ACC 459 part 3

What are the four key business processes?

Plan-to-Produce; Procure-to-Pay; Order-to-Cash; Record-to-Report.

What question does Plan-to-Produce answer?

“What should we produce, when, and how much—given uncertain demand and limited resources?”

What is the basic Plan-to-Produce sequence?

Understand demand → Determine finished-goods requirements → Use BOM for material requirements → Check feasibility/build schedule → Produce/inspect/store → Compare actual results with plan → Feedback to next plan.

What is Independent Demand?

Demand from outside the production system for finished products customers want to purchase.

What is Dependent Demand?

Demand derived from the planned production of another item

What is Forecast-driven production?

Production begins before final customer orders are known. Example: everyday bread.

What is Order-driven production?

Production begins after a customer places or confirms an order. Example: large private-label or seasonal order.

What determines whether production should be forecast-driven or order-driven?

Delivery expectations, demand predictability, storage life, ability to sell excess elsewhere, cost of schedule changes, and how customer-specific the product is.

What factors affect demand planning?

Historical patterns; customer/market information; product characteristics; external conditions; internal plans. Their relevance and reliability differ.

What four kinds of information go into a production plan?

Facts, estimates, constraints, and management choices. A plan combines data with assumptions and judgment.

What is a Bill of Materials (BOM)?

Identifies the ingredients, packaging, and standard quantities required to produce a defined quantity of finished product.

What is the Availability vs. Waste trade-off?

More production reduces shortage risk but increases expiration and waste risk.

What is the Efficiency vs. Flexibility trade-off?

Long production runs may reduce changeovers/improve efficiency but make responding to demand changes harder.

What is the Capacity Utilization vs. Resilience trade-off?

Full utilization may look efficient but leaves little room for rush orders, equipment failures, or quality problems.

What is the Inventory Buffer vs. Cash/Storage trade-off?

Extra inventory protects against shortages but requires materials, labor, warehouse space, and cash before sale.

What question does Procure-to-Pay answer?

How do we obtain the right materials/services, in the right quantities, at the right time, from appropriate suppliers, and pay only for what we properly ordered and received?

What are the main phases and sequence of Procure-to-Pay?

Plan & Request → Source & Receive → Invoice & Pay.

How do production requirements become supply requirements?

Independent Demand → Dependent Demand → Bill of Materials → Material Requirements → Supply Plan.

What determines order quantity?

Inventory on hand, safety stock, scheduled receipts, lead time, sourcing requirements, and product characteristics such as shelf life/storage capacity.

What can management do when minimum-order rules create excess inventory?

Negotiate smaller order; use different supplier; change production plan; accept excess; reduce safety-stock target; find another product that can use the item.

Define Class A inventory.

Small percentage of total inventory, but high value and/or importance.

Define Class B inventory.

Medium percentage of total inventory, moderate value and/or importance.

Define Class C inventory.

Large percentage of total inventory, low value and/or importance.

Purchase Requisition vs. Purchase Order

Requisition: internal request to buy goods/services. PO: formal order issued to supplier. POs should link to approved requisitions and specify delivery/payment conditions.

What separation of duties should exist when goods arrive?

Separate supplier selection, confirming receipt, and approving payment.

What is the purpose of the 3-way match?

Ensures the company pays only for authorized goods that were actually received at the agreed-upon price.

What three documents are involved in a 3-way match?

Purchase Order: what did we agree to purchase? Receiving Record: what did we accept? Invoice: what is the supplier asking us to pay?

What question does Order-to-Cash answer

How do we convert valid customer orders into accurate, timely deliveries, invoices, and collected cash?

What are the broad phases of Order-to-Cash?

Commit → Fulfill → Bill → Collect.

Why is receiving an order not the same as accepting it?

An order is a request until the company determines that it can and should fulfill it.

What should be checked before accepting an order?

Customer authorization; contract price; credit limit; product availability; delivery capacity; profitability under the agreed terms

What distinction is critical during fulfillment?

Picked ≠ shipped ≠ delivered ≠ accepted. Reliable evidence includes sales order, shipment record, proof of delivery.

What are the two key billing objectives?

Completeness: every valid delivery is invoiced/no shipment overlooked. Accuracy: each delivery is invoiced once with correct customer, quantity, price, and terms.

What can billing errors cause?

Customer disputes/deductions, delayed collection, incorrect receivables, misstated revenue, damaged customer relationships.

Why is receiving cash ≠ correctly applying cash?

Receiving confirms funds arrived. Applying cash means identifying the customer, matching payment to correct invoices, recording discounts/credits/deductions, and investigating differences.

What question does Record-to-Report answer?

“How do we turn activities across the business into complete, accurate, timely information that decision-makers can trust and use?”

What are the major Record-to-Report stages?

Record: capture/classify transactions. Close: adjust/reconcile/validate/approve. Consolidate: combine reporting entities/eliminate internal activity. Report & Explain: prepare reports, analyze results, communicate implications.

What is the basic closing sequence?

Capture remaining activity → review exceptions/incomplete transactions → record adjustments/estimates → reconcile accounts/subledgers → investigate unusual differences → review/approve → close period. Subledgers → General Ledger.

What is a reconciliation?

A reconciliation compares two sources that should agree and investigates the differences. It is not merely making two totals agree; the difference must be understood

What is the purpose of consolidation?

To present multiple controlled entities as one economic organization.

What do Combine, Align, and Eliminate mean in consolidation?

Combine: add entity financial information. Align: consistent periods/classifications/accounting policies. Eliminate: remove transactions and balances between entities in the group

What should reporting ultimately accomplish?

Reporting is more than statements and is not the end of the process. Results inform the next planning cycle. Reporting should answer: What happened? Why did it happen? What should management do next?