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SBM Sales Administration

Superior Builders Merchants (SBM) is a small private limited company selling building materials mostly to the construction industry. It is a merchandising company, i.e. it manufactures no products, simply relying on purchasing its goods from a variety of specialist suppliers and reselling them to its customers in convenient quantities. SBM’s abilities to deliver goods to the customer’s premises coupled with the wide selection of materials it holds has meant that in the last five years the business has grown substantially, to the extent that the administration of the business is barely keeping up with the current volume of trade.

In particular, the SBM Sales Administration System (SAS) which currently has limited computer support (word processing package for documents, spreadsheet for customer accounts) is under considerable pressure and customer goodwill is low. Management have requested that an integrated computer-based system be developed and after interview with the appropriate departments the following information has emerged. An initial feasibility study into allowing customers to order on-line, via the Web, has shown that most of the SBM customers are very small local builders who do not have the facilities to take advantage of on-line ordering so this has been shelved. Orders will continue to be accepted by mail. SBM have (for the moment) decided to retain separate departments for receiving orders, credit checking, stock control, invoicing and accounts. The expected interaction with each department is outlined below.

Order Reception

SBM has about 500 credit customers, who send orders on SBM order forms that Order Reception can then use to create an electronic version online.

The standard order form will be created electronically in the following manner. Sometimes the order form received from the customer contains the SBM customer-number. Where this is so, the customer number is simply copied onto the electronic version. If the number on the customer order form is incorrect (i.e. customer details do not match those on the customer order form) or is missing then a list of customer names should be displayed and the appropriate one selected. If the customer does not appear on the list then the original paper order form will be passed on to Sales Management. Note Sales Management can access the system to add new customers.

The order-number is assigned sequentially. The date on the standard order form is the current date (i.e. date created). Invalid order details are sent back to customers for a number of reasons. Firstly, because one or more of product description, unit of measure or quantity fields are not on the order line and clearly all are necessary for acceptance. Secondly, the product code supplied by the customer may not match the product details (description and unit of measure). This can be checked by inputting the product code onto the on-line form. An online product list will then be accessed to display the corresponding product details and Order Reception can accept or reject the order line. Any invalid order lines will be added to a rejected lines list which is returned to the customer with the reason for rejection.

Order Reception also initiate the generation of blank order forms - blank order forms are sent to customers at the beginning of each month based on the number of orders received from that customer in the previous month e.g. if a customer has sent in 10 orders then they will receive 15 blank order forms. Catalogues are generated (from the on-line product list) and sent with the blank order forms every 6 months.

Credit Control

When an order is accepted by Order Reception (i.e. all the lines on the order are valid) then the order number is added to the end of a list that can be accessed by Credit Control. Credit Control can then initiate the credit check for the next order in the list. The appropriate order is displayed on screen.

The accepted on-line form is checked to ensure that the customer’s available credit is greater than the value of the order. To do this the order has to be priced by reference to the on-line product list. The price for each line on the order is calculated and then totalled to obtain the value of the order. The line cost is added to each order line on the display and the total is displayed at the bottom. Where the value of the customer’s order is greater than their current available credit, then Credit Control can remove lines from the order until the order value is below the available credit. The customer’s current available credit is calculated by subtracting the customer’s current balance form their credit limit. Details of the customer’s current balance and credit limit are held online in a list of customer accounts.

Where an order or part-order is rejected, a rejection notification is sent to the customer. The notification is a paper copy of the order including details of the customer’s available credit and order value and what, if any, lines were accepted. This is then sent back to the customer. If the whole order is rejected then the order is removed from the system. A copy of the rejected order is printed off at the Sales Management workstation with details of customer credit, lines rejected etc. Sales Management can access the system to make a permanent update to the customer’s credit limit.

Stock Control

When an order has passed the credit check then the order number is added to the end of a list that can be accessed by Stock Control. Stock Control can then initiate the stock check for the next order in the list. The appropriate order is displayed on screen. A stock check is initiated to check the quantities for each item on the order against the stock levels in the online product list. If there is insufficient stock for an item, then Stock Control can look up the online product list to determine if there are suitable alternatives that can be substituted e.g. if a customer asks for tins of 10 litre paint and the same paint is available in 5 litre tins, then Stock Control can substitute the original order line. If there are no suitable alternatives then that complete order line is removed from the original order and stored as an outstanding order line.

Outstanding order lines are held in a list in customer-number sequence. For each customer, a list of outstanding items is held. Once each week a review of that list is initiated by Stock Control to identify items that can now be fulfilled. An accepted outstanding order is created for those customers where one or more items can now be delivered. The accepted outstanding order is identical to the first time accepted order in format. A copy of either the accepted outstanding order or the first time accepted order is used to generate an acknowledgement which is sent back to the customer.

Invoicing

When an order has passed the stock check, the order number is added to the end of a list that can be accessed by Invoicing. Invoicing can then initiate creating an invoice for the next order in the list.

A Standard Invoice is created by accessing information from the order and from the product list. A copy of the invoice is generated for the customer and a further copy is printed off at the Warehouse workstation. The Warehouse has access to the system to update stock information. Once complete, the summary details from the invoice are added to the customer’s account.

Accounts

The purpose of the on-line sales ledger in SBM is to keep details of each customer’s account.

At the end of each month, Accounts initiate the generation of a statement of account for each customer containing the details of all events concerning the account during the month. These events include payments made by the customer, invoices sent to the customer and credit adjustments sent to the customer. A credit adjustment is made when the value of the original invoice was greater than what it should have been. This may have been because the goods delivered were faulty in some way or perhaps because insufficient quantities were delivered by the Warehouse. Naturally, the customer is not going to pay for faulty goods or goods not received, so the value on the credit adjustment reflects this difference in value. In these circumstances, the Customer liaises with Sales Management who will then make the necessary input into the system to create a credit adjustment.

The statement of account generated for the customer contains a tear-off Payment slip which is returned by the customer with their payment. The customer is able to indicate which particular invoices are being paid by simply ticking against a list of all outstanding invoices. The details from the Payment slip returned by the customer are recorded in the system by Accounts. Any discrepancies (e.g. value remitted does not match invoice values) will result in the payment and Payment slip being sent back to the customer for correction. Accounts input the payment number and the payment slip will be displayed on the screen. Accounts then repeatedly identify which invoices on the payment slip are being paid. Accounts then need to indicate that the selection of invoices is complete. The system will then calculate the total payment amount (based on the values of the invoices that have been selected) and display on the screen – Accounts can then confirm whether or not the payment is to be accepted – if the payment is ok then each invoice that has been selected will be noted as having been paid.

If a customer does not pay an invoice within 30 days of the date on the statement of account, then that invoice becomes overdue. Around the middle of each month Accounts initiate checking for overdue invoices and a reminder letter is generated for each customer that has overdue invoice(s).

Lastly, Sales Management are interested in information about the overall sales performance in each month. They can initiate the generation of two reports, the first is a sales report which indicates the sales in the previous month of each item stocked. The second report is an aged debt analysis which provides information on each customer with overdue invoices. It contains details about how much debt the customer has and how old (i.e. overdue) it is.

Example Order Form:

Order No.:       017321

Date:               15/06/16

Customer No:  0324

Name:              J. Smith, Building Contractors

Address:          36 Inchinnan Road

Renfrew

Example Invoice Form:

Invoice No:     018758

Invoice Date:  24/06/16

Date Due:        31/07/16

Order No:        017321

Order Date:     15/06/16

Customer No:  0324

Name:              J. Smith, Building Contractors

Address:          36 Inchinnan Road

Renfrew

TOTAL AMOUNT: 1465.00             TOTAL VAT: 256.38             TOTAL DUE: 1716.38

Example Customer Account:

Customer No:  0324

Name:              J. Smith, Building Contractors

Address:          36 Inchinnan Road

Renfrew

Credit Limit:   £6000

Example Payment Slip returned by customer

Payment No.   003397

Date:               30/06/16

Customer No:  0324

Name:              J. Smith, Building Contractors

Address:          36 Inchinnan Road

Renfrew

Amount Paid:  2252.50

Date:               06/07/16