues accounts payable.
? Differences between goods received and goods ordered are identified before payments are made.
Automated Integrated Receiving System
? Long-term contract is signed with vendor.
? Quantities are based on production plans or sales programs. Quantities and delivery times are updated monthly or biweekly depending on scheduling and shipping constraints.
? Price is locked in with a preferred vendor.
? Goods are delivered to production line.
? Accruals are set up based on contract.
? Payments are electronically transferred to vendor based on contractual terms.
? Processes are described in the contract to resolve difference between goods received and goods that were shipped by vendor.