Though the preceding controls are the basic ones needed for a paper-only order entry and shipping system, the next controls can be used to bolster the level of control over the process.

• Verify credit limit at time of order placement. The control point noted earlier that requires a mandatory review of all orders by the credit de­partment can be supplemented by this control, which allows the order entry staff to verify the remaining amount of credit available under a customer’s preestablished credit limit. This approach eliminates the queue time for some orders that would otherwise sit on the desk of a credit department employee. However, it also requires the ongoing tracking of available credit by the order entry staff, which can be quite difficult in a paper-based environment.
• Prenumber sales order forms. Only prenumbered sales order docu­ments should be used. By doing so, the company can track which sales order numbers did not reach the billing department, which may indi­cate that a delivery was not invoiced.
• Lock up unused sales order forms. It is possible for someone to enter an order to a shell company on an unused sales order form, fraudulently stamp it as approved by the credit department, and route it to the ware­house as authorization for a delivery. Though this scenario is unlikely (since the credit authorization stamp must also be obtained), it may be useful to store all unused sales order forms in a locked file cabinet.

Exhibit 2 Procedure for Paper-Based Order Entry/Credit/Shipment

• Lock up the credit approval stamp. For the same reasons just noted for the fraudulent use of a sales order form, the credit approval stamp should be stored in a locked file cabinet when not in use.
• Investigate product returns. When products are returned by customers, it is possible that an error in the order entry or shipment processes caused the return. To investigate this potential problem, compare the return documents to the customer purchase order and sales order.
• Compare quantity ordered to amount shipped. The standard fulfillment approach is for a warehouse staff person to use a copy of the sales order as a picking document when pulling items from the warehouse for de­livery. Once picked, this control requires a second person to verify that the quantity, unit of measure, and product picked match the sales order.

The types of controls shown here for the order entry and shipping processes make it clear that a great many handoffs occur in the overall process, which not only delays order processing, but also introduces the risk that paperwork will be lost before a product is shipped. For example, the ini­tial order must be reviewed by a supervisor, sent to the credit department, sent to the warehouse for picking, and then reviewed prior to actually being shipped. In the next section, we will see that a computerized order entry and shipment system greatly compresses the time required to complete these processes while reducing the risk of information being lost.

[tags]basic order entry, order credit, shipment controls[/tags]

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