Accounting Cycle
Essay Preview: Accounting Cycle
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The purpose of this assignment is to select a step in the accounting cycle that is not currently automated at one of our team members organization. The place of business we have selected is an independent financial brokerage firm, LPL Financial. The firm places a strong emphasis on the recruiting of established financial advisors throughout the country. When a financial advisor joins LPL Financial, so does their clients. One of our team members works in the transfer department. The transfer department handles the transferring of accounts held at other financial institutions into LPL Financial. The transfer department handles various types of securities including stock, mutual funds, bonds, retirement accounts, and cash. The first step of the accounting cycle is to “identify the business events that can be considered accounting transactions and to collect relevant economic data about those transactions.” This step in the cycle occurs during the accounting period. Each transfer that takes place in the transfer department can be considered a business event. Therefore, we have selected to automate a step in the transfer process, more specifically, the tracking of incoming mutual fund transfers.
Currently, a Mutual Fund Transfers Access Database exists which contains information related to the incoming transfer of mutual funds. Some of the information contained in this database includes the clients name, social security number, account number at both LPL Financial and the delivering firm, the name of the mutual fund, and the unique mutual fund code, called the CUSIP. An employee of the transfer department manually enters this information into the Microsoft Access Database. The information is entered after the employee verifies the information from the Accorde System and the Beta System.
The Accorde System is an electronic imaging system, which scans and images all hardcopy transfer forms delivered to LPL Financial from the financial advisors. The information is gathered from the transfer forms and entered into the Accorde System by employees of a separate department.
The BETA system contains all of the companys clients accounts and account information. In addition it posts all incoming and outgoing transactions, including mutual funds.
There are two main problems with the current Mutual Fund Access Database, which are related to the manual entry of the data. The first problem is the inaccuracy of the data due to human error. The second problem with the database is the speed and efficiency of entering the data. Each mutual fund requires the same information stated previously and keep in mind, one transfer can contain several mutual funds.
An example of the current process is as follows:
A client fills out transfer forms to request the transfer of five mutual funds.
The forms are delivered to LPL and received and imaged by the Accorde System.
An employee in the transfer department reviews the image of the transfer form and information is verified off of the BETA System.
The mutual fund information is entered into the Mutual Fund Access Database.
An off the shelf macro software (EZ Macro) is used to relay the mutual fund information and post onto the BETA System.
You can see where the problem of inefficiency lies in step 4 and 5. For each mutual fund, the clients name, account number, and social security number is repeatedly entered for each mutual fund. In this case, the employee would have to enter or copy the information 5 times for this one transfer. In addition, EZ Macro is not very reliable because it is very sensitive to computer performance. The macro software often hiccups which equates to inaccurate information being posted onto BETA System. An employee must validate the information and make corrections if necessary. This amounts to considerable time exhausted. Overall, information is manually entered and passed among 3 systems, which allows a greater chance of error and inaccuracy.
Our proposal or solution to this problem would be to replace the existing Mutual Fund Access Database with a new automated database, which would support the transfer functionality. We are highly confident that this new system would complete and support the audit trail of incoming mutual fund