It is increasingly common for companies to allow customers to place orders through electronic forms over the Internet, while other firms have created in­terfaces into their order entry modules that allow electronic data interchange (EDI) messages to be entered without manual intervention. It is necessary to create a set of automated controls for these inputs, so that you can enjoy the benefits of automated order entry without any manual intervention that would slow down the process flow. The basic controls for receiving elec­tronic orders are shown in Exhibit 1.

The controls noted in the flowchart are described at greater length next, in sequence from the top of the flowchart to the bottom.

• Verify credit card. If the customer is paying through an electronic form on the Internet, it is likely that the order is being paid for with a credit card. If so, the computer system should verify the amount of credit left on the card and notify the customer if it is insufficient to process the order.
• Automated credit review. When an electronic order arrives via an EDI transmission, this typically means that the order is from a long-term business partner who does a high volume of business with the com­pany, so there is a large credit line already in place. Consequently, the computer system should allow these transactions to proceed unless the most recent order exceeds the total amount of the credit limit-in which case the system should flag the order for a manual review by the credit staff.
• Flag order as approved for shipment. Once either credit card verifica­tion or the automated credit review is completed, the system automat­ically flags the order as being approved for shipment. This control is not really needed anymore, but since the flag is likely to still be present in the computer system (and used for manually entered orders), there needs to be a mechanism for flagging automatically approved orders.
• Communicate order status to customer. When the human interface is removed from the order entry process, it is possible that the electronic systems will fail and not enter the order into the company’s computer systems at all. Consequently, the system should issue a confirmation message to the customer, stating that the order has been received and perhaps noting an expected delivery date as well. If the customer does not receive this confirming message, its own control systems may flag the order as not having been received by the company, thereby trig­gering a follow-up call from its purchasing department to the com­pany’s order entry staff.

Exhibit 1 Controls for Receiving Electronic Orders

• No control point for verification of approved buyer. There is no longer a control point to verify that the buyer placing the order is approved by the customer to place orders. This is a manual control that would in­terfere with the automated nature of an electronic order. Further, if the electronic order comes from an EDI message, then the customer is probably a trading partner of long standing, for whom there is no ques­tion about who is approved to place orders. Also, if the electronic order was placed over the Internet, then the buyer probably paid in advance with a credit card, so there is no issue about the customer not paying on the grounds of having an invalid buyer.
• No control point for automatic price match. Price matching is not needed when orders are automatically received, for two reasons. First, a cus­tomer paying with a credit card through an electronic form has already been presented with the correct price and agreed to pay it. Second, a cus­tomer placing an order with an EDI transmission has previously sent in a master purchase order to which the company has agreed. Thus, no ad­ditional price matching is required.
• No control for setting up complex billing terms. When a customer places an electronic order, it is typically done within a tightly defined set of ordering parameters that leaves no room for complex billing terms. Thus, there is no need for a control point to enter special billing terms at the order entry point.

A key issue related to the receipt of electronic orders is the number of control points that are no longer required. By introducing a great deal of automation to the front end of the order entry process, there is no need for time-consuming manual controls later in the process. Also, no procedure was listed for the receipt of electronic orders, since the process is designed to be handled entirely by the computer system. No manual intervention is needed, unless exception conditions arise.

[tags]accounting for manager, receive electronic order[/tags]