Reference no: EM13837267
Phoenix Motors Case Study
• Overview of business processes related to car dealership
• Risk Management and Internal Controls
• Design of business solutions to meet an organization's business needs
• Business Process Mapping
Phoenix Holden is a privately owned motor vehicle dealership for Holden that commenced its operations in 1982. The Phoenix Holden dealership has two locations - Wangara and Clarkson.
The type of cars and services it offers are:
- New Vehicles: Holden, Jeep, Fiat, Great Wall, Ssangyong, Chery, Foton, Proton, Mahindra
- Used Vehicles
- Holden Rental Vehicles
- Aftercare Sales
- Finance Sales
The dealership's business model is based on a retailer for the manufacture, Holden. The business in recent years has faced increased competition from online sales such as carsales.com.au as well as increases in the number of dealers in Osborne Park and Wangara.
Acquiring new vehicles
The Directors of Phoenix Holden go through a decision making process before the upcoming financial year on what vehicles to stock. The decision is based on a number of factors such as sales performance of vehicles in the current market, changing consumer preferences, and the availability of vehicles.
Vehicles are acquired by either placing an order with the manufacture, Holden, for a new car to be manufactured or through a stock swap from another dealer.
Second hand cars are acquired from trade-ins, which are recorded into the accounting system as "used car stock". The cost of the second hand car is recorded when the new vehicle is sold to the customer. The cost of the used car reduces the accounts receivable amount owed by the customer.
The dealership's accounting system, ERA, automatically generates unique identifiers for each new vehicle acquired, which is recorded as inventory in the accounting system. Each vehicle has an additional two unique identifiers for servicing and warranty, which are the Chassis and Engine Number.
The inventory accounting module in ERA accounts for all cars, parts, and days in stock, which makes for an efficient stock take and assists internal decision making about average time in stock for different types of vehicles.
Selling to customers
Marketing to Customers
To generate sales, Phoenix markets to its potential customers via online sites such as carsales.com.au, social media (Facebook), and through traditional medium such as newspaper and radio. Phoenix also takes advantage of Holden deals to market its products such as low interest rates, free servicing, longer warranty periods and cash back deals.
The ERA accounting system supports marketing to customers by maintaining a customer database, which allows for automatically generated daily letters for service reminders and special deals to be sent out to customers recorded in the customer database.
When a car is sold to a customer a "Contract to Buy a Motor Vehicle / Tax Invoice Form" is completed by the sales agent and is signed by both Phoenix Holden representative, customer, and a witness.
The contract is then gets forwarded to the Accounts Clerk who will then update in the ERA accounting system: the inventory records, floor plan of vehicles and accounts receivable ledger accounts.
The vehicle is then registered and license details updated online on the Department of Transport website for registering and licensing vehicles. The accounting system sends out reminders when renewals of licenses are due for in stock vehicles.
Commissions for sales agents are calculated through the use of a deal book maintained in Microsoft Excel and is not calculated and paid via the payroll system, which is outside the ERA accounting system.
Car financing is now a large part of most dealerships' profitability. Financing for vehicles is done via Phoenix Holden's lender. The bank sets all credit checks and decides whether or not to approve a new loan. Once finance is approved, the contract for the new vehicle is between the customer and the bank.
Budgeting and Reporting
Budgeting is undertaken annually in June. Seasonal trends will be taken into account in the budgeting process to account for busier/slower months.
Budget projections may be updated if there is large expense/income variations expected and the accounting system is quite flexible in accommodating changes in the financial year. Actual versus Budget reports are prepared on a monthly basis.
Phoenix's chart of accounts for general ledger accounts and cost centres are based on the generic chart of accounts that came with the ERA accounting package. There have been few customizations to the chart of account structure as the generic accounts reflect the management structure and activities undertaken at a motor vehicle dealership.
Managers at Phoenix Holden have access to the accounting system to view and print their Department's operating costs for the month.
Phoenix Holden prepares consolidated accounts at year end for statutory reporting purposes.
The Dealership has installed firewalls on its network to control as well as for onsite and offsite system monitoring of the accounting system.
The dealership will only accept payments from customers by bank cheque, bank transfer or cash.
A stock take is completed weekly for all vehicles and every six months for parts.
For security of assets after hours, the vehicles are locked up, alarms installed, and security guards patrol the premises at night.
Payments can only be made by authorized employees/directors. Multiple signatories and payment authorizers are required to make any payments.
All employee records and sensitive items are kept locked away. Network and password protections are set on any data which is confidential.
ERA Support and Maintenance
The ERA accounting package is an accounting software package developed for the motor dealership industry. Pentana Systems is the software company that owns ERA package and provides support and maintenance for the software.
Training on the ERA software is provided by the managers and procedural manuals documenting each process have been developed.
System updates and patches to the ERA system happen automatically overnight and out of business hours.
The ERA system is one of the two commonly used accounting packages in the Motor Vehicle industry. The other commonly used software package is called Revolution.
The Pentana ERA system is expensive to run due to monthly fees as well as new setups costs. The biggest costs are with the set-up of new franchises. This can be very involved as there are many back screens which the interface forms retrieve information from. It can be difficult to ensure these are all set up correctly prior to identifying issues when processing. A more transparent set up system would be more efficient.
The customer support provided by Pentana is viewed as poor by Phoenix staff as it is viewed as a hard process to have issues fixed in a timely manner. They have their support set up online and a contact support team, however the Phoenix staff have to often follow up on issues.
1. You have been asked to prepare a Business Process Map and EAD table for the sale of a finance approved vehicle.
a) Prepare an Event Agent Decision Table.
b) Prepare a Business Process Map in Excel.
2. Phoenix currently uses a paper based form for entering into sales contracts with customers.
a) Identify the data that Phoenix Holden would need to capture?
b) Design an electronic form in Excel that can be filled out by customer and sales representative to capture all the data needed to make the sale.
3. a) Identify the types of Business Intelligence that you believe would be of benefit to Phoenix Holden's managers. Select the four most critical reports and explain the rationale for choosing each BI.
b) Explain why the BI reports you have identified in part a) for most cases cannot be run from the operational database.
c) Develop an Excel dashboard based on test data, which showcases the BI identified in part a).
4. You have been asked by Phoenix Holden to help management with its risk assessment and risk management activities.
a) Outline and provide examples of the types of operational risks that Phoenix Holden is subject to.
b) What are the control objectives and activities for Phoenix's ordering and management of car parts inventory, and Phoenix's sales and cash collection processes from customers?
c) Develop a risk register for Phoenix Holden to manage its operational risks identified in part b).
5. Accounting software packages such as Pentana's ERA has been developed for car dealerships.
a) The SAP premise is that all business processes can be modeled in one best practice way; while Pentana's ERA has been developed around the unique business processes of the car dealership industry. Do you agree/disagree with SAP premise that all business processes can be modelled in a best practice way? If Phoenix was to adopt SAP what changes, if any, would be required?
b) Given the customer support issues - what process would you got through to resolve these issues?