CSE1IS Information Systems
Week 3 Lecture 2

Introduction

preliminary investigation into the accounts payable system completed.

Summary

• Fleet Foot not taking full advantage of discounts offered by suppliers for prompt payment of bills
• a study of the accounts payable system was requested

Findings

initially AP staff and suppliers were interviewed

investigation revealed:

• payment details, invoice amounts and number  processed per month
• current AP system is running smoothly, however:
  • staff workloads are quite heavy
  • and no new equipment for 4½ years
• most suppliers offer 2% discount for payment within 10 days and some offer 3% for discount within 5 days

Recommendations

• carry out a detailed analysis to determine feasibility of a computerised AP system
• authorise head of AP system to sign cheques

Costs and Benefits

• calculations show a saving of $1600 per month
• save three days processing time by authorising the signing of cheques which presently go to and from the finance manager

Total cost = $16,750.00

Introduction

Frank Pisciotta, consultant, has finished the preliminary investigation into the accounts payable system for Fleet Foot. Sally Edwards, vice-president of Operations, requested this investigation.

Summary of Request

Sally Edwards noticed that Fleet Foot was not taking full advantage of discounts offered by suppliers for prompt payment of bills. The company does not have a cash flow problem, and so is well able to pay promptly. However, it is not receiving discounts. Ms Edwards requested a study of the accounts payable (AP) system to find out how Fleet Foot could take advantage of discounts and so save money.

Findings

Frank Pisciotta interviewed four key people involved in the AP system, and circulated summaries of these interviews to everyone involved. He also interviewed two suppliers, Nike and Converse, to verify potential discounts.

The investigation revealed the following seven points.

1. On average, it takes 16 days to pay from the time an invoice is received.
2. Each invoice received in April, May and June of this year had an average value of $1 000.
3. For this same 3-month period, on average, 100 invoices per month were processed.
4. The AP system is functioning smoothly. Fleet Foot's credit rating with the two suppliers interviewed was good.
5. The work load of the staff in the AP system is quite heavy, and Fleet Foot has not acquired any new equipment for this area for the past 4½ years.
6. While the business volume has expanded tenfold in the last 4 years, the number of members of staff in the AP system has increased by only 2.
7. While most suppliers offer a 2% discount for payment within 10 days, at least 2 offer a 3% discount for payment made within 5 days.

Recommendations

Based on these preliminary findings, I recommend the following.

1. Immediately carry out a detailed analysis to decide whether computerising the manual accounts payable system is feasible.
2. Mr Mark Stensaas, who is in charge of the staff in the AP system, should be authorised to sign checks.

Based on 100 transactions per month with an average value of $1,000 and a 2% discount for payment within 10 days, Fleet Foot has potential to save $2,000 per month ($1,000 x 100 x 0.02) or $24,000 per year. The company can save three days processing time just by authorising Mr Mark Stensaas to sign checks, which presently go to and from the finance manager.

If Fleet Foot authorises a detailed analysis, I will be available to carry this out 5 days after I receive approval. I expect this to take 5 weeks to complete and to cost the following.

Five weeks for Frank Pisciotta @ $100.00 per hour, 30 hours per week	$15,000.00
Clerical help for 30 hours @ $25.00 per hour	$750.00
Estimate of cost of time for Fleet Foot staff to participate in interviews and discussions	$5000.00
Total	$16,700

Ms Birra-li Fonteyn
Mr Robert Cross
Kamp Krazy    Kastlemaine

3 June 1998

Dear Birra-li and Robert

This letter reports the findings on the problems you are having with your roster of camper interests and scheduling. We hope that you find that our recommendations are suitable and that you authorise us to proceed to a detailed study. We have included an estimated fee and time frame for such a study.

Mikaela Rogers and Shannan Lehman examined your application form, studied your filing system, toured your facilities, and interviewed Birra-li Fonteyn and Robert Cross, the owners of Kamp Krazy. They found the following.

1. You receive 90% of your applications 2 months after your advertisements appear in local and metropolitan newspapers (including newspapers in other states).
2. Most campers come to Kamp Krazy for 3 weeks and want to take part in the following activities.

   Volleyball	50%	Swimming	80%
   Hiking	70%	Archery	35%
   Rowing	16%	Shooting (Target Range)	25%
   Canoeing	40%	Computing	15%

3. You have a scheduling problem, which is in part caused by your application form not collecting the correct camper interests.
4. You are spending $15,000 per year and 250 hours per year on manual scheduling. You spend another $1,924 per year on long distance telephone calls to potential campers who have scheduling problems.
5. You have a very high (75%) camper return rate. Your excellent manual scheduling system is responsible for this excellent return rate.
6. You will have to hire another office worker next year to keep the schedules and camper enrolments up to date if no action is taken.

Based on these preliminary findings, ADS Computer Consultants recommends the following action.

1. Perform a detailed study, to begin immediately, with the goal of investigating computerising your entire camper enrolment, interest, and payment record-keeping system.
2. Begin your advertising campaign a month earlier than last year. This early start will give you a longer time in which to schedule the campers for 1999.
3. Redesign your camper application form to gather the missing data items Shannan and Mikaela discussed with you at the last meeting.

ADS Computer Consultants is willing and wish to perform the detailed analysis. Mikaela Rogers and Lesley Kosey will be available to carry out this task. They expect it to take until the end of  July 1998 to complete a detailed analysis of your requirements and report their findings to you. Our fee for this study is based on an hourly rate of $116 per hour per person plus expenses. It will probably take about 25 hours of each analyst's time, total 50 hours and will cost $5,500.

If you have any questions or comments, please call Lesley Kosey between 9am and 5pm.

Thank you