sales order cycle review report

8/14/2019 Sales Order Cycle Review Report

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SALES

ORDER

CYCLE R

EVIEWREPOR

T

ins


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2pany X Confidential: Do not distribute

Table of Contents

Executive Summary

Executive Summary 3

Objective, Scope & Procedures Performed 4

Background

Background Statistics 5-6

Action Matrix

Action Matrix Summary 7 Action Matrix Detail 8-15

Appendices

A: Best Practice Scorecard 16

B: Internal Control Assessment 23

C: Process Maps 30

D: Testing Matrix 36

E: Acknowledgments 37


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Executive Summary

Internal audit conducted a review of the sales order processing process with the objective of evaluating the overall function for

adequate controls and operational effectiveness. Specific areas of focus included quote-to-invoice process, contractoperations/maintenance, accuracy and integrity of data captured in the order management system, and the quote-to-invoice cycletime. This review was completed in (insert date).

The current sales order processing process is inefficient and results in increased quote to invoice cycle time. Also, the companysinformation system is currently not collecting valuable sales discount information. This lack of information hampers managementsability to make informed decisions relating to pricing. Other key observations noted during our review include:

Discounts are currently not being tracked on an overall basis. This lack of discount information hinders managements ability

to create and maintain effective pricing strategies. In an analysis performed by Internal Audit, it was noted that XX% discount($XXM) was given on orders of $XXXM during the period (insert dates).

Discount authorization documentation is incomplete or missing. Potential unauthorized discounts may be given to customerswhich results in lost revenue and undermines the companys overall pricing strategy.

Contracts and agreements are not consistently submitted to contract operations for review.

Tool configuration information is not readily available to regional marketing and sales personnel. As such the overallquotation/order process cycle time is increased because quotes and purchase orders do not contain complete information.

Sales quotes do not consistently have complete tool configuration information, resulting in incomplete purchase orders fromcustomers. Incomplete tool configuration information on purchase orders creates process inefficiencies in the configuration

process and ultimately increase the overall order cycle time. A global clean book checklist (CBC) to address the overall sales order process do not exist. As CBC requirements are not

consistent between departments, quotes and purchase orders are sometimes passed on to the next process step withoutcomplete information.

The master price list in the (system) is not maintained. Pricing information provided to customers may be incorrect and couldpotentially result in lost revenue. Maintaining a manual system is costly and time consuming.

The shipping log is not consistently filled out to reflect all appropriate shipping information. Failure to record shippinginformation in the shipping log could potentially hinder the companys ability to trace shipments and respond to customerinquiries regarding shipments in a timely manner.


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Objective, Scope, & Procedures Performed

Objectives Evaluate the internal control environment and the effectiveness and efficiency of the sales order cycle from quote to invoicing.

Review and evaluate the adequacy of existing policies and procedures in the sales order process.

Benchmark Company Xs sales order process with Best Internal Control Policies and Best Practices information.

Identify opportunities for internal control and process improvements.

Scope

The scope of the work included a review of the sales order cycle at (company).

Our work did not include other Company X locations

Procedures Performed During This Review

Reviewed existing policies and procedures in the processing of sales orders from quote to invoicing.

Interviewed key personnel in regional marketing, order management, and systems engineering to obtain an understanding ofthe sales order process.

Performed transaction testing of sales orders to evaluate cycle time, proper authorizations and support for entries.

Perform CAAT (Computer Assisted Auditing Testing) analysis on sales order records.

Evaluated the efficiency and effectiveness of the sales order process and related internal controls and compared to BestPractices, noting opportunities for improvement.


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Background Statistics

Key Discount Statistics:

Sales order statistics from (dates):

Total Orders Received $xxx.xMLess: Total Discounts xx.xM (xx%)

Net Bookings Value xxx.xM

The table at right shows the top 10customers by discount given. Thisrepresents approximately $xx.xM (xx%) ofthe total discounts over the period from(dates).

The table below shows the top 10discounted parts over the same period.Discounts relating to the xxxMM Indexeraccounted for approximately $xx.xM (xx%)of total discounts ($xx.xM) given.

Note: Data for both tables taken from sales

order data from (dates).Top 10 Part Discounts

PART # PART DESCRIPTION LIST PRICE BOOKING VALUE DISCOUNT GIVEN DISCOUNT %

TOTALS

Top 10 Customer DiscountsCUSTOMER NAME LIST PRICE BOOKING VALUE DISCOUNT GIVEN DISCOUNT %

TOTALS


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Background Statistics

The total order value of $ is comprised of x,xxx orders and is broken out

below:

Stratified Value # of Orders % of Orders Total Value % of Value

*The data above was obtained from the system and includes all orders received from(dates).

Stratification of Order Values

Top Ten Customers as Percentage of Total Order Value

The top ten customers below accounted for $ (xx%) of the totalbooking value and x,xxx (xx%) of total orders from (dates). Thedetailed breakdown is outlined below:

Customer Name Booking Value Percent Of Total


7/367pany X Confidential: Do not distribute

1. Discount information is not tracked on a global basis and is therefore not available for managementsanalysis.

Action Matrix Summary

8

Issues / Observations PriorityPage

2. Discount authorization documentation is incomplete or missing.

3. Contracts and agreements are not consistently submitted to contract operations for review.

4. Tool configuration information is not readily available to regional marketing and sales personnel whichincreases the overall order process.

Priority Rating High Medium Low

9

10

11

5. Sales quotes do not consistently have complete tool configuration information, resulting in incompletepurchase orders from customers.

12

6. A global clean book checklist (CBC) to address the overall sales order process do not exist.

7. The master price list in the system is not maintained.

13

14

8. Repeat Item: The shipping log is not consistently filled out to reflect all appropriate shipping information. 15



1. Discount information is not tracked on the system and is therefore notavailable for managements analysis.

Internal audit conducted analysis of sales orders received from (dates). We comparedthe booking value of orders received to the master price list in the system. It was notedthat approximately XX% discount was given ($XX.XM) on total orders of $XXXM. Thisinformation is not readily available to management (i.e., no reports from which detailthis information, is currently available).

When customer orders are entered into the system, the total price on the orders isinput into a field called booking value. Orders are currently entered in at the net salesamount and not at the gross price with the associated discount (if applicable). Perdiscussion with the Project Specialist, the system has this capability (tracking both thegross price and the discount) but it is currently not being utilized. As such, thecompany is not tracking discounts through its order management system.

As the company currently does not have good visibility of total discounts given tocustomers on a global basis, management is not informed on how much discount isactually given away. Additionally, margin & profitability information on the various

product lines is difficult to ascertain because of the lack of detailed discountinformation.

Business Impact: Lack of discount information affects managements ability to create and maintain

effective pricing strategies. Margin & profitability information on the various product lines is difficult to ascertain

because of the lack of detailed discount information.

Action Matrix Detail

Issues / Observations Action Required DateOwner

A. The gross value of theproduct and the discountsoffered should be enteredand tracked in the system.

B. Perform periodic marginand profitability analysis ofthe sales order in the

system to ensure thatoverall discounts given tocustomers are inaccordance withmanagements strategies.



2. Discount authorization documentation is incomplete or missing.

According to the companys sales authorization matrix (on the companys intranet), alldiscounts greater than XX% must be signed by either the CEO or the COO.

At the request of the Operations Controller, we reviewed X purchase orders (with thepurpose of verifying proper discount authorization) for the following customers;(companies). Our findings are as follows: (insert findings)

Business Impact: Unauthorized discounts given to customers.



A. Train applicable salespersonnel to ensure thatdiscount authorization isobtained prior to providingdiscounts to customers.Additionally, make sureapproved discounts aresupported by the

appropriate documentation.

B. Evaluate the currentdiscount authorizationmatrix/policy for relevancyand make changes asappropriate.



3. Contracts and agreements are not consistently submitted to contractoperations for review.

According to the Director of Contracts/Intellectual Property, the company does notcurrently have a formal contract and agreement review process.

There are currently no formal guidelines or policies governing sales individuals whenthey are negotiating contracts/agreements with customers. As such, sales individuals

have at times entered into agreements with customers without first consulting thecompanys in-house legal counsel. Per discussion with the Director ofContracts/Intellectual Property, any non-standard agreement (i.e., any modification ordeviation from Company Xs standard Terms & Conditions) should be reviewed bycontract operations. However, this is a verbal policy only at this time and no formaldocumentation exists.

Establishing a formal documented review process will help mitigate potential legal risksthe company may be exposed to during contract negotiations.

Business Impact:

Although we did not encounter any significant issues, the company may havepotential exposure by entering into agreements without first obtaining the necessarylegal advice.

A. Establish a systematicprocess to review non-standard contracts.Additionally, create a matrixof potential salesopportunities withcorresponding action itemsto help sales individuals

know when they shouldobtain assistance from thein-house legal counsel.





4. Tool configuration information is not readily available to regionalmarketing and sales personnel which increases the cycle time in the salesorder process.

Sales personnel request pricing and availability information from regional marketingwhen preparing a quote for a customer. This is done for both tool (configurable) andnon-tool (not configurable) products. If the quote involves a tool then it will requireconfiguration information.

Per discussion with the Senior Regional Marketing Representative, tool configurationinformation is not consistently available to regional marketing and sales personnel.Systems engineering maintains a database of known configurations with tool names;however, regional marketing and sales personnel do not have access to thisinformation. If quotes do not contain accurate tool configuration information then thewhole order process is slowed down because systems engineering can not configuretools without complete information from the customer. As both regional marketing andsales personnel are heavily involved in the quoting process, they need to have easyaccess to this information to be able to provide customers with accurate toolinformation.

Providing regional marketing and sales personnel with a report of known toolconfigurations will help them to better communicate with the customer on the front endand expedite the quoting process.

Business Impact: The overall quotation/order process cycle time is increased because quotes and

purchase orders do not contain complete information. This in turn increases theoverall cycle time from quote to shipment.



A. A periodic report of knowntool configuration should beprovided to by Systemsengineering should provideregional marketing andsales personnel.

B. Management should

consider creating an onlinedatabase of known toolconfiguration that regionalmarketing and salespersonnel can access.Such database should beupdated with accurate toolconfiguration information.On-site field engineers andselected customers shouldbe provided access to such

tooling information.



5. Sales quotes do not consistently have complete tool configurationinformation, resulting in incomplete purchase orders from customers.

Per discussion with the Senior Regional Marketing Representative, sales personneldo not consistently provide regional marketing with all the necessary information toensure that quotes (which customers use to issue purchase orders) are accurate andcomplete. Additionally, sales personnel are required to complete a clean bookchecklist (CBC) for the quote before they issue it to the customer; however, this is notconsistently done. A standardized quote request form has been developed for salespersonnel but is not consistently used. As such, customer purchase orders do notalways have complete information. According to the Systems Engineer, purchase

orders need to be more specific to allow the systems engineering team to accuratelyconfigure tools.

According to the Systems Engineering Manager, approximately XX% of purchaseorders received from order management have incomplete or incorrect toolconfiguration information. When this happens, systems engineering is required tocommunicate with regional marketing or directly with the customer to obtain thenecessary information to complete the tool configuration process.

Internal audit tested XX purchase orders received by systems engineering over a one

week period and noted that X purchase orders contained incomplete (X) or incorrect(X) tool configuration information. These types of issues prevent systemsengineering from completing tool configurations in a timely manner and therebyincreases the cycle time to process customer orders.

Business Impact: Incomplete tool configuration information on purchase orders creates process

inefficiencies in the configuration process and ultimately increase the overallorder cycle time.

Incorrect configuration information could potentially cause the company to incuradditional costs associated with rework.

A. Establish a systematicprocess to ensure thatcomplete configurationinformation is provided bythe customer before thepurchase order is submittedto systems engineering.

B. Systems engineeringshould be involved in thequote process to ensure

that customers areprovided with accurateconfiguration informationup-front.

C. The standardized quoterequest form should beused to ensure completeand accurate quoteinformation is captured from

customers. Salespersonnel should reviewcompleted quotes foraccuracy andcompleteness beforesubmitting to regionalmarketing and systemsengineering.





6. A global clean book checklist (CBC) to address the overall sales orderprocess do not exist.

Regional marketing and order management are required to complete a clean bookchecklists (CBCs) which are unique to their respective area. Additionally, systemsengineering completes an engineering design analysis (EDA) when configuringtools. However, there is no global document that addresses the overall sales orderprocess. As such, customer purchase orders are processed without regard to the

overall sales order process. This has resulted in inefficiencies in the sales orderprocess.

For example, the order management CBC does not contain all the informationneeded by systems engineering. Items such as the customer contact name, toolname and model name are not addressed by the current order management CBC.As a result, purchase orders pass the order management CBC which do not meetsystems engineering information requirements. These purchase orders requireadditional follow-up work (i.e., locating the customer contact name, tool name, etc.).We tested XX purchase orders that passed the order management CBC and were

faxed to systems engineering and noted that X of the purchase orders required

follow-up work.

In order to expedite the sales order process, management should consider aligningthe CBCs and the EDA among the various departments involved in the sales orderprocess. This will help streamline the overall process as all the necessaryinformation is captured from the customer at one point in t ime.

Business Impact: As CBC requirements are not consistent between departments, quotes and

purchase orders are sometimes passed on to the next process step withoutcomplete information. This inefficiency increases the overall cycle time fromquote to shipment.



A. Regional marketing, ordermanagement, and systemsengineering shouldevaluate consolidating theexisting CBCs and EDAinto one global documentthat contains all necessaryinformation (i.e., billing

information, toolconfiguration information,etc.)



7. The master price list in the system is not up to date.

Per discussion with the Information Technology specialist, the master price list in isnot complete and is not kept up to date.

Internal audit reviewed the list price for XX part numbers in the price book used byregional marketing for quote purposes and traced and agreed the price to themaster price list contained within and noting one discrepancy. Additionally, we

performed CAAT testing on the master price list within and found that XXX partnumbers were missing from the master price list.

The master price list within should be kept current with all existing tools and theirassociated prices. Maintaining pricing information on system X will increase theaccuracy and integrity of the pricing information and decrease the cost ofmaintaining and updating the manual system which is currently being employed.

Business Impact: Pricing information provided to customers may be incorrect and could

potentially result in lost revenue.

Maintaining a manual system is costly and time consuming.



A. Update and maintain themaster price list on thesystem.

B. Establish a formal processto ensure that pricinginformation is consistentlyobtained and updated.


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8. Repeat Item: The shipping log is not consistently filled out to reflect thecarrier and routing number.

The shipping department is required to keep a shipping log to capture dailyshipping information and activity. Each log entry is supposed to capture keyinformation on the shipment, which includes the carrier and the applicable routingnumber.

Per review of the shipping log, it was noted that key shipping information is notconsistently being recorded in the shipping log. It was noted that XX% of the logentries did not contain carrier and routing number information. Additionally, wewere unable to locate the supporting shipping documentation in XX% of thetransactions reviewed.

Shipping employees should record all applicable shipping information in theshipping log on the same day that shipment occurs. This practice will ensure thatall supporting information is properly recorded and documented.

Business Impact:

Failure to record shipping information in the shipping log could potentiallyhinder the companys ability to quickly respond to customer questionsregarding shipments.

Potential loss of traceability for products in transit.



A. Implement policy thatrequires shipping log to becompletely filled out thesame day product isshipped.

B. Create an X databasedatabase to maintain theshipping log. The invoicingdepartment should haveaccess to the database sothey can verify items havebeen shipped beforeinvoicing occurs.


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Appendix A: Best Practices Scorecard

The matrix The Best Practices Summary on the following pages is based on Company Ys GlobalBest Practices. As part of this review, Company Xs practices were benchmarked against the BestPractices. An evaluation of Company Xs processes is noted in each instance. Best Practiceswere evaluated as follows:

Where possible improvement can be made in the companys best practice structure, a referencehas been made to the Action Matrix, where managements change implementation is describedalong with the responsible party and estimated implementation timing.

Good/World Class - Best Practice currently in use.Moderate Use - Improvement possible in order to achieve Best Practice status.

Limited/Some Use - Improvement recommended to improve processefficiency/effectiveness.

"


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1. Provide one primary contact point for each type of customer.

Best Practices

Key Internal Control Objective PriorityPage

2. Create a simple, easy-to-use order-taking process.

3. Create an integrated system that is informative and flexible and usedthroughout the company.

4. Make decisions at the time of customer contact.

5. Establish and periodically reevaluate long-term agreements betweencustomers and the company.

18

19

20

21

22


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1. Provide one primary contact point for each type of customer.

The company has records that indicate customercharacteristics such as order frequency, volume, andcomplexity.

Customer technological and personnel capabilities are a majorconsideration in deciding how a company's orders are placed.

Employee responsibilities relating to taking customer orders iswell defined, and questions about products are referred to atrained customer service representative.

The company has mechanisms in place to measure how wellemployees taking orders respond to customers.

Benefits:

Reduced customer frustration in searching for answers toquestions.

Improves order cycle time. Reduces company costs and customer complaints.

Improves the companys responsiveness and ability to trackorders.

Company X customers currentlyinteract primarily with the salesperson servicing their account.

When the customer needstechnical information thensomeone from the systemsengineering department willinteract with the customer toexchange the relevant technicaldata.

Systems engineering does notcurrently have a formal processfor communicating this informationto the customer. The companyshould evaluate the feasibility ofdedicating a systems engineer (oranother employee with a sufficient

technical background) to workingexclusively with customers todetermine technical specifications.

Best Practices

Key Internal Control Objective Company X Practice ReferenceRating

Action Item #4,5


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2. Create a simple, easy-to-use order-taking process.

Computer systems are always accessible while employeesare taking orders.

The company considers the complex or specialized needs ofcertain customer groups in designing its order-taking process.

The company always confirms a customer's order beforecompleting the order-taking process.

The company uses the order date as the primary means ofranking orders by priority.

Benefits:

Order process time is reduced. Reduces customer inquiries/complaints and internal follow-up

on orders.

Sales personnel do notconsistently provide regionalmarketing with all the necessaryinformation to ensure that quotes(which customers use to issuepurchase orders) are accurateand complete.

According to the SystemsEngineering Manager,approximately XX% of purchaseorders received from ordermanagement have incompleteinformation. When purchaseorders have incompleteinformation systems engineeringis required to communicate withregional marketing or with thecustomer to obtain the necessary

information to complete the toolconfiguration process.

Best Practices


Action Item #4,5


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3. Create an integrated system that is informative and flexibleand used throughout the company.

Customers are transferred from the primary contact whenorder status must be checked.

All departments involved in the order cycle share a commondatabase.

If the company sells to distributors, its system is linked withindividual distributor's sales data.

Customers who place orders on a credit basis must haveeach order approved by the credit department.

Benefits:

Improves order cycle time. Reduces internal follow-up on orders. Improves the accuracy of the order process. Improves the efficiency of tracking and monitoring the order

status.

Best Practices


Action Item #4The company currently uses thesystem, which is anenterprisewide system. The orderentry system resides in system x;however, only regional marketingand order management use thesystem to locate pricinginformation and to inputconfiguration information. Salesand systems engineering do notuse the system to perform theirspecific functions.


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4. Make decisions at the time of customer contact.

The customer contact representative is empowered to makemost decisions regarding customers during the course oftaking an order.

The company has a system mechanism by which it canmonitor representatives to ensure they adhere to presetcredit/discount authorizations.

In most cases, calls from customers with questions aboutorder status must be referred to someone other than thecustomer contact representative.

Benefits:

Reduces the number of times customers have to call. Reduces the time spent on answering questions and taking

orders. Eliminates frustration with not getting an answer. Speeds up the customer's decision process.

Best Practices


The company does not currentlyhave a systematic process toensure that complete configurationinformation is provided by thecustomer prior to the purchaseorder being submitted to systemsengineering.

Systems engineering should beinvolved in the quoting process toensure that customers areprovided with adequateconfiguration information beforethe purchase order is submitted toCompany X.

Action Item #5


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5. Establish and periodically reevaluate long-term agreementsbetween customers and the company.

The company makes an effort to identify customers withwhom to establish long-term contracts.

The company jointly decides with the customer on the termsand conditions of the sale that should be expected of both thecompany and the customer.

Terms and conditions of sale in general and for specificcustomers are reflected in the company's order processingsystem.

Benefits:

Improves customer relations. Allows the company to cooperate with their customers on

price, service, and quality. Enables the company to estimate product demand. Increases customer satisfaction by providing reliable sources

and predictable lead times. Eliminates expectation gaps. Reduces customer claims for non-conformance.

Contract operations is currentlyattempting to institute a formalcontract and agreement reviewprocess to ensure that termsand conditions of contracts andagreements are clear andunderstood by both parties.

Best Practices


Action Item #3


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Appendix B: Internal Control Assessment

The matrix on the following pages lists process controls which should be present within thewarranty/field services environment. We evaluated the adequacy of each control in Company Xswarranty/field services process. Controls were evaluated as follows:

Strong Controls -Controls are present to mitigate process/business risk and are operatingeffectively and efficiently.

Moderate Controls - Controls are present to mitigate most process/business risk, butmanagement should evaluate opportunities to enhance existing controls.

"Limited Controls - Existing controls may not mitigate process/business risk, andmanagement should consider implementing a stronger control structure.

Where possible improvement can be made in the control structure, a reference has been madeto the Action Matrix, where managements change implementation plan is described along withthe responsible party and estimated implementation timing.


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Internal Control Assessment

Key Internal Control Objective PriorityPage

1. Discounts should approved by appropriate personnel. 25

2. Use a comprehensive control documentation to ensure that all relevant sales orderinformation is captured on quotes and purchase orders prior to processing.

26

3. Standard quote request forms should be used when obtaining quotes. 27

4. Sales order information on quotes should be reviewed by the appropriatepersonnel prior to final distribution to the customer.

28

5. Shipping logs should be filled out completely and maintained on a daily basis. 29


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1. Discounts should approved by appropriate personnel.

Discount authorization forms should be signed and dated by theappropriate personnel.

Discount authorization forms should be filed with the applicablepurchase order or contract.

Business Impact: Discount authorization policies and procedures protect the

companys pricing strategy and provide management with visibilityover the discounts given to customers.

It was noted during our review thatstandard authorizationdocumentation for discounts wasmissing or incomplete.The sales authorization matrix onthe companys intranet states thatall discounts greater than XX%must be signed by either the CEOor the COO.

Train applicable sales personnel toensure that discount authorizationis obtained prior to providingdiscounts to customers.Additionally, make sure approveddiscounts are supported by theappropriate documentation.

Management should also evaluate

and update the current discountauthorization matrix/policy forrelevancy.

Action Item #2




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2. Use a comprehensive control document to ensure that allrelevant sales order information is captured on quotes andpurchase orders prior to processing.

Ensures all the necessary information is obtained on the purchaseorder for entry into the system

Provides accountability and allows management to trackbreakdowns in the process.

Ensures all the correct information is on the quote before it isdistributed to the customer.

Business Impact: Improves cycle time from quote to entry into the order backlog. Improves process efficiency. Provides control points to ensure all information is complete and

accurate.

Order Management currently usesa Clean Book Checklist (CBC).The CBC ensures that the POcontains all the necessaryinformation for entry into thesystem. However, the CBC doesnot require that all necessaryconfiguration information be on thepurchase order before entry ismade into the system.

According to the QuoteCompletion process map (date ),sales personnel should completea CBC for the quote before theydistribute it to the customer.However, this is not doneconsistently.

Action Item #5,6




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3. Standard quote request forms should be used whenobtaining quotes.

Ensures that all the information needed by regional marketing,order management, and systems engineering is provided by thesales personnel on the front end of the sales order process.

Reduces the overall time spent obtaining the necessary quoteinformation (i.e., pricing, tool configuration) from regionalmarketing.

Business Impact: Improves overall sales order cycle time. Pricing and tool configuration information is more accurate and

timely.

Per discussion with the SeniorRegional MarketingRepresentative, a standardizedquote request form has beendeveloped for sales personnel butis not used consistently.

This form should be used toensure complete and accuratequote information is captured fromcustomers. Have sales personnelreview completed quotes foraccuracy and completeness.

Action Item #5




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4. Sales order information on quotes should be reviewed by theappropriate personnel prior to final distribution to thecustomer.

Quotes are reviewed by the engineers to ensure the productconfiguration is technically correct.

Systems engineering should interact with the customer (ifnecessary) early on in the quoting process to ensure the integrityof the quote process is maintained.

Business Impact: Improved process efficiency in the quotation process. Reduce the number of purchase orders that need to be

reconfigured. Provide accurate quotes to the customers.

Quotes generated by regionalmarketing for sales personnel arenot consistently reviewed bysystems engineering.

Systems engineering should beinvolved early on in the quotingprocess to ensure that customersare provided with adequate toolconfiguration information.

Action Item #4,5



l l


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5. Shipping logs should be filled out completely andmaintained on a daily basis.

All information in the shipping log should be filled out daily at thetime of shipment.

Shipping information allows the company to verify shipments forinvoicing purposes and to track shipments once they have beensent.

Business Impact: Improve traceability on products shipped to customers. Provide complete and accurate shipping documentation.

The shipping department does notconsistently record the carrier androuting number in the shipping logon the same day of shipment.Currently, this information isrecorded the day after the productactually ships.

Detailed testing revealed that thisinformation is often not recordedin the shipping log. Also, we wereunable to locate much of thesource documentation providingthe applicable information.

It should be noted that thecompany is in the process ofdetermining the feasibility of usingan electronic shipping log.

Additionally, the company isevaluating using bar codetechnology for all shipments. Assuch, all the shipping informationwill be electronically recorded andinput into the companysinformation system.

Action Item #8



A di C S l O d P M


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Appendix C: Sales Order Process Map

Regional Marketingobtains Standard productand pricing informationfrom product marketing.

" Sales Representatives donot use a standardizedquote request form.

Quote is sent to the salesrepresentative for review.This review is notconsistently performed.

Non standard orders thatare not in the visibilitysystem or in the pricebook are sent to systemengineering forconfiguration, even if thetool has been createdbefore.

" Known tool name report isnot distributed monthly toRM.

Quote is not consistentlygenerated by productmarketing with SystemEngineering input.

Quote is emailed to theSales Representativebefore receiving systemengineering input.

Sales Representative

sends quote to thecustomer.

The PO is logged into the Xdatabase that tracks thesales order process.

The Order Management(OM) Specialist utilizes theclean book checklist (CBC)to review the PO.

If the PO fails the CBC, thenthe OM Specialist will notein Access, the reason whythe item failed and who thePO is sent to in RegionalMarketing.

" A standard form is not usedto communicate problems toRegional Marketing.

One copy is placed in thePO folder and one copy issent to appropriate Regional

Marketing personnel.

The PO comes intoCompany X and isdistributed to theappropriate OrderManagement Specialist.

A folder is created tomaintain copies of the PO,CBC check list, Xdatabase log sheet, orderentry check list, anychange order check list,copy of fax set to systemengineering (for nonstandard products), andany product configurations.

When PO passes the CBC,it is entered into .

Company X Control Points In Place:

Process Step

Internal control point (manual)

Internal control point (system based)Company X Control Weaknesses:

Internal control weakness" Process inefficiency

When PO passes the CBC,it is entered into as SystemEngineering.

The Order ManagementSpecialist faxes the PO toPerson X in SystemEngineering.

System Engineeringconfigures the toll andemails the configuration tothe appropriate OrderManagement Specialist.

Order ManagementSpecialist enters theinformation into backlog.

PO is entered into

the System

System Engineering

determinesconfiguration

Order Management

specialist reviewsPO and enters it intothe system

Customers Sends

Purchase Order toCompany X

Sales

Representativerequest a quote fromRegional Marketing

A di C Shi i /I i i P M


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The packing slip is sent toinvoicing and an invoice isgenerated by system.

A copy of the invoice is sentto the shipping floor (forinternational shipments) andis attached to the product

being shipped (along with allof the other shippingdocumentation).

Invoice is generated.

Order management enterssales order information intothe system.

Regional Marketing createsa Shipping Request Form(SRF) based on the salesorder information within the

system. The SRF triggersthe shipping process.

A copy of the SRF is sent tothe finished goodscoordinator.

"Some SRFs are createdmanually because ofefficiency limitations within .

The serial number isassigned to product on themanufacturing floor.

Serial numbers areduplicated or are incorrectlyassigned.

The Shipping

Request Form (SRF)is created.

QA inspects the product andverifies that the information onthe SRF matches to the actualitems on the shipping floor(i.e., part number, description,quantity, serial number)

QA is using the SRF, rather

than the packing slip, to verifythe serial numbers instead ofthe packing slip.

Product is inspected

by QualityAssurance (QA).

The LPT line managerprovides a daily shippingsheet which the finishedgoods coordinator reviewsand matches up to the SRFdetails.

The finished goods

coordinator then examinesthe serial numbers on thegoods to be shipped andwrites the serial numbers onthe SRF. Tools requiringserial numbers include:SmartComm, SmartTag,LPTs, Indexer, & 300MMPods

The items on the SRF areallocated (transferred fromfinished goods) to the salesorder.

Finished goods not alreadyon the shipping floor arepulled from the inventorywarehouse.

The SRF is then passed onto Quality Assurance forreview.

Serial number information isstill manually transferred onsome of the shipping docs,and is therefore subject tohuman error.

Product is pulled

from the inventorywarehouse.

Once SRF information hasbeen verified it is enteredinto the system and apacking slip is generated.

The packing slip is used tocreate the invoice.

Packing slips are not being

reviewed/checked againstthe SRF.

Packing slips are

generated.

The product is

invoiced andshipped.

A copy of the invoice ismailed to the customer.

Product loaded onto freightcarriers is not beingsufficiently monitored asits being loaded.

The daily invoice log is not

being matched up to theshipping log.

Appendix C: Shipping/Invoicing Process Map


Process Step


Internal control point (system based)

Company X Control Weaknesses:

Internal control weakness

" Process inefficiency

Appendix C: Proposed Sales Order Non-Tool Processing


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Appendix C: Proposed Sales Order Non Tool ProcessingProcess Map

Sales Representativerequests a quote for tooland non-tool productsfrom Regional Marketingutilizing the standardquote request template.

Standard products, pricinginformation is obtainedfrom product marketingsystem.

Quote is sent to OrderManagement for technicalreview.

Quote then forwarded tothe sales representativefor order completenessreview.


sends quote to thecustomer.


request a quote fromOrder Management

The PO is logged into the Xdatabase.

The Order ManagementSpecialist utilizes the cleanbook checklist (CBC) toreview the PO.

If the PO fails the CBC, thenthe OM Specialist will logunder the PO number inAccess, the reason why theitem failed and who the POis sent to in RegionalMarketing.

One copy is placed in thePO folder and one copy issent to appropriate RegionalMarketing personnel.

The Order Management

Specialist fills out thestandard CBC fail sheet andsends the PO to RegionalMarketing .

This process is completedutil the PO passes the CBC

Order Management

specialist scrub POand enters it into thesystem


If the PO is new, a folder is

created to maintain copiesof the PO, CBC check list,X database log sheet,order entry check list, anychange order check list,copy of fax set to systemsengineering (for nonstandard products), andany product configurations.

" There are no policies orprocedures in place thatindicate the proper way toreceive/process PO, to

maintain a folder, what toput in the folder, and whatto enter into Access.

Customers Sends


When PO passes the CBC,it is entered into system.

PO is entered into

the system


Process Step






Appendix C: Proposed Sales Order Tool Based Processing


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Appendix C: Proposed Sales Order Tool Based ProcessingProcess Map


Process Step






When PO passes the CBC,it is entered into asSystems Engineering.

The Order ManagementSpecialist faxes the PO to(name) in Systems

Engineering. Systems Engineering

configures the toll andemails the configuration tothe appropriate OrderManagement Specialist.

Order ManagementSpecialist enters theinformation into backlog.

Systems

Engineeringdeterminesconfiguration


Check in the visibilitysystem, the price book,and the known tool namereport (provided by SE) forthe requested tool.

Standard products, pricinginformation is obtainedfrom product marketingsystem.



Sales Representativesends quote to thecustomer.


request a quote fromOrder Management(known)


If the PO is new, a folder is

created to maintain copiesof the PO, CBC check list,X database log sheet,order entry check list, anychange order check list,copy of fax set to systemsengineering (for nonstandard products), andany product configurations.

" There are no policies orprocedures in place thatindicate the proper way toreceive/process PO, to

maintain a folder, what toput in the folder, and whatto enter into Access.

Customers Sends


The PO is logged into the Xdatabase.

The Order ManagementSpecialist utilizes the cleanbook checklist (CBC) toreview the PO.

If the PO fails the CBC, thenthe OM Specialist will logunder the PO number inAccess, the reason why theitem failed and who the POis sent to in RegionalMarketing.

One copy is placed in thePO folder and one copy issent to appropriate RegionalMarketing personnel.

The Order Management

Specialist fills out thestandard CBC fail sheet andsends the PO to RegionalMarketing.

This process is completedutil the PO passes the CBC.

Order Management

specialist scrub POand enters it into thesystem

SalesRepresentativerequest a quotefrom OrderManagement


Check in the visibility

system, the price book,and the known tool namereport (provided by SE) forthe requested tool.

If tool is not found, sendto systems engineering forconfiguration.

Quote is generated.



Sales Representativesends quote to thecustomer.


request a quote fromOrder Management(Unknown)

A di C P d Shi i /I i i P M


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QA performs final qualityand documentation checks.

Pick list goes to the TrafficCoordinator to print thePacking slip.

The goods are packed,boxed and prepared for

shipment. The necessary shipping

documents are attached tothe shipment (i.e., packingslip, invoice)

For international shipments,a shipping employee cangenerate a copy of theinvoice at the shipping docklocation using softwarepackage.

Product is packed

and prepared forshipment.

Each manufacturing lineprovides regional marketingwith an accurate lead timereport indicating productavailability.

The serial number is inputinto the system at the front

end of the shipping/invoicingprocess (at the end of themanufacturing process).

QA examines the product toensure it matches thepick/pack slip (part #, serial#, etc.) and goes throughthe remaining QA checklist.

Product is moved

from manufacturingto the finished goodsarea and inspectedby QA.

The pick/pack slips areused to pull the productsfrom inventory.

Product is pulled

from the finishedgoods inventory.

Regional marketingcoordinate orders fromcustomers with the finishedgoods availability andmanufacturing backlog.

Regional marketing assignsfinished goods with orders

and established what isavailable for shipment on adaily basis.

Orders are allocated toFinished Goods by Regionalmarketing.

The Finished GoodsCoordinator prints out a listof goods to be shipped eachday and generates thepick/pack list for thesegoods.

Regional marketing

coordinates orderswith available goods.

The product is

invoiced andshipped.

The product is loaded ontothe freight forwarders andshipped.

Invoicing receives copiesof the shippingdocumentation so that anyremaining invoices can be

generated and sent to therespective customer.

For shipments via PowerFreight, invoicing sets upan intermediate invoicinglocation in and invoicesthe intermediate location insystem.

Once a copy of the signedfreight document isreturned to invoicing(indicating final shipment),the invoice is transferred

out of the intermediatelocation and is closed tothe regular revenueaccount.


Process Step






Appendix C: Proposed Shipping/Invoicing Process Map

Appendix D Testing Matrix


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Appendix D: Testing Matrix

The following matrix documents the audit tests performed, relating to the sales order process review, andthe results of these tests. Overall, opportunities exist to improve the process. These improvements willensure that internal controls are operating effectively and efficiently in order to mitigate risks associated withthe process.

Verified that the customer file contained a copy of thePO and a signed X database entry form

Of the XX customer files tested, XX contained acopy of the PO

Customer File toPO

Verified that the CBC was signed and completedOf the XX files tested, XX CBCs were not signedand one was not fully completed

Customer File toCBC

Verified that shipments had proper weigh billdocumentation

Of the XX log entries checked X did not havesupporting weigh bill documentation

Shipping Log &Supporting Doc.

Of the XX files tested, X did not contain an orderentry check list

Customer File toOrder Entry List

Verified that the customer file contained a completedand signed CBC and order entry list

Verified that shipper documents were properlyauthorized or signed

Of the XX shipper documents checked X did nothave shipped by signed

Shipping Log &Supporting Doc.

Verified shipping log contained carrier name andweigh bill number

Of the XXX log entries checked XX did not haveinformation for carrier or weigh bill invoice number

Shipping Log

Verified with system engineering that clean POssent to them were actually clean

Of the XX clean POs tested, only X contained theproper information for systems engineering toconfigure the product immediately

Clean PO toSystems

Engineering

System to

Customer PO

Of the XX sales orders selected from , all XX

contained the proper information form the PO

Attribute Tested Comments/Detail%Test

Non-

compliance

Verified that the information on the PO was

accurately reflected in the system

Traced and agreed the list price from the price bookto the master price list in the system

Of the XX prices tested, X price discrepancy wasnoted

Master PriceList

Appendix E: Acknowledgements


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Appendix E: Acknowledgements

We would like to thank all Company X employees who assisted us in our work during this project.We received input and assistance from the following persons:

Operations Controller

Global Spares and Logistics Manager

Regional Marketing

Contracts/Intellectual Property

Systems Engineer

Systems Engineering Manager

Project Specialist

Regional Marketing

Information Technology

Order Management

sales order cycle review report

Documents