Strategic Information Systems for Business and Enterprise
Case Study Rainbow Illusion
Table of Content
1Executive Summary2The Report to the CEO of Rainbow Illusion3Background4Strengths of Rainbow Illusion Sales Transaction Controlling System5Problems That Are Avoided By the Incorporation of Transaction Process Strengths of Rainbow Illusion6Situational Pressure in Apparel Business That Could Elevate the Possibilities of Fraud7Distributed Computer System vs. Centralized Computer System8Conclusion
The following report to the Chief Executive Officer (CEO) of Rainbow Illusion enwraps the transaction process practices of a well-established clothes business Rainbow Illusion. Rainbow Illusion is successfully operating its thirty stores and has developed and implemented some standards to maintain their sales transactions throughout its outlets. The report signifies the efficiency and strengths of the company from the transaction process controlling standpoint. Moreover, a brief description regarding companies situational pressures that consequently pave the paths to fraud and other swindling is also provided. On the other hand, an overview regarding the comparison of a decentralized computer system and the centralized computer system is elaborated.
Furthermore, throughout the report, it will become evident that organizations with scattered branches, outlets, and offices have to revise their business and other processes to enhance profitability and effectiveness. Along with different dimensions, various factors are discussed that are interrelated to efficient internal control of the company. However, the discussion encapsulates the case study of Rainbow illusion, but the findings are universal and can be applied to similar businesses.
The Report to the CEO of Rainbow Illusion
Evaluation of Rainbow Illusions Business Processes, Risks and Internal Controls for the Revenue Cycle
To The Chief Executive Officer of Rainbow Illusion
The following paper analyses transaction controlling techniques and their impact and other interrelated effects on business efficacy to report the significant factors to the CEO of Rainbow Illusion. The case study elaborates the practices of Rainbow Illusion that is a renowned ready-to-wear clothing and apparel business and deals with clothing style for young women. Rainbow Illusion is operating about 30 retailing chain outlets throughout Victoria and New South Wales. The further highlights regarding the business process and operational modus operandi of Rainbow Illusion describe the following significant points.
Every store has employed a full-time manager as well as an assistant manager. Both designations are subject to be paid through salaries.
Sales staff and cashiers belong to the second tier of the organizational hierarchy, and for such jobs, mostly young and energetic employees are recruited. Payment at this workforce level is hourly paid that may include any additional amount earned through sales commission.
Rainbow Illusion prefers to utilize uncomplicated and straightforward cash registering process that is comprised of the four-part sales receipt. The sales invoices are used to record every transaction that takes place at the store.
In this context, it is essential to define that cash registers are utilized for each type of purchase whether the amount is paid through bank card, cash or cheque.
According to transaction system implied by the company, the event of every sale needs to follow a few steps. In this regard, the salesperson has to record his or her employee identity as well as the product specification along with subtotal, discounted price, and sales tax to prepare the sales receipt with calculated grand total.
Subsequently, the salesperson requires handing over sales invoice at the cash counter. Meanwhile, one copy of the transaction remains in the main cash register.
At the cash counter, cashier evaluates the invoice and inputs the sale to the record.
As a result, the cash register automatically approves the sales invoice, and a serial number is allocated to the transaction.
Furthermore, the staff at the cash counter is obligated to attain the validation regarding credit card or cheque as well.
In case of payment through credit card or check, the cashier provides a copy of sales receipt to the customer and keeps the second and third copy till the clearance of deposit
Evidently, the sales return are the inevitable part of selling businesses, and therefore rainbow Illusion has implicated reverse transaction strategy to tackle returns. In such cases, the cashier generates a return slip.
All the sales invoices are serially organized after the closing of stores and the cashier computes the totals for cash payments bankcard and cheque sales, and returns by using entries in the cash register.
Afterward, the assistant manager assesses and reconciles the provided totals to the register tapes.
On the other hand, after obtaining the reports from its subordinates, the manager examines the inflow of deposits through cash or other credit sources and prepares daily bank deposit report.
After depositing the amount to the bank, the manager validates the deposit slip.
Rainbow Illusion designed the transaction process that affirms the significance of forwarding all the cash register tapes, sales receipts, and any sales return slip to the central data processing department that is located at companies headquarter. In HQ, the retrieved data is further processed to generate weekly, monthly, and yearly financial reports.
Strengths of Rainbow Illusion Sales Transaction Controlling System
The above-mentioned transaction process of Rainbow Illusion elaborates several strengths that are effective and pragmatic to control the transaction process of all its stores.
Rainbow Illusion has 30 clothing stores in two cities, and it is not a piece of cake to handle such extensive and scattered transaction data. Therefore the implication of employing uniform transaction process for every outlet is a prominent strength of Rainbow Illusion. Identical transaction recording and reporting process allow it to keep a thorough check on transactions, sales events, payment modes, and sales returns.
The other strength of Rainbow Illusion is the employee distribution processes that divide employees payment periods based on their designations and hierarchy. The labour distributed system is convenient and straightforward to comprehend. The manager and assistant manager are salaried persons meanwhile, the other sales staff paid on an hourly basis, such technique proffers Rainbow Illusion with an opportunity to design and develop compensation programs that are profitable and feasible simultaneously.
Rainbow Illusion has classified the workforce in a more than smart way. When it comes to hourly-paid workers, the cashiers and sales personnel are effortlessly identifiable. The implied differentiation in responsibilities and job description encourages employees to understand their perceived roles in a far better manner.
Along with other advantages, the automatic sequential cash register numbering for all the sale transactions is extremely practical and beneficial for the company.
Evidently, Rainbow Illusion opted for a sales transaction recoding process that involves more than one person. Such an infusion of interconnected tasks in recording process augments the intensity of supervision, which is, of course, is an indispensable aspect.
Rainbow Illusion has implemented an accounting procedure that separates the cash receipts from accounting records altogether.
Problems That Are Avoided By the Incorporation of Transaction Process Strengths of Rainbow Illusion
The underlying transaction process controlling strengths of Rainbow Illusion are imperative because each of them props up the company in evading the perils of associated problems. A reciprocal account of such prospect problems avoidance is as follow.
Rainbow Illusion applied a uniform transaction and sales recording system throughout all of its 30 outlets that saves it from auditing intricacies. Different transaction recording processes necessitates different knowledge level, and that could be hectic and irksome in auditing season. Implementing diverse transaction recording systems in different stores can boost the auditing and marinating expenditures and is exacerbated time-consuming.
Secondly, the labour payment distribution standards are effectual in setting compensation and perquisites. Manager and assistant managers are permanent, fulltime employees of Rainbow Illusion, and therefore, it is adequate and preferable to pay them monthly. Moreover, both the designations have predefined job responsibilities, and consequently, a preset monthly payment is feasible for them. Contrarily, the sales staffs are part-time youngsters, and their work features vibrant nature. In seasonal shopping fad, they become entitled to the earned commission that could complicate the entire process of monthly calculation. Hourly wages chunk down the different overheads and it becomes handy to compute daily payments for sub-staff. Similarly, if a manager paid on a commission basis, there are bright chances that they approve credit transaction more frequently even to customers who are not creditworthy. The greed of the commission can evoke managers to get involved in unfair and irrational means of sale boosting.
In order to strategically control the internal risks, job specialization and parallel qualifications and expertise are critical. Rainbow Illusion has parted the job description and perceived responsibilities of sub-staff, including sales personnel and cashiers that, in turn, support employees to mitigate the workload troubles. Moreover, the peril of several people intends for a similar task can be evaded through precise instructions (Martin, 2016).
Sequential cash register numbers proffer the top management with an organized insight of all the transactions as well as sales returns. Absence of serially managed cash registers can lead managers and other relevant staff to aim for fraud or omission of any substantial or minor sales event.
The perspective of supervision permits a smaller group of people or groups to execute the tasks. Such a limited group can maintain the notion of check and balance and Rainbow Illusion can protect the outlets from employees theft incidents. The echelon of Rainbow Illusion features more than one supervisor that dejects any prospect unfairness and stealing.
The strength of Rainbow Illusion that comprised of separate cash and accounting register eradicates the possibility of several fraudulent activities. A single focus on cash invoices could encourage the employees to alter and misrepresent the accounting records to conceal their thefts. Just suppose, if the outlet manager gets access to the accounting records along with regular cash records, they could digest reasonable cash by changing the transaction entries in both registers. Without separated cash and accounting records, it is handy for managers to write-off the inventory, by offsetting it with shoplifting account.
Situational Pressure in Apparel Business That Could Elevate the Possibilities of Fraud
As a matter of fact, almost all the organizations encounter some extent of situational pressure that may be related to the institution, environment or individual. Such situational constraints implicitly or explicitly trigger individuals and corporations to seek ways out with the help of fraudulent activities specifically falsification in financial reporting. Generally, the following pressures most dominantly elevate the probabilities of false and deceitful financial reporting.
Exacerbated and extreme pressure that asserts the necessity to enhance the reported performance standards and insists on meeting or surpassing the predetermined expectations.
An overly downward crisis of the company that could lead it to worsen financial position.
On an individual level, most of the employees allured by the frauds because they get the opportunity to do so (Wells, 2001).
Distributed Computer System vs. Centralized Computer System
The advent of technological advancement has shifted business paradigms to a great extent. The incorporation of computer systems is inseparable from todays dynamic business world. Computers and specially devised systems allow organizations to create a facilitating working environment and conditions. When it comes to large businesses which are operating through multiple places and with a vast outlets portfolio, the debate about distributed and centralized computer system takes place. It is believed that some certain campiness would opt for a distributed computer system to enhance the fruition of their functions. The following content evaluates both perspectives to comprehend the implications.
Distributed System Can be defined as a system that pivots the idea of intertwined informational functionality. The decentralized system denies the authority of any single individual or entity and approves the networked form of computer systems.
Centralized System Unlike the distributed networking system, the centralized system performs its tasks through a central server. Centralized computer system underlines the techniques of exploitation and deployment of central server through different components, including management and resources.
The notion of distance is the leading agent that helps in determining the conceptual frameworks regarding the application of either centralized or decentralized organizational computer systems. The distances can be measured among the premises of headquarters, plants, organizational hierarchy or operational tiers. Such scaffolding includes physical and organizational echelon to determine the scope of decision making (King, 1983). The modern era sustains and persuades the organizations with several outlets, franchises and also allows companies to distribute their operational levels. In such cases, the management needs to organize all their business processes and other interrelated activities from a particular physical or organizational distance. Furthermore, the outburst of technology has made the decentralized system affordable and handily available, and therefore most of the companies that are tackling with ranges would go for a decentralized network. The innovative and contemporary computers are mighty enough and are considerably cheaper in the recent epoch.
Furthermore, the computing has infused in the organizational mainstream and consequently enlarged its scope that surpasses the boundaries of traditional centralized systems. A distributed computer system is preferable for a justifiable distribution of essential and critical organizational activities. Distributed systems are highly preferable in dwindling the frauds and other similar delinquencies as well.
The report relays a myriad of aspects that could directly or indirectly impact the internal control, transaction process, and other similar facades of an organization. In the following, a skimmed conclusive reflection is elucidated.
Internal organizational control can be elevated through a well-devised and smartly implemented transaction process.
The factor of supervision on different organizational levels mitigates the chances of employees fraud to a certain extent.
Coherency and synchronization of operations at all levels is imperative in preventing fraudulent incidents.
Uniformity of business processes saves the time and cost of auditing.
In order to eradicate the probable effect of fraud, companies should assess situational pressures on environmental, institutional, and individual levels. A pre-evolution of perils can help devise preventive measures.
The contemporary business world is vibrant and has altered the ways of doing business as well as the usage of traditional technological implications.
Nowadays, the companies become global and regional and therefore to comply with new standards they need to replace conventional centralized systems with decentralized computer systems.
The development of technological mtier decreases the cost of computer systems. As a result, it is advocated for large organizations to install a distributed computer system to their functional and operational facilities.
King, J.L., 1983. Centralized versus decentralized computing organizational considerations and management options. ACM Computing Surveys, 15(4), pp.319349.
Martin, M., 2018. How to Define Roles, Responsibilities and Handovers. Cleverism. Available at https//www.cleverism.com/how-to-define-roles- responsibilities-handovers/ Accessed September 9, 2019.
Wells, J., 2001. Why Employees Commit Fraud. Journal of Accountancy. https//www.journalofaccountancy.com/issues/2001/feb/whyemployeescommitfraud.html Accessed September 9, 2019.
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