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I worked as an assistant accountant at Nespresso New Zealand for nine weeks to accomplish my Co-operative Placement (CP). My Co-operative Placement Organisation (CPO), Nespresso New Zealand is a division of Nestlé Nespresso S.A. Nestlé Nespresso S.A is an autonomous globally managed business of the Nestlé Group. Headquartered in Lausanne, Switzerland, it is present in more than 50 countries and counts overÂ 7,000 employees worldwide. From its beginning in 1986, Nespresso has evolved from being the pioneer and trendsetter into the reference of the portioned coffee category. This is due to the company's commitment to excellence and highest quality, the company's deep expertise and singular focus on delivering ultimate coffee experiences cup after cup. Nespresso has a direct business-to-consumer (B2C) and business-to-business (B2B) approach allowing consumers to enjoy highest quality coffees both at home and out of home. The company runs twoÂ production and distribution centresÂ for worldwide production in Orbe and Avenches, Switzerland and in 2011, Nespresso sales exceeded CHF 3.5 billion.
The purpose of this report is to clearly demonstrate my competency in all of the Bachelor of Business (BBus) learning goals (LG) through critically reflect, analyse and evaluate my CP experience. This report is divided to two sections. In section one I will discuss BBus LG 2 - Be knowledgeable in your field of study by identifying appropriate links from my tasks to my academic major, critical reflecting my performance on these tasks and analysing and evaluating the value my role add to my CPO; I will discuss BBus LG 3.1 & 3.2 - Be critical enquirers and problem solvers in both internal and external environment of your CPO by identifying and analysing complexities and the interrelationships within my CPO, identifying and analysing the impact of the external environment on my CPO; I will discuss BBus LG 4 - Be able to think and act ethically by identifying and analysing ethical issues and their impact in my CPO business practices; Finally I will discuss BBus LG 5 - Be able to work collaboratively by identifying and analysing my strength and weakness, evaluating the achievements on the goals which have been set at the beginning of CP to overcome my weakness. All discussions in section one will be supported by relevant and appropriate authoritative concepts, theories and frameworks. In section two of this report, I will critically analyse and evaluate my research topic - design a new and/or improved process or procedure for the revenues cycle and the expenditure cycle of the company from the perspective of internal control to demonstrate LG 3.3 - how I develop the skills as a critical enquirer and problem solver.
2. Section one: Co-op Placement Experience
2.1 BBus LG 2 - Be knowledge in your field of study
2.1.1 Links from tasks to major
As an assistant accountant of Nespresso, my role covers almost all finance and accounting functions like accounts payable (AP), accounts receivable (AR), credit control, and month end report tasks. In my first few weeks, I was engaged to do some daily tasks in AP and AR. I need print bank statement on daily basis and reconcile all bank transactions in order to allocate correctly. Bank Reconciliation compares the bank balance as per company's accounting records with the balance stated in the bank statement (Financial Accounting, 2012). I use double entry concept (Hamilton, Black & Tozer, 2005) when I reconcile bank statement. As all receipts are on credits side of bank statement and all payments are on debits side, in company's balance sheet, cash in bank is an asset, therefore I upload bank journal with credit cash deposit from Boutique and debit cash in bank. I also use the concept of the revenue cycle (Considine, Parkes, Olesen, Speer & Lee, 2010) to evaluate this task because bank reconciliation is part of AR tasks, and the concept of the revenue cycle is a major theory from accounting information system to design the procedure of AR tasks. Apart from bank reconciliation, I need reconcile New Market Boutique cash journal between the cash records in company accounting system and the actual cash balance on the Boutique cash daily summary. I need investigate the variance on cash balance and credit card. I use the concepts of audit procedures (Leung, Coram & Cooper, 2007) to investigate the cash and credit variance in boutique daily summary. The purpose of this task is to minimise the risk to run the business.
Except daily AR tasks, I also have tasks from AP side. I need process all suppliers' invoices and employee expenses for payment, reconcile supplier statement and follow up all outstanding invoices. I need follow up and resolve queries with all suppliers. I also act as a financial support role for entire Nespresso NZ team with any queries about purchase order, supplier set up, budget structure, etc. In this task, I use the concept of the expenditure cycle (Considine, Parkes, Olesen, Speer & Lee, 2010) to analyse and evaluate whether the AP procedures are effectively and efficiency. I also use the theory of ERP system (Considine, Parkes, Olesen, Speer & Lee, 2010) to exam company system to find out what improvement we can possibly add on.
After few weeks CP, I start to take more tasks which transfer from AU finance team because previously all finance and accounting functions were handled by AU finance team. In task of bank reconciliation, I need do allocation for both domestic and overseas payment. Overseas payment allocation is quite different from domestic payment allocation, as Nespresso always use the foreign exchange spot rate on the payment date form our bank, but our accounting system use the rate from Reserve Bank of New Zealand which enter by me at the beginning of the month for entire month. Therefore, a variance of NZD will occur for every foreign currency transaction in between bank and the general ledger. To reconcile and balance the variance, I need do manual allocation and manually adjust NZD value in bank journal to hit the general ledger.
I had my month end training in week 4 and 5. During month end period, I need do adjusting entries for prepaid expenses and accrued expenses in order for expenses to be recorded in the correct accounting period (Carlon et al., 2012). I will receive the current month bonus, salary, annual leave and long leave journals for all Nespresso New Zealand staffs from Human Resource department before month end closing the books. I need split those journals per department like marketing, finance, sales etc. Before I upload those journals to accounting system I firstly need reverse last month bonus, salary and leave journals and then upload current month. Before the month end closing the books, I need check status of all invoices that I have processed in accounting system during the month. For example, if status of invoice is "open" which means the invoice is just enter in system but need further information like purchase order, authorise person etc, I need follow up and update information to change invoice status. If status of invoice is "waiting for match" which means invoice have entered in system with correct purchase order but wait for the purchase order raiser to match, I need change accounting date of invoice to next month first working day, because the expense should not record in current month. If status of invoice is "waiting for sign" which means invoice has been matched in system and wait for authorisation, I do not need to do any action except chase up for sign because the invoice hit the GL in current month. Purchase order accrual is a complicated task during month end period. For example, Nespresso participate Auckland Food Show in 09/08/2012-12/08/2012, the cost of the show must recognised in August 2012, even though the charges may be paid in July 2012 or September 2012. I will close end entering invoices in accounting system on the last working day of month minus 5. The management accountant then hands over the open PO report to be reviewed and closed off. One I reviewed, I will send the open PO report to concerned departments for their comments whether open PO need accrual or not or close. After received comments from each department, I need check the relevant comments with previous month to identify whether the comments are consistency. For example, if the comments on the particular PO was not accrual last month but is accrual this month, it is not consistency.
In tasks of credit control, I need prepare provision for doubtful debt report during month end period. The method Nespresso use to estimate the provision is aging the accounts receivable (Carlon et al., 2012). I need print aging report for NZ debtor and based on the balance of the length of time and percentage of the provision to calculate total provision for doubtful debt.
I also had training for GST return task. Basically I need download previous month all sales and purchase data to excel file, with filter out GST free sales and purchase to calculate GST output and input amount then to get whether Nespresso New Zealand need pay GST or get refund.
2.1.2 Reflection on tasks
During nine weeks CP, I realised that how important for students apply their academic knowledge to real situations and challenges because I don't want to be an armchair strategist. It is not simple and easy as I imaged before my CP. For example, I use double entry concept (Hamilton, Black & Tozer, 2005) to reconcile bank statement. I understand double entry concept that each transaction changes at least two different nominal ledger accounts, one in debit side and the other in credit side. However in real situation different companies have different rules to set up their ledger accounts, therefore one concept can't fit all situations. Also nowadays most companies have advanced accounting system which simplify the procedures to record the transactions but same time reduce the ability to do manual record when need. When I perform boutique daily reconciliation, I found that some accounting concepts, theories and frameworks are not only apply to the specific practice but widely apply to all accounting practices. For example the concepts of audit procedures, I am not an auditor and I use the concepts to identify, investigate and analyse the variance occurs when I perform boutique daily reconciliation. When I find the variance, the procedures are firstly identified where the variance come from, cash, credit card or EFTPOS. Then find how the variance occur, if the variance comes from mistype the figure in between cash, credit card and EFTPOS then I can easily to balance the variance, for example if the variance in cash is -$300 and the variance in EFTPOS is $300 which means Boutique staff mistakenly record cash sales $300 under EFTPOS but total figure still correct. If the variance comes from unidentified reason, then I request investigation together with Boutique manager and assistant Boutique manager, the level of investigation will detailed to every transaction on every counter and every POS machine.
With more accounting practices I have engaged, more better understanding for relevant accounting knowledge. When I did my month end tasks I used accrual-based accounting theory (Carlon et al., 2012) to understand why company use accrual-based accounting and what are the prepaid expenses and accrued expenses. For example, prepaid expenses are payments of amount that will provide economic benefits for more than the current accounting period (Carlon et al., 2012). In Nespresso, our boutique rent is paid every quarterly. When I make a payment for the rent in July, which actually includes rent for July, August and September. However it is not properly if I record all three month rent as expenses because the economic benefits of rent for August and September will incurred in the following months not July. Therefore I will only record July rent in expenses account but put August and September rent under assets account - prepaid expenses. When August month end come, I then transfer August rent out prepaid expenses account and record as expenses occur in August. Accrued expenses are expenses not yet paid or recorded at the end of the reporting period (Carlon et al., 2012). Nespresso pay staff salaries monthly and pay day normally is middle of the month, as Nespresso month end is calendar month end, therefore approximately 2 weeks salaries need accrual as salaries generated between last pay days to accounting period end are not paid yet. When I perform my credit control tasks, I use aging the accounts receivable method (Carlon et al., 2012) to identify how much provision of doubtful debt should input. For example, if provision is based the length of the time, like 100% provision for amount overdue 120 days and 50% for amount overdue 90 days, which I can estimate the provision for doubtful debt.
2.1.3 Adding value to myself and CPO
My role is an assistant accountant in Nespresso New Zealand. It is the first finance role in the company and it fulfils the finance function of Nespresso New Zealand to make the company fully functional. The tasks like bank reconciliation I have done help in the identification of error in the accounting records of the company or the bank. As cash is the most vulnerable asset of an entity, bank reconciliations provide the necessary control mechanism to help protect the valuable resource through uncovering irregularities such as unauthorised bank withdrawals. The boutique reconciliation helps to detect any discrepancies between the accounting records of the system and the actual. I act as an internal auditor to audit Boutique day by day to minimise management risk, operation risk and control risk to run Boutique. From the view of internal control (Considine, Parkes, Olesen, Speer & Lee, 2010), this task provides necessary control to reduce the risk of misappropriation company assets and the risk of fraudulent financial figure.
As a new created assistant accountant, one of my responsibilities is to provide a comprehensive financial and accounting support for the company every staff. It is fair to say that non-accounting back ground people have less accounting knowledge. Since I join Nespresso NZ, I found some of our staffs were struggling to raise purchase order with correct budget structure, some staffs do not have idea what is accrual and why need accrual and which one need accrual, some staffs do not have idea about the procedure to set up supplier, some staffs do not know how to match an invoice in accounting system etc. All these problems will definitely affect normal business activities for Nespresso, therefore I have planned to have regular training session for different topics and problems relate to finance and accounting to every staffs. Until now we have 2 training sessions for raise purchase order and supplier set up. The result is obvious. There are fewer phone calls from supplier to complain no payment because no supplier set up in our accounting system. And also I do less manual journal to correct wrong budget structure used in purchase order.
My role also benefit for New Zealand Nespresso customer. They can have a local support in finance and accounting. When customer send cheque, it definitely will banking fast when you post cheque to local rather than overseas, therefore customer will receive their order more quick. Also it is more convenient for customer to ring domestic when they have query. For supplier, it is easy for them to communicate about payment, purchase order, delivery term and condition etc.
As only finance team member in Nespresso New Zealand, I learn how to work very independently. Before I join, all Nespresso New Zealand finance functions were handled by AU finance team. When I went to Australia for training, I record nearly everything that I have been trained as I know when I back to NZ I am on my own. As my previous work experiences were work within a team, so it is a good chance for me to gain a different play role to make me work as a good team player also works independently. This role also makes me more creative. As most accounting functions are transfer from AU to NZ, it is a good opportunity to create a new or improve process or procedure which more suit for NZ accounting regulation and policy. This role gives me opportunity to work on right track of my career goal. My initial career goal is becoming a Chartered Accountant of New Zealand Institute of Chartered Accountants (NZICA). As I have met the general experience requirements and I will complete NZICA academic requirements this year. So the assistant accountant role can help me to generate further 2 years specific experiences to work towards becoming a full qualified CA.
2.2 BBus LG 3.1 & 3.2 - Be critical enquirers and problem solvers in both internal and external environment of your CPO
2.2.1 Internal environment of CPO
Nespresso New Zealand is functional structure, which means the departments are grouped by the function they perform for the organisation (Elkin & Inkson, 2004). However Nespresso Oceania is mixed functional structure and geographical structure because of significant regional variations between Australia and New Zealand (Elkin & Inkson, 2004). Nespresso New Zealand has one country manager to general manage Nespresso New Zealand business and report directly to Nespresso Oceania regional director. Under country manager the company has 4 departments; they are marketing department, sales & trade department, finance department and boutique shop. As Nespresso New Zealand just starts business 2010, therefore some functional departments are shared with Nespresso Australia like human resource department, legal department, supply chain & logistic department, IT department. However with the fast growth of New Zealand business, the company may need add some necessary functional department in accordingly, for example supply chain & logistic department to manage stock and inventory.
The strategy of Nespresso can be described as three key growth drivers and six core competencies. Three key growth drivers are: creating highest quality Grand Cru Coffees; creating long-lasting consumer relationships; creating sustainable business success. Six core competencies are: unsurpassed coffee quality and deep coffee expertise; unstoppable drive for innovation, distinctive design and in-house R &D expertise; passionate global brand community with direct consumer relationships; aspirational, global super-premium brand; unique business model/route to market and exclusive client services; unique holistic approach to sustainable quality development (Nespresso, 2012a). Nespresso core business is coffee, so provide the highest quality coffee to our consumer is the key. Nespresso portioned Grand Cru coffees are selected from the top 1-2% of the world's green coffee production, after our experts specially roast and blend to create the widest selection to suit every taste.
Nespresso founded in 1986, the first Nespresso Boutique open in Paris in 2000. In coffee market with brand share, Nespresso increase form 1.3% in 2006 to 2.2% in 2011 worldwide and rank 4th place. In Oceania region, Nespresso is growing from 0.8% in 2007 to 2.7% in 2011 which rank number 5 (Passport GMID, 2012). Compare to other top 10 coffee brand, Nespresso is the youngest but the fastest growing brand. Nespresso New Zealand is one of the countries on the top list of growth. Since Auckland Boutique opened in September 2011, Nespresso brand awareness increase dramatically, sales revenue in August 2012 increase 125% compare to a whole year figure in 2011 (Nespresso, 2012a). There is only one word can describe the Nespresso business in New Zealand that is "growth".
2.2.2 Complexities and interrelationships management
As finance department always acts as a supportive role, therefore when I perform my tasks I have the internal relationships with every department and every employee. For example, when I process employee expenses I need all employees pass their expense claim forms to me which have authorised by their department managers, if not I need contact both employees and their managers to follow up. After I process I need send to finance manager to review and authorise the journal and then I can book the journal to system and send to financial controller for post (Carlon et al., 2012). When I process supplier invoices, I need check whether there have the purchase orders or not. If it has purchase order, I need send invoices to PO raiser to match and manager of PO raiser to sign, same time I need check with warehouse whether they have received the goods, if not I need check with logistic department to find out where is the goods. When process the payment for employee expenses and supplier invoices, I need get authorisation from CFO and country manager to do bank transactions. During the month end period, I need do open purchased order accrual (Carlon et al., 2012). Company management accountant will generate the open purchase order report then send to me. I will check the report first and send to each department manager and purchase order raiser to request comments on each open purchase order whether need accrual or not.
When I process employee expenses, employees need pass their expenses claim form together with AMEX statement and support documents like invoices and receipts on time. As AMEX statement always come around middle of the month, so there only around 2 weeks to process all employees' AMEX expenses before month end. If employees pass the form later then a lot of manual process will occur, therefore increase the complexities of the task. Also the support documents are important when claim expenses, but some employees always careless about keep receipts or invoices, obviously claim expenses without support documents increase company operating risk. Nespresso New Zealand regularly have the training session to educate employees that receipts and invoices are necessary, official proof of purchase from a financial perspective, and are systematically sample-checked during audits. Receipts and invoices are the only way to ascertain: any credit card expense actually happened, preventing any mischarge or misuse of the credit card, including fraud; any cash expense actually happened, and the cash reimbursement is justified and approved, without receipts or invoices, cash expense cannot be reimbursed. In order to minimise the uncertainties, Nespresso have very strictly internal expense policy. Firstly, our accounting system will automatically send reminder email to every AMEX card holder during the middle of the month to remind AMEX expenses claim is due now. Secondly, make sure each people have read through internal expense policy before apply company credit card. When I process month end open purchase order accrual, I need send open purchase order report to relevant department to review and comments whether purchase order need accrual or not or close. If some department staff do not understand the purpose of accrual, either no comments or wrong comments will back to finance and lead contradictions between other departments and finance. To prevent the contradictions, Nespresso regularly have a training session for common accounting knowledge for all staff. Finance department provide some manual to illustrate the physical procedures in accounting system.
To well manage internal relationship and complexities in the organisation, a good organisation structure is necessary. Creating organisational structure involves taking the totality of work that need to be done in an organisation and breaking it down into specific functions and jobs. Each of this is then allocated either to a particular group or to an individual (Elkin & Inkson, 2004). Functional structure is the most common way to group activities by the functions based on professions they perform for the organisation. The advantage is that, because specialists are brought together, efficiencies are gained, knowledge can be shared more readily and career paths are presented for employees to move along (Elkin & Inkson, 2004). Another common way of creating departments is by geography, the method is used when the organisation serves an area with significant regional variations and when it is important to take into account local concerns and needs (Elkin & Inkson, 2004). Nespresso organisational structure should mix functional structure and geographical structure together. Nespresso has functional departments like finance, IT, marketing, sales, HR, customer services etc. Nespresso Oceania also divides by Nespresso Australia and Nespresso New Zealand as there are significant regional variations between Australia and New Zealand, for example tax system. The principle of segregation of duties from internal controls theory (Carlon et al., 2012) is another effective way to manage complexities and interrelationships. There are two common application of this principle: the responsibility for related activities should be assigned to different individuals; the responsibility for keeping the records for an asset should be separate from the physical custody of that asset (Carlon et al., 2012). Nespresso also uses organisational communication channels to help manage complexities and interrelationships. There are three common communication channels used by Nespresso, face-to-face, conventional and internet-based (Pauleen & Yoong, 2001). For example, when I did interview to apply assistant accountant role in Nespresso, I have been interviewed by my manager in Australia via telephone and also he personally fly to New Zealand to face-to-face meeting with me to build the relationship. Internet-based communication channel is heavily used by Nespresso. For example, customer order and supplier order through internet and email; employee communicate via email within each department, location, country. Nespresso also manage complexities and interrelationships by using performance measurement tool. Balance scorecard approach simplified the performance measurement frameworks by categorising performance measures into one of four perspectives: financial, internal business processed customers, and innovation and learning (Bonham, 2008). Nespresso has similar performance measurement frameworks which called performance evaluation (PE) and performance developing goal (PDG). The PE and PDG include employee performance measured from financial perspective like profit and expense, internal business perspective like interpersonal relationship, customer perspective like feedback from customer, and innovation and learning perspective like professional improvement. The PE and PDG measure not only what employee has achieved but also how employees achieve the goal.
2.2.3 External environment and impact on CPO
The external environment of the organisation comprises of all the entities that exist outside its boundary, but have significant influence on its growth and survival (Gupta, 2009). An organisation has little or no control over its environment but needs to constantly monitor and adapt to these external changes, a proactive or reactive response leads to significantly different outcome (Gupta, 2009). Legal factor is one of the external environment elements. All organisations have to abide by the legal system, new laws and regulations can result in additional cost, developing new technology, additional taxes or legal fees. For example, before 90 day trial implement, Nespresso employment agreement does not have this criteria to new employee. After implementation, Nespresso need change employment agreement in accordingly add more term and condition to meet the requirements of 90 day trial. Resource is another external environment factor. As Nespresso is coffee company, therefore the change on the production of coffee bean and the price of the coffee bean will change company sales goal, financial goal. Economic factor is quite wide range of external environment. Nespresso might need change accounting system if tax rate change. If Reserve Bank increases OCR, all commercial banks will increase their deposit rate accordingly, it might cause consumer less spending which could affect Nespresso sales target.
In 2011, the market size of hot drink worldwide is USD $125,919.8 million and coffee is No.1 hot drink with USD$70,816.7m or 56% of hot drink market globally (Passport GMID, 2012). Compare with global market, the market size of hot drink in Australasia is USD$2076.3m where $1303.5m or 63% is coffee. This means there is more coffee drinker in Australasia. In past 6 years, the hot drink industry average growth rate is around 10% worldwide and 12% in Australasia annually and where coffee industry is around 10% world wide and 15% in Australasia. In coffee market with brand shares, Nespresso is 2.2% in 2011 worldwide. In Australasia, Nespresso is growing from 0.8% in 2007 to 2.7% in 2011(Passport GMID, 2012).
As the effect of global economic crisis and Christchurch earthquake, the macroeconomic environment in New Zealand still under a slow recovery period. Therefore 2013 is a challenge year for every business in New Zealand which includes Nespresso. Nespresso New Zealand has excellent growth rate in 2011 and 2012, how to keep growth in 2013 will be the major topic for every staff to discuss. As a major sponsor Americas Cup ETNZ, Nespresso New Zealand provides all machines and coffee capsule to Emirates Team New Zealand while they training and rest. Nespresso also carry out the promotion in August 2012-September 2012 for every machine purchaser at that period go to the draw to win a trip to San Francisco to watch Americas Cup in 2013 (Americas Cup, 2012). The event definitely will increase the Nespresso brand awareness in New Zealand consumer.
New competitions come in New Zealand market. As forecast, over 2011-2016, coffee pods will account for around 75% of coffee value growth (Haffner, 2012). With the success of Nespresso business, some traditional coffee businesses start to involve in coffee pod business. There is few competitors' coffee machine with capsules that claim compatibility with Nespresso coffee machine. Competition is an important driver of innovation and growth, but it must be fair and all the players must respect the rules. Nespresso take competition seriously and confident that our total consumer offering of the highest quality coffee, exclusive personalised service and continuous innovation will keep on earning the loyalty and enthusiasm of our Club Members and new customers in Australia and New Zealand.
2.3 BBus LG 4 - Be able to think and act ethically
2.3.1 Ethical and social responsibility business practices
Nespresso commits to source 80% of the coffee from certified AAA farms, reduce our CO2 emission by 20% and triple our used capsules recycling capacity to 75% by 2013 (Nespresso, 2012b).
Since 2003, Nespresso and Rainforest Alliance have worked together to develop and implement the AAA Sustainable Quality Program.Â The AAA program is an innovative package of recommendations for farmers, helping them conserves the natural resources on which their farms depend, be good neighbours to local communities and improve the quality of their beans. Nespresso works together with the Rainforest Alliance and the SAN network to manage locally the implementation of the Rainforest Alliance certification program and to train agronomists in auditing procedures according to internationally recognized guidelines. Since 2006, Nespresso has been working in partnership with the IFC and ECOM - a green coffee supplier - to help farmers improve their farming practices in relationship to quality, productivity, and sustainability. As a pilot programmer, Nespresso, and IFC contributed a total of US$500,000 over two years to expand the Nespresso AAA Sustainable Qualityâ„¢ Coffee Program in Central America (Nespresso, 2012b).
Since 2009, all new Nespresso machine ranges have all been equipped with an energy-saving mode, and from 2011, all our machines will have an automatic power off function, as pioneered by today's Pixie models. Pixie, our latest innovation, automatically switches off after nine minutes of inactivity, consuming 40 % less energy than previous models (Nespresso, 2012b).
Nespresso launched the AluCycle â„¢ initiative to build its capacity to collect used capsules for recycling and to source responsible aluminum. As part of our AluCycle â„¢ initiative, we have set up our own capsule retrieval systems in 15 countries, in complement to the Green Dot system in Germany and Sweden. Today, we have installed about 7,000 dedicated capsule collection points, such as in Nespresso boutiques, municipal waste or through retail and local partners (Nespresso, 2012b).
2.4 BBus LG 5 - Be able to work collaboratively
2.4.1 Manage myself effectively
At the beginning of my CP, I have identified my strength and weakness in order to manage myself effectively. My strength is I am a good planner. I always make the plan for every task before I start to make sure the tasks can be completed before the deadline. But I was very bad to deal with stress. When I under stress, I feel I can't do anything because my brain seems temporary dysfunctional. To maintain my strength and overcome my weakness, I have set my goal for my CP which is to learn how to best relax myself, to change the way I see my situation, to seek alternative viewpoints and to try to be positive to minimise the element cause the stress. After nine weeks CP, I can say I achieved my goal to deal with stress more smoothly as I expect. My strength in time management helps a lot to overcome the weakness. During my CP, my workload increases every week. Because I keep following ABC time management (Arizona, 2012) to write a daily "TO DO" list, breakdown large tasks to small tasks. I also use the time management matrix (Covey, Merill & Merill, 1996) to set up each task priority and time to complete. Therefore even workload has increased a lot but all tasks were well organised and managed. This help to minimise one of key element cause my stress which is over workload stress.
I also find some new steps to dealing with stress are very effective. I have found the major reason make me stress is I always lock myself in to one way of viewing the issue or situation. When I try to seek other alternative way of viewing, I will find that different reactions to same problem will give different level of stress (Diener & Hokanson, 2012). For example when I was training to do open purchase order accrual journal, I initially quite stressful about how could I do well in next month end by my own as the journal contains a lot of line and accounts. When I ask my trainer how she can remember so much journal lines, she told me an easy way that as every month we have similar accrual journal, she make a template for accrual journal and every month just change amount and add or delete few lines if need. After I know this I feel more relax and comfortable to do accrual journal by my own. I also set up reminder in my schedule that remind me every 1 hour sit in front of computer I need 10 minutes break for a cup of coffee or chat some interest topics with colleague (Smith & Segal, 2012). All these strategies are worked very well to overcome the stress. I will definitely continue to do so to keep stress away from my life
During I was training in Australia for Nespresso New Zealand month end, Nespresso New Zealand country manager forward an email to me to ask whether I can help to sort an issue. The email originally sent from one of Nestle New Zealand manager form Nestle factory. The question he would like to ask is whether Nestle New Zealand staffs get discount to purchase Nespresso machine and coffee capsule, if so what is the procedures to place order. I was actually very busy about learning finance month end task, and also as I am new in the company, therefore I really have no idea about that. However, as our country manager forward email to me which means he believes I should take responsibility for this issue and for future reference as well. In other point of view from sales perspective, if every Nestle New Zealand staff purchase one machine and consume few capsules per month, it helps our sales target in machine and on-going revenue generate from capsule. I immediately reschedule my timetable to find any gaps I might have to investigate the issue. Firstly I have found discount policy for Australia Nestle staff but no discount policy for New Zealand Nestle staff. I then went to our process & control analyst who draft this policy and ask whether same policy apply to Nestle New Zealand staff. The answer is positive so next I need find out what the procedures to place order. I ask one of finance staff who training me that how she place order for machine and capsule, if there is problem which department she need contact. The reason I ask her is to find out which department deal with order placement for internal staff rather than external customer, because I would like to get correct direction to raise question to instead of waste time ask around no relevant department. Nespresso has Club department to deal with all customer order query, however a special team in Club deal all internal staff order. I immediately email to the team leader and ask for all information about the procedures for Nestle New Zealand staff to order discount products. After I gather all details I send them through email to that Nestle New Zealand Manger and attached relevant discount policy. Our country manager very impressed about my proper and quick response. He told me actually quite a lot Nestle New Zealand staffs have asked about purchase machine and capsule previously, but no one form Nespresso New Zealand can provide full details like I gathered. He recommended the process I email to Nestle New Zealand might be useful in the future for other Nestle businesses.
From this experience, I found to be able to work collaboratively in the workplace everyone should share responsibility for action planning, implementation and results. Company should clearly classify each employee's duty and responsibility in order to get right direction when the relevant issue occurs. Communication should two-way not one-way, both parties involve in communication should take initiative.
2.4.2 Developing a range of interpersonal skills
In my Co-op learning framework, I had outlined that I was good at negotiation skill but my listening skill was weak. When I try to solve the problem, I use principle negotiation (Fisher & Ury, 1991) to separate the people from the problem, focus on interest not positions, invent option for mutual gain, and insist on objective criteria (Fisher & Ury, 1991). For example, when I discuss some accounting issue with marketing people there always have disagreement. As an assistant accountant, how to maximise company profit and minimise the expenses is my priority. However play as a marketing role, how to promote our product, how successful in public relationship is their priority. The disagreement always comes with finance complain marketing spend too much but marketing complain not enough budget. When use principled negotiation I should separate both parties position from problem and then focus on what actually both parties want, and then find common interests which could be financial stability and increase sales and revenue. Then invent options for mutual gain like finance to understand more about marketing strategy and marketing provide more measurable budget structure and more control on spending. However, to be able to work collaboratively in workplace only have good negotiation skill is not enough; I need good listening skill as well. As one of my weaknesses, my poor listening skill sometimes make me misunderstand the contents of tasks which not only waste time but also get incorrect result. To overcome this weakness, I need distinguish between hearing and listening. Hearing is a physical ability while listening is a skill (McKay, 2012). Moreover when listening, try to show how I centre my attention to speaker and try to make eye contact (Campling, Poole, Wiesner & Schermerhorn, 2006). I need learn active listening skill ((Active Listening, 2012) to become an active listener to show speaker that I am listening and provide feedback and respond appropriately.
When I was process employee Amex expenses, I noticed that on our Auckland Boutique manager's Amex statement always has a big amount pay to energy provider and water provider due to overdue invoices with late payment penalty. I have questioned him what this payment for, and he get back to me said those payments are power bill and water bill for Boutique. Under company policy, all energy and water suppliers should set up as a regular supplier in our accounting system. It helps finance department to track the spending and accurate budgeting and forecasting in following financial year. However when I ask him why we didn't set those suppliers up, he start to complain that it is not his job to set up the suppliers. I use active listening skill to pay attention what he said and what he wants. Then I explain to him that I understand in normal situation it is procurement department job, but Nespresso New Zealand is a new company, and our procurement function hasn't big enough to employee a full time staff to look after. I then start to use principled negotiation skill. I separate Boutique manager and me from our position, focus on what we really want and need. I found both of us want invoices paid on time so we don't need pay unnecessary penalty. The best way to do so is set them up as a regular supplier in accounting system. I communicate this issue with Boutique manager and offer a training session for him and other 2 assistant Boutique manager to learn what the procedures to set up a supplier, and this training is not only for currently issue but also for future if any more suppliers provide service to Boutique.
From this experience, I found that to be able work collaboratively in the workplace, every employee should always understand company rule and policy and apply it, every employee takes his/her own responsibilities and obligations. Moreover, the business will highly benefit from a whole effective and efficiency teamwork if each team member has excellent negotiation and listening skills.
In Conclusion, my nine weeks Co-op is such a great experience on my journey to complete my academic study in AUT. Through my CP, I have learned a lot of things which can't learn from classroom and same time I have learned how to apply academic knowledge to real situations and challenges.
In the past nine weeks, I have successfully complete all my tasks of assistant accountant role by applying all relevant accounting concepts, models, frameworks and theories. The Co-op experience has improved my ability to learn not only academic knowledge itself but also how to apply the knowledge to real life. My strong performance on my role got very positive feedback for my CPO which described by Nespresso Oceania Accounting Operations manager as I am a highly valued member of finance team with a great attitude, adaptability and flexibility. My role is a start point of build finance function in Nespresso New Zealand. The role gives Nespresso New Zealand the benefit by providing a comprehensive financial and accounting support to all employees, customers, suppliers and other key stakeholders. The experience of the role will definitely be a milestone on my way to work towards a Chartered Accountant. I have developed my critical thinking ability during my CP experience by analysing and evaluating complexities and the interrelationships within Nespresso New Zealand and the impact of external environment on Nespresso New Zealand. My CP experience is not only just covering my academic major in business but widely in all business areas. I have actively involved in the Nespresso sustainability program to understand how important the business demonstrate ethical and social responsibility business practices to public. After the Co-op experience, I have achieved my goals to overcome the weakness of deal with stress and poor listening skill. This achievement will benefit me in both work and life.
Overall, I was very impressed my Co-op experience. It is one of the best papers I have studied in AUT. I strongly believe I will keep adding value to Nespresso New Zealand as well as myself by following the Co-op learning framework.
Section 2: Discipline Topic
Over the last decade there has been an increase in publicly reported corporate leadership malfeasance and controllership lapses. The government attempts to rebuild public confidence by carrying out more legislation to force business leaders to formulate operational strategies ensuring the proper internal controls over financial statement accuracy, e.g. Sarbanes-Oxley (SOX) Act. The main components of financial statement which business leaders concentrate most are asset generation and stabilisation, liability commitments and fulfilments, and equity balance stabilisation (Kansas Federal Reserve Bank, 2004). An often-overlooked financial component of the liability statement is the accounts payable process (Mueller, 2001). Theoretically, current liabilities fluctuate periodically depend on business production; however, there is a predictive nature to normal business flow with any given period, especially in account payable transactions (Schaeffer, 2006). The stability of the accounts payable balances gives a false sense of security to leaderships that the controls over the accounts payable cycle are well functioning, which encourages leaderships focus on the more volatile and unpredictable financial statement components rather than accounts payable (Alexander, 2009). However, accounts payable is a critical area because that's where financial commitments are made and outbound cash flow is regulated. Companies can't manage their cash flow and spending effectively unless they have real-time access to accounts payable cycle (Kaskinen, 2007). The purpose of this report is to discuss whether the company need adequate internal controls over the accounts payable. Firstly this report will discuss different views on internal controls over accounts payable cycle. Secondly some controls activities will be discussed in relate to prevent accounts payable fraud. Finally a recommendation on the procedures of accounts payables cycle will be discussed from the perspective of internal controls.
3.2 Review of the literature
Accounts payable is a controlled disbursement account used by companies to purchase goods on credit (Haber, 2004). A controlled disbursement account is a type of subsidiary ledger (Sub-ledger) used in place of the company's general ledger (GL) to process transactions associated with external payment to suppliers and vendors (Haber, 2004). From the perspective of accounting double-entry theory, the purchase of goods on credit would record a debit to an internal account used to receive the goods, like an inventory account, followed by a credit to accounts payable account. Although a debit is reflected in the inventory account and a credit is reflected in the accounts payable account, the entries represent increase in both accounts. Companies can reduce the amount of credits in the accounts payable account by paying invoices to suppliers or vendors in a timely basis. The term of a timely basis is normally defined by the supplier or vendor that has allowed the company to purchase goods on credit (Haber, 2004). Normally finance managers within the company will focus on how to maintain low balance on the accounts payable account, because it is reflecting in the company's ability to pay goods and services used by the company. When invoices are received, the company would make an entry in the GL to credit the accounts payable account. Once the company pays the outstanding invoice, another entry is made in the company's sub-ledger to debit the accounts payable account which reduces the balance the company owed. When accounts payable balances decrease, the cash balance in the company's checking account is correspondingly decreased by a credit entry in the cash GL. For foreign related accounts payable transactions, companies must account the value of purchase in supplier's home country currency. The amount of any change constitutes between local currency and foreign currency is commonly termed "Foreign Exchange Gain and Loss". As Dixon and Annett (1993) have stated, foreign currency transactions can impact the total balance of current liabilities on a company's financial statement. Moreover, although foreign exchange gain and loss occur from accounts payable transactions, they are properly treated as element in current income determination. Therefore, accounts payable transaction accuracy impact not only current liability balances but also current income balances. Since the balances contained within current liabilities can directly impact a company's financial statement, therefore the accuracy on reporting of current liabilities to investors and external company stakeholders is extremely important. In most financial statements, the accounts payable balance is greater than any other current liabilities. The accounts payable balance is also the sub-component of the current liabilities category used in determining how much cash an organization have available to settle debts (Haber, 2004).
When issues arise within the company's accounts payable procedures which would impact the accuracy of the company's financial statement, the leadership of the company must be able to determine by using some easily apply and readily accessible measurements. There are four key measurements within the accounts payable procedure that accountants and internal auditors rely on to ensure current liabilities accuracy (Moeller, 2004). The first measurement is accrued and suspended accrual balances (open liabilities and tax withholding) (Moeller, 2004). The second measurement is account reconciliation completion (timely and following GAAP) (Moeller, 2004). The third measurement is debit balance aging (returned payment credited to expense) (Moeller, 2004). The fourth measurement is supplier or vendor settlement aging (statutory recording of the timeliness of payment) (Moeller, 2004). Those measurements provide a reasonable indication of how well the company pays current bills and how much liquidity the company has available at any given time. However, as Alexander (2009) has stated that it is normally difficult to maintain an experienced finance team in the accounts payable area. Other areas of business operations, like acquisitions or supply chain management, attract experienced professionals from the mundane function of accounts payable. Because of these circumstances, accounts payable is one procedural area of a company's financial statement that typically does not receive the same scrutiny as other company financial statement categories from a controllership perspective (Schaeffer, 2006). Controllership of accounts payable procedures specifically refers to the planning, organising, directing, measuring, financial analysis, and process analysis of accounts payable transactions (Anderson & Bragg, 2004).
However, implementing and maintaining new processes or procedures are expensive, especially for many small and medium sized public companies. In order to defer large-onetime expenses, many companies have taken a multiple-tiered approach that ensures financial statement accuracy and that internal controls over those statements are sustainable (Lander, 2004). The first tier of the approach to financial statement accuracy requires companies to develop documentation which clearly demonstrates the steps of the complex procedures utilized in creating financial statements. Creating control procedures leads to simplification and standardization of existing controls similar to the procedural improvements sought in a manufacturing environment (FASB, 2012a). To ensure the controllership model is repeatable and sustainable within the company, standardisation and simplification of accounts payable procedures is necessary. By ensuring that procedural controls are sustainable, the company leaderships will help create consistency in the financial statements reported to external stakeholders, such as shareholders, auditors, and regulatory administrators (FASB, 2012b). The second tier of the approach to financial statements accuracy occurs in the form of managerial reporting after the company has completed the standardisation and simplification of procedures. The company leaderships must frequently generate reports to review the evaluations of the internal financial statement accuracy controls and procedures. The third tier of establishing long-term controllership over a company's financial disclosures is implementing IT-related controls to help monitor the data used for creating accounts payable transactional settlement information (Moeller, 2004). The company leaderships must be able to monitor the transactions which impact on company liability statement and have charged the IT leadership with the responsibility of implementing and controlling the procedures required to support the monitoring function.
The Committee of Sponsoring Organisation of the Treadway Commission (COSO) is the organisation that was created in 1985 designed to correct the business and audit failures of the 1970s and 1980s. COSO is sponsored jointly by five major professional associations: the American Accounting Association, the American Institute of Certified Public Accountants (AICPA), the Financial Executive Institute (FEI), the Institute of Internal Auditors (IIA), and the Institute of Management Accountants (IMA) (COSO, 2012a). Many organisations have taken guidance from COSO in past years regarding how to create an effective internal control environment. Figure 1 is the COSO Internal Control Matrix; it illustrates the important interdependence between the company leaderships' strategic, operations, reporting, and compliance teams when creating internal control programs.
Figure1. The COSO Internal Control Matrix
As outlined by COSO, a control environment contains a series of processes which effected by an entity's board of directors, management, and other personnel, to provide reasonable assurance regarding the achievement of objectives in the following categories: (1) effectiveness and efficiency of operations; (2) reliability of financial reporting; (3) compliance with applicable law and regulations (COSO, 2012b). Because of the difficulty and the cost associated with implementing each of the COSO matrix components, many company leaderships will select those components which can be implemented most effectively in their companies. Therefore, it is important for the company leaderships to have a broader overview of the matrix and its contents. There are eight interrelated components include in COSO matrix which are necessary for companies to consider in their governance activities. The eight components are: Internal Environment, Event Identification, Risk Assessment, Risk Response, Control Activities, Information & Communication and Monitoring (COSO, 2012c).
Internal Environment: The company leaderships must provide clear directions to the company when communication the importance of financial statements accuracy. The internal controllership improvement activities must implement across the entire company. Specifically within the accounts payable department, ensuring that all transactions are paid for or accrued within the correct accounting period is vital to financial statements accuracy. Thus, the company leaderships play a key role of ensuring that all employees who are involved in accounts payable procedures understand the statutory requirements about timeliness and accuracy.
Objective Setting: Objectives must exist before leaderships can identify potential events affecting their achievement. Companies must report all significant material weakness in a business' control environment in an independent external auditor's attestation report.
Event Identification: Internal and external events affecting achievement of the company's objective must be identified, distinguishing between risks and opportunities by testing the contents of the events to ensure that the identified controls are valid and reliable.
Risk Assessment: The company leaderships must assess risk regularly. Green (2004) stated that the detection of risk activities, including fraud and massive financial losses due to the lack of operational controls must be the primary focus in any risk management process.
Risk Response: After implemented the controls, the company must assess the design and effectiveness of the control as well as examine detailed process and transactional level activity to allow leadership to attest to and assert publicly to the strength of the internal controls and processes used for external company focused financial statement reporting.
Control Activities: A strong control environment is a people-dependent process (Ramos, 2004). Control activities are the most people-dependent element of the COSO matrix because those activities are the policies and procedures that help ensure that leadership's directive are carried out (The COSO Model, 2005). Many companies create authorisation and responsibility matrices to ensure that the right level of scrutiny occurs on transactions. These matrices are often referred to as segregation of duty controls (Ramos, 2004). Companies create these matrices to reduce the opportunities of any person being in a position to both perpetrate and conceal errors or irregularities in the normal course if his or her duties (Ramos, 2004).
Information and Communication: A detailed, written depiction of the process and any subcomponents of the process used by systems or people is a key part of understanding the controls associated with a particular financial cycle. To correct any deficiencies found during the process, all deficiencies that can affect the company's ability to produce reliable financial information should be identified and reported (Ramos, 2004).
Monitoring: The company internal controls environment requires regular monitoring to ensure that the quality of the control system's performance over time does not fall of or downgrade. The two most important methods of monitoring are internal audit reviews and financial forecasts.
In addition, Kaskinen (2007) stated some valuable lessons specified designed for accounts payable cycle which companies can improve their ability to be compliant, benefit from improved procedures, and minimize costs. One of the critical lessons is that policies and procedures are not enough. Despite all the efforts companies have untaken to establish financial policies, many still lack effective ways to enforce internal controls. It is not enough to have a large amount of internal policies without the internal controls in place to ensure that those policies are being implemented and applied effectively (Kaskinen, 2007). For example, companies need to have a way to ensuring that only employees with proper level of approval are approving invoices in fact. Companies need to know where any particular invoice is in any given time. A decentralized company that received invoices in different location has very little control over this process. If someone is away or does not hand in invoices on time, the invoices can be sitting somewhere without anyone else knowing. This creates the problem that companies have incorrect information about how much money it need to set aside for payments. In the meantime, companies also miss out another benefit: the ability to negotiate early-payment discounts as well as avoid late-payment penalties. Invoices without purchase orders (POs) generate additional problem. For example, companies that process thousands of invoices per month and hundreds of thousands of invoices per annual could have a staggering number of non-PO-based invoices. If those invoices are not routed to accounts payable in a timely manner, then companies can't report expenses accurately. A large number of unrecorded invoices mean companies' liability balances and income balances on their financial statements are not represented a true and fair view of companies real financial information. Technology is an essential element for companies to effectively enforce the policies they have established. For example, an automated invoice processing system will only allow employees with the proper approvals to approve the invoices. The system will record all occurred actions for each invoice as soon as it is entered in system. It will create an audit trail that enables companies to have visibility and control over the entire invoicing process. Technology also enables companies to conduct accurate reporting. Leaderships can look at invoice processing data in different ways, like viewing cost codes, outstanding amounts that need to be paid, time from processing to payment, and the person who processed invoices. Technology also help to simplify audit procedures because all invoice information is available in system where no longer needs someone spend time to find a specific invoice required by auditors. SOX act require that companies demonstrate continual improvement on internal controls. In order to accurately determine and implement improvement, a measurement system must be taken in place. One effective approach is to determine the key performance indicators (KPIs) for the purchase to pay (P2P) procedures. The company leaderships should select the indicators that match with business goals. For example, a company may want to measure the cost of processing an invoice, the time to process an invoice and the percentage of outstanding invoices. Once these criteria are determined and measured against current practices, the company should then revalue these measures after implementing some new procedures. This will enable companies to continually monitor and control the improvement they are making to their procedures.
Nevertheless, Kaczmarek (2012) argued that internal controls issue on accounts payable is not from control procedures but from reporting line of accounts payable function. Generally, accounts payable function has reported to finance. This historical alignment is caused by three main reasons. Firstly, the basics of accounts payable function, such as reviewing invoices, process payments, managing cash flow, etc., are finance-related (Kaczmarek, 2012). Secondly, it is the need of separation of responsibility within the three-way match of purchase order, receiving document and invoice (Kaczmarek, 2012). Finally, it is the leadership matter. As traditionally materials management has been only considered a buying and moving function, and the leadership has not been viewed as strong (Kaczmarek, 2012). However, even accounts payable department is under finance but major internal stakeholders are purchasing/procurement department and receiving department which are part of the supply chain based on a general understanding and acceptance. Recently, there is a growing consensus that much more value is realised by having a single organisational entity manage the total supply chain (Kaczmarek, 2012). As the supply chain is viewed as a continuum form manufacturer through payment. Therefore, the payment function needs to be included in the supply chain functions. One significant advantage to consolidation of accounts payable under supply chain is the highly increased level of communication and cooperation between the accounts payable, purchasing/procurement and receiving department (Kaczmarek, 2012). There are always considerable communication barriers between accounts payable, purchasing/procurement and receiving because they can have very different priorities and different expectations on who should do what when resolving invoice discrepancies. Kaczmarek (2012) suggested that if accounts payable, purchasing/procurement and receiving all under one common leadership structure, the barriers such communication barriers are eliminated. Moving accounts payable to the supply chain speed invoice approval, allow payment discounts to be realised,