- Bus 4068 Unit 4 Assignment 2 Effective Business
GNWC: A Leader in Rapid Product Innovation and Health Solutions
The Green Natural Wellness Company, aka GNWC, sells select, astounding quality nutritional health and beauty products to small health food stores throughout the United States. Its headquarters and warehouses are in Clear Lake, Texas, several miles from the NASA Space Center. GNWC’s key success factor is its ability to bring to market new products before other suppliers do rapidly.
The company has two full-time buyers who spend all their time searching worldwide for exceptional “nutraceuticals.” For example, one of the buyers recently discovered that when a typical plant in the Brazilian rainforest is blended in with natural emollients, the result is a cream that eliminates even the most troublesome cases of acne. After the discovery, GNWC took six weeks to market the product. Explore our assignment Bus 4068 Unit 4 Assignment 1 Internal Control Process for more information.
GNWC Sales Divisions and the Role of Barbara Larkin in Skin Care Division’s Success
GNWC has four sales divisions that report to the VP of sales: skin care, hair care, nutritional supplements, and dried foods. Each division operates autonomously with its own income and expense budgets. The regulator’s office reviews and approves all divisional budgets. Barbara Larkin is the head of the skin care division. As of late, her division has done spectacularly well, with annual sales improvement rates averaging in the 20% range and the most ongoing quarter’s sales being just more than $4 million.
Until several years ago, Barbara’s division was so independent that it managed its collections of accounts receivable, although it forwarded all incoming customer checks to the central finance division for deposit, and all purchase orders had to be approved by the finance division preceding being sent to the purchasing division for additional approval.
Account Collections and Leadership
About two years ago, Barbara chose to turn over the collection of customer accounts to the collections department in the finance division. Because of the rapid improvement in her skincare division, there was a staff shortage, and she was having trouble keeping up with collections. Things were so bad that she couldn’t even get great ageing reports. Martin Mouse runs the collection department in the finance division; he is an up-and-coming star in the company. Rumours from far and wide suggest that he’s in line for the bad habit presidency of finance as soon as the existing VP retires or leaves the company.
Furthermore, he’s a cousin of the President, so nobody wants to get on his bad side. Under the present and past systems, Barbara’s division has a single master financial plan account used to credit all the division’s incoming cash receipts and charge the division’s payments. As a result, the master account should effectively mirror the balance in cash funds available to the division.
Challenges and Changes in Account Collections
Barbara has been having problems with Martin throughout the past year. First, he asked Mac Plata, the regulator, to use his influence to allow Martin to charge Barbara’s division 7% of its revenues for the collection services. That charge would seriously harm Barbara’s master account and hinder her ability to continue creating. Second, Martin’s collection department has not been doing steady work with Barbara’s collections, especially in sending out bills on time and dealing with past-due accounts.
Bus 4068 Unit 4 Assignment 2 Effective Business
The issue with the collection efforts is that Martin periodically shifts his staff’s efforts to the dried foods division and doesn’t concentrate on the skincare division. The apparent reason for this is that Betty Riley, the head of the dried foods division, has been with the company since it was established 15 years ago. She regularly eats lunch with the Boss and knows everybody in the company, so Martin wants to win her favour to further her transition to the finance position.
Barbara is cautious when managing her division’s budget and master account. Because her division operates as an investment place, she maintains at least a $1 million balance in the master account as a safety net. She needs this cash to be available in case there is a sudden interruption or slump in sales so that she can continue to operate and pay employees until she can resolve the sales issue.
Barbara’s Monthly Reconciliation Process: Challenges and Estimations in Master Account Management
On the first day of another month, Barbara surveyed the balance in her master account; it was about $2.3 million. Following her regular practice, she attempted to accommodate this against her internal sales records. She could not accommodate the balance against actual cash receipts because Martin’s collections department handles and processes all receipts. Furthermore, Barbara had to estimate gathered sales because sales collection reports were about 90 days behind in the system, thanks to Martin inputting all collection data into spreadsheets and forwarding them sporadically to the accounting department.
Barbara took the beginning balance in the master account, subtracted new expenses (which she knew because she had to submit purchase requisitions and payroll authorization), and then added an estimate of, as-of-late, gathered sales. She had a brilliant view of consideration of the gathered sales because when she handled her division’s collections, 95% of accounts receivables were collected within 30 days of billing.
Barbara’s Struggle to Resolve Discrepancies in the Master Account
Barbara checked and reevaluated her calculations. The balance in her master account should have been about $1.1 million, not $700,000, as the system detailed. That meant that her account was short about $400,000. Being somewhat afraid of Martin and mindful of their argument over the collection department’s charging for her services, Barbara caught him in the hallway and casually asked him to investigate the matter. She didn’t immediately proclaim her request anyway but instead inserted it into a casual conversation regarding an injury accident in the warehouse the earlier day.
Over the following week, Barbara again alluded to the issue on the telephone with Martin, yet he seemed uninterested in helping. Finally, Barbara called him again and told him that if she didn’t find a solution in one day, she would have to report the issue to Martin’s Boss, the VP of finance. Barbara was sure that the $400,000 had disappeared. She was afraid that Martin had been embezzling incoming receipts. Furthermore, regardless of what happened to the missing funds, Martin was responsible for keeping up with collections and should have decided to explain what happened to the missing funds.
Barbara Faces a Freezing of Accounts and a Suspicious Investigation Into Missing Funds
The following morning, Barbara got a call from Myrna Wilson, the secretary to Victor Vaccio, the VP of finance. Myrna spoke in case Barbara was inconvenienced: “Mr. Vaccio considers this a serious issue. He’s looking into it.” Barbara was somewhat shaken because she hadn’t even announced the issue yet. Barbara had friends in various places in the company. One companion, who works in the assistant regulator’s office, told her that Martin was telling Victor and every other person that Barbara had overspent her spending plan in the previous quarter.
Barbara then got an email from the President’s secretary advising her that her master account was frozen and that Victor must personally approve any expenditures except continuing payroll. The President himself had told Victor to coordinate a total investigation. He wanted a total audit of all sales and collections beginning with the previous quarter. Barbara was stunned. With barely a second thought, the Boss had swallowed Martin’s story about Barbara’s having overspent her spending plan in a previous period. And Martin was doing the audit.
Bus 4068 Unit 4 Assignment 2 Effective Business
To make things worse, Barbara’s sales analysis and reconciliation to her master account ensured that the cash had disappeared in the ongoing quarter, not in the previous one. That meant that the investigation would be a bad situation for quite a while, and in the meantime, her spending plan would remain frozen, and she would have to Bus 4068 Unit 4 Assignment 2 Evidence Collection reside with the embarrassment and disgrace accompanying being suspected of irresponsible financial actions. Barbara called Martin and offered her assistance in locating the missing funds, yet he refused. “I’ve been instructed to keep our investigation independent,” he said. “Sorry, yet this means we can’t use any outside help.”
1. From a process standpoint, evaluate how well this investigation began to unfold.
The process of this investigation at GNWC has advantages and disadvantages. One advantage is that Victor Vaccio, the vice leader of finance, took the situation seriously once it was brought to his attention and acted instantly to halt any further infractions. In addition to the VP of finance, the CEO directs an investigator-to-bottom operation. Including upper management is crucial to any investigation as they should be ready for any action that should be taken because of the investigation.
There are a couple of essential flaws in this investigation. As a matter of a couple of importance, Martins’s familial connections to the CEO and their rapid acceptance of Martin’s claims without conducting a full investigation. Another flaw is Martin’s resistance to outside help and lack of cooperation. Accuracy, validity, collaboration, and open communication are essential to any investigation.
2. Should Barbara have done anything differently?
Barbara should not have involved Martin with the financial disparity issue if she had been suspicious of his mishandling holds. Instead, Barbara should have contacted her direct Boss or Mr. Vaccio about her suspicions. Before going to anyone, Barbara should prepare a compelling case featuring the inefficiencies of Martin’s department by carefully documenting any examples of collection problems and investigating any other possible avenues. If Barbara had followed the above procedure without including Martin, she would not have been a target of the investigation, and her budget may not have been frozen.
3. What changes, if any, would you recommend be made to the system?
Many changes can be made at GNWC. These changes should be focused on reducing risk, further creating processes and encouraging a culture of reliability inside the company. My most memorable recommendation for GNWC is to address the inefficiencies of the collections department and pinpoint what is causing the issue.
Then, a more robust system for revealing accuracy and transparency should be utilized. The new system should require various approvals for financial transactions over a specified amount and increase routine account studies and reconciliations. Furthermore, autonomous audits should also be regularly, not altogether immovably, established to detect any more discrepancies swiftly. Finally, GNWC needs to create a climate that deals with cross-departmental communication and encourages a culture of validity through all levels of the company and their management.
References
GNWC: A Leader in Rapid Product Innovation and Health Solutions. (2024). The Green Natural Wellness Company. Retrieved from [website]
Bus 4068 Unit 4 Assignment 2 Effective Business. (2024). University of Business and Finance. Retrieved from [website]