Binalong Community Club is one of the clubs having an 18 holes sand green course for golf, café and a licensed bar. It also has a clubhouse, which makes it even more attractive for an outing with friends and family. It also has superior home style cooking to offer to the visitors but off late, it has been facing a number of issues in the accounting and financial reporting due to manual system and age-old processes and methods being used in the business (Arnott, et al., 2017). Some of the major issues, which were being witnessed, includes positive and negative cash flows in business, if the cash flows is equal to profits, the appropriate inventory that needs to be held by the organization at a given point of time, the overdue invoices and the non-utilization of the cash balance and therefore hurting the liquidity of the business. On close examination, it was found that the major issues revolves round several things like that of delayed recovery of receivables, delay in the payables, invoicing inefficiencies, manual system being used for accounting and inadequate KPI’s for different teams coupled with inefficient decision making (Alexander, 2016). Few of measures suggested were hiring of a full time chief financial officer who would be having an overall visibility of the performance of the organization and who can detect and resolve the pitfalls, implementation of automated accounting information system instead of manual accounting system, automation of the billing process, tracking system for accounting, receivables management, etc.
Out of the diverse issues, one problem that has been selected for analysis and discussion is the invoicing and the billing issue, which is one of the very critical activities to be focused upon considering it, might lead to huge delay in sales and thus cash collection. In a way it impacts most of the other activities including those of sales, receivables, cash flow management and the accounting cycle a whole (Bailey, et al., 2017). As per the given case study, the company is not being able to track the invoicing and the billing procedures and there are issues like inconsiderable delay in billing, missing and mixing of invoices, the speed of billing, missing out on correct timelines for payment of vendor bills, errors in accounting, unnecessary wastage of paper and manual intervention. Given the size of the organization, a big, large and intensive software such a SAP would not be a best fit as it is meant for the larger organization and above all, it needs the expertise of the personnel to operate the same for business purposes. Therefore, all the given problems and issues needs to be sorted in some other manner which has been mentioned below.
The problems and issues pointed out above can cost to be detrimental to the interests of the company and can significantly result in missing the revenue. These are some of the operational measures and the system where the agility is warranted or else the customer may switch on to the competitors. Some of the consequences, which the company may face because of above-mentioned issues, are shown below:
There are a number of recommendations and plans in place by which the inefficiencies in the invoicing and billing mechanism can be sorted and the processes in the organization can be streamlined, some of which are mentioned below. However, before mentioning the steps, there should be a flowchart built in the organization, which will help the personnel and the staff to understand the flow of activities and thereby make each one of them responsible for the same.
For the above measures to be implemented and practiced in the given organization, the club would have to invest in the processes and method. Some of which are as follows:
Therefore, all together there will be expenses of $ 700000-750000 including all the operational expenditure and the salaries of the staff and the CEO. The benefits it would be reaping will be in the form of standardised processes, real time invoicing, lower receivable days, positive cash flow, non-loss of sales revenue, good relationship management with the customer as well as the vendors, better negotiation ability with the vendors, less wastage of paper, availability of backup and recovery of the data in the case of a mishap and it would also serve as the audit trail (Jefferson, 2017).
There are several other issues which needs to be addressed in the Binalong community club like those of non-recovery of the receivables on time which can be improved by sending a customized tracker to the customer on the overdoes and the outstanding amount (amount pending to be received) after the credit period automatically through the computerised system. This will help in reminding them of the dues and that in case the same is not paid on time, the penal interest would be charged. The computerised system can also be helpful in tracking of the inventory and thus can help in the proper management of the same (Kew & Stredwick, 2017). It can help the management in knowing what are the levels of inventory on a real time basis and in suggesting when to procure the inventory and when to stop. Thus, it would be helpful in savings the inventory losses and the inventory carrying costs (Fukukawa & Mock, 2011). It was also being learnt in the given exercise that the profit of the entity is not equal to the flow of cash. There might be several items which are non-cash based but still do find a place in the profit and loss account or the income statement of the entity like those of depreciation, accrued interest, outstanding payment on account of rent or salaries, the dividend proposed or the income tax liability, all these items are based on the accrual principle and do not actually result in the inflow or outflow of cash but do contribute the profit and loss of the entity (Linden & Freeman, 2017). It is for this reason that the profit and loss account of the entity and the cash flow statement is being prepared separately.
Conclusion
From the above discussion and the analysis on the ins and outs of Binalong community club, we can see that there are a number of system constraints in the organization, which may lead to huge losses in the future. These operational inefficiencies may lead to lose of customers for the organization and depletion of the relationships with the vendors. Furthermore, there might be a huge financial loss for the entity and therefore several ways have been suggested and recommended for one of the most important processes in the organization, i.e., billing and invoicing. The major outcomes of the study include implementation of the automated billing and invoicing software, training of the personnel, segregation of the duties, hiring of the skilled staff and the CFO for the company and the use of cloud services. The cost benefit analysis has also been done to give an assurance and to prove that the long-term benefits and gains that they would accrue to the organization would be more than the short-term costs and expenses. Overall, in case the recommended process is implemented it would also lead to improvement in the internal control processes of the organization.
References
Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp. 411-431.
Arnott, D., Lizama, F. & Song, Y., 2017. Patterns of business intelligence systems use in organizations. Decision Support Systems, Volume 97, pp. 58-68.
Bailey, C., Collins, D. & Abbott, L., 2017. The Impact of Enterprise Risk Management on the Audit Process: Evidence from Audit Fees and Audit Delay. Auditing: A Journal of Practice & Theory, 37(3), pp. 25-46.
Belton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat International ltd.
Cheatham, C. & Cheatham, L., 1996. Redesigning cost systems: Is standard costing obsolete?. Accounting Horizons, 10(4), p. 23.
Choy, Y. K., 2018. Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview Analysis. Ecological Economics, p. 145.
Farmer, Y., 2018. Ethical Decision Making and Reputation Management in Public Relations. Journal of Media Ethics, 33(1), pp. 1-12.
Fukukawa, H. & Mock, T., 2011. Audit risk assessments using belief versus probability. Auditing: A Journal of Practice & Theory, 30(1), pp. 75-99.
Goldmann, K., 2016. Financial Liquidity and Profitability Management in Practice of Polish Business. Financial Environment and Business Development, 4(3), pp. 103-112.
Jefferson, M., 2017. Energy, Complexity and Wealth Maximization, R. Ayres. Springer, Switzerland. Technological Forecasting and Social Change, pp. 353-354.
Kew, J. & Stredwick, J., 2017. Business Environment: Managing in a Strategic Context. second ed. London: Chartered Institute of Personnel and Development.
Linden, B. & Freeman, R., 2017. Profit and Other Values: Thick Evaluation in Decision Making. Business Ethics Quarterly, 27(3), pp. 353-379.
Marques, R. P. F., 2018. Continuous Assurance and the Use of Technology for Business Compliance. Encyclopedia of Information Science and Technology, pp. 820-830.
Sithole, S., Chandler, P., Abeysekera, I. & Paas, F., 2017. Benefits of guided self-management of attention on learning accounting. Journal of Educational Psychology, 109(2), p. 220.
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