System Analysis and Selection for Fonterra Co-operative Group Ltd.

System Analysis and Selection

Executive Summary

This report described business of the Fonterra Co – operative Group Ltd. as well as its activities related to its business such as sales order, accounting and payroll. Its key processes were shown like sales order of the company, billing process and account receivables that have been used in the TPS – Transaction Processing Systems. The potential weaknesses related to the internal control were also shown such as wrong entry in accounts, miscommunication related to the order delivery, charging the wrong amount from the customers and providing the products on credit without analyzing the credibility of customer. The techniques were also provided to resolve these risks. The features were also discussed of the software for this risk’s solution. The ERP suggestion were provided for betterment of this company.

Introduction:

This report is providing the solution to the client company Fonterra Co – operative Group Ltd. in Australia which is registered under the Australian Stock Exchange. The activities that are carried by this company in the TPS are production of dairy, purchase of raw material items, operation of the raw material into products and supplying. The main processes are sales order, billing as well as account receivables of Fonterra are discussed. The potential weaknesses related to the internal control at the Fonterra and the related risks are explained along with the recommendation of techniques. The requirement of needed system is also discussed and yhe selection of software is also carried out.

1.Background of the Selected Business

The company registered in the Australian Stock Exchange selected is the Fonterra Co – operative Group Ltd. which is a MNC in the Australia. The company is into the manufacturing or production of dairy products. The client is facing problem for which the activities are analyzed

1.1 Business activities involved in the Transaction Processing System

The Fonterra Co – operative Group Ltd. is using the TPS – Transaction Processing Systems for diverse activities of their day - to - day processes of their business. It helps to know the data related the generation of the scrap during the production or manufacturing of their dairy products in a factory. It helps in recording the orders of sales, staff payroll and record – keeping of employees (Kennedy, 2017). The activities that TPS perform at the Fonterra are scheduling the production, purchase of raw material, operation of the raw material into products and transporting of the products into the market.

1.2 Key business processes involved in the Transaction Processing System

The main processes of the Fonterra Co – operative Group Ltd. are production, sales, accounting, shipping as well as inventory management using the TPS – Transaction Processing Systems. It helps to ensure the entry of order, controlling the inventory, management of payroll, account - receivable and gender are different process that the company does throughout its production planning to sales of its dairy products. The TPS helps in addition of the value to its manufacturing process as well as its services. The key processes that Fonterra Co – operative Group Ltd in TPS are as follows:

Sales order: This helps the Fonterra Co – operative Group Ltd in taking the orders of the customer or market and make it into a proper format which includes the customer details like name, bank account number, address, quantity of products order, discount provided. It is important for the shipping of the order to the customer on time.

Billing: This process of billing at the Fonterra Co – operative Group Ltd involves receiving the order of sales copy from the sales division of this manufacturing company. After receiving the notice of shipping, document related to release of stock, the invoice of sales is prepared of the dairy products which this company produces. The bill is prepared

Account Receivables: This department of the Fonterra Co – operative Group Ltd, this helps in posting in receivable account about the sales or order. It helps to ensure the payment record of the buyers and tracking the bills which is unpaid from the buyer side (Chuma, 2020).

1.3 Evaluation the business process of your client to identify potential weak internal controls and the risk associated with these potential weak controls

The business processes of the Fonterra Co – operative Group Ltd has certain potential weaknesses related to the internal control such are that the sales personnel are handling the credit approvals as well as processing the orders of the sales. The Account Receivable department personnel is using the control account of account receivables as well as sub – ledger of account receivables along with the general ledger. The billing department personnel is creating bills of the buyers as well as doing the sales recording without knowing the shipment details or status of the shipment of their dairy products to customers. The shipping department personnel is failing to inform about the shipment status which is processed to deliver.

The risk that are connected with the above - mentioned potential weaknesses related to the internal control at the Fonterra Co – operative Group Ltd such as:

• The risk of selling of the products to the buyer who is not credit-worthy without check financial condition of the buyer and approve the credit of the buyer by the sales department can result in loss.

• There is a risk of recording the inappropriate or wrong transaction entry as the Account receivable manager handles the gender ledger along with the account receivable sub – ledger as well as the account receivable control.

• The billing department personnel is responsible for the risk on recording the transaction of the sales in wrong date without confirming the delivery or shipping status of the goods or dairy products to its customer. Another risk is that the when a transaction is made in the ending month and its shipping is done in the next month creates the problem (Senzu and Ndebugri, 2017).

• Due to the late shipping, the document of shipping is not prepared, the billing department personnel will be not aware of the quantity of the products that are shipped and create the bill on the basis of the order received rather than actual quantity ordered. This led to the risk of charging wrongly to the client without the confirmation or knowledge of order.

• The risk of the error in the transaction can be more as the notice of shipping the products is not prepared.

1.4 Recommendation of the control techniques that will reduce or eliminate the potential risks identified

The internal control recommended to utilized by the Fonterra Co – operative Group Ltd as it helps in achieving the objectives such as the company’s assets can be protected, the details or records can be maintained properly, reliable as well as accurate data can be gained, it also ensures that the financial reports are based on the GAAP that is Generally Accepted Accounting Principles. Even the operational level efficiency can be enhanced at this manufacturing organization. It also observes the policies of the managers that are designed along with this the company can function legally by following the laws as well as regulations. The functions of this internal control at the Fonterra will help in the preventive control which means finding or detecting the problem prior to its occurrence, the detective control is one which is identified when the problem arises and the corrective control is used to correct the errors in accounting as well as billing and change the system from occurring any problem in future (Akhmetshin, et. al., 2018). The techniques like risk assessment, risk audit, variance analysis and meetings for communication can be used. This will help in reduce error and misunderstanding between billing, account receivables and shipping department.

2. Systems Requirements

2.1 Discuss the software features and functionalities that your client should consider supporting its business activities.

The Fonterra Co – operative Group Ltd can use the software for the account management in which will help in centralized accounting. Its features that will help in eliminating the errors and risks that this company is facing in its business operation as well as activities are as follows:

• It must be user – friendly as the employees of billing, account receivable and shipping will used it. Therefore, it is used for by the employee and even customized can be done as per the company needs. It must have reporting feature for ensure no miscommunication or error.

• It required software must have the invoicing as well as billing features along with the inventory management. This system must be integrated these the functions such as invoice, bill and managing the inventory for reducing the time for transfer as well as migration of the data from the one type of system to another.

• The automatic identification of error or problem feature must be there for the solution of the accounting problem. It must help in minimizing the various kinds of accounting entry errors in billing and account receivable department of this company (Ionescu, 2019).

• The feature to connecting with the stake - holders like client through the software will help to update about the accounting, shipping and invoice details to the customers of the dairy products of this company. It must have feature like accounts verification, payment tracker as well as the due payment notification to reduce the above risks.

• The software must be secured as it will contain the sensitive details like accounting details, payment details of this company, the lack of this feature leads to frauds or breach of the confidentiality of the company’s data (Al-Rashdan, et, al., 2020).

3 3. Software Selection

3.1 ERP functionality falls into two general groups of applications. Summarise two general groups of applications.

The two general groups of application of ERP system are as follows:

Online Transaction Processing (OLTP), is considered as the software program that has the ability to support the transaction and other application on the internet. This software is really designed to provide support to transaction based on the internet. The system of OTLP are mainly used for maintaining or looking after finance transactions, order entry, management of customer relationship and the sales made via internet. The major advantage of this application is to look after different transaction request in simultaneous manner and allow company to reliable backup and continue if the current system gets failed (Moniruzzaman, 2014). The software also allow user to perform the functions like writing, reading, and deleting of data in quick manner. The response is highly made to user actions and has the ability to process in quick manner. As the OLTP software serve a huge group of users then it has to deal with mission critical data and requires very high security and availability. The application characters are as follows:

• It has lower volume of connections.

• Includes the long running batch jobs to modify the data.

• There is a multi-dimensional view of different kinds of business activities that allow the users to solve problems, and support the decision of business (Tatemura, et. al., 2013).

Online Analytical Processing (OLAP) helps the business to perform multidimensional business data analysis, and also provides capability for typical calculation, analysis of trends and complicated data modelling. It is very powerful technology that includes decision modelling, support, retrieval of information, what if analysis and many more. This tool is mainly used for planning and analysis purpose. The OLAP application can be highly intended for different reporting for finance transactions and also address the medical institution activities as a concern for patient analysis. This application is mainly used for mining of data, and aims at discovering new relationship with different data sets. Both the above general application groups of ERP effectively help in supporting transaction and data sets (Lanphear, and Biswas, 2015).

3.2 General functionalities and key elements of ERP systems. Compare and contrast the features and functionalities of three ERP software packages offered by the ERP vendors.

ERP vendors offers different type of ERP system that helps the business in maintaining its integrated applications. The three ERP software packages that are offered by ERP vendors are as follows:

• Human Resource: In the ERP this concept is widely implemented. It helps streamlining the human resource management and capital. The modules of HR effectively look after employee’s database, information, details of salary, performance evaluation and many more. It allows the company to manage the employees on priority basis. It effectively help business in looking after payroll and issues of direct deposits as these are very time consuming. The HR will take measure to automate payment, including deduction and tax (Yu, Xu, Wang, and Ni, 2019).

• Customer Relationship Management: Managing relationship with customers is the second and high priority of ERP business. CRM in ERP always allow business to keep on track and provide them best solution to the problem. It also helps in tracking the history of buyers. With the usage of CRM software’s vendors can offer analytical functions as this will allow users to develop customizable reports and dashboards dependent on customer data. The software report will help in segmenting customers, managing of campaigns that are personalized and tracking of firm revenues.

• Supply Chain Management: Supply Chain management includes the different factors like execution, planning, monitoring and control of supply activities in the company. The Software of ERP take care of aspects that are in physical form and includes storage and transportation. The real time data will allow business to keep tab on the supply chain, so that the issues can be fixed in effective manner or way (Clegg, et. al., 2013).

The above elements and functions of ERP are interconnected with each other and the software of these will help in solving business issues and problems in quick manner.

3.3 The most suitable vendor and ERP software package for your client and explain why it is the best option.

The most suitable vendor for the client can be Microsoft. This offer the company robust products for both small and medium size firms. This is suitable for both large and small organizations. The best ERP software package for the client can be Sage Intacct as this will help the Fonterra Company to give real time financial information throughout the business. This application will help in streamlining of business procedure and led to reduction on labour cost in effective manner. In the business of manufacturing there is a need to have differ net software for accounting, cash management, purchasing, management of vendor, revenue recognition, management of contract and many more. Such application will reduce the firm burden of managing different functions and all of them will be automatically delivered and maintained through cloud. It is the best option as there as less complication involved in this software and can be easily understood by the manager of the company in effective manner or way (Ozturkoglu, and Esendemir, 2014).

Conclusion

Therefore, it can be concluded that business of Fonterra Co – operative Group Ltd and its activities such as sales order, accounting and payroll are used in TPS. Its key processes are sales orders, the billing and account receivables in the TPS are evaluated. The potential weaknesses of internal control are impacting negatively such as errors in accounts, mis - communication of delivery, the customers are charged wrongly and approving wrong credit. The techniques involve resolving the risks. The features the software will provide solution risk. The selection of ERP will help to function smoothly.

References

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