: WIDGET MANUFACTURING - Case Study Example

Case Study: Widget Manufacturing Case Study: Widget Manufacturing According to Sagner , WidgetManufacturing had been started by Arnold Parks’ father, Arnold Sr., in 1946 soon after completing his military service during the Second World War. During its inception, Widget Manufacturing mainly concentrated on radio components before venturing into other consumer electronics products. The company had undergone tremendous changes, and by 1976 when Arnold Park took over as the president, the annual sales had shot to about $75 million (Sagner, 2010).

This case study discusses the financial and accounting management aspects of the company. In particular, the paper shall discuss the recommended cash cycle of the corporation and the changes that should be adopted in the company’s inventory management system and the estimated benefits. In addition, the paper will also discuss the enterprise’s collections and disbursement systems and what Arnold, as the president of the company should do to manage the company effectively. Recommended Changes to the Company’s Cash Cycle Notably, the management of Widget Manufacturing Company had empowered its employees to individually be in-charge of the billings and collection of the funds (Sagner, 2010).

The company’s cash cycle promoted fraud since there was no one to keep track of the cash payments and the working capital. According to Sagner (2010), usually, the company’s manager only reviewed the payments on the first day of the month. However, this review was only aimed at whether the cash balances were within the plant’s targets. The company needs to adopt fraud detection and reduction mechanisms to ensure that all the billings and collections are recorded and accounted for. In addition, the manager should adopt real-time categorization and resolution of all cash payments.

Instead of reviewing the payments at the beginning of the month, the manager should either accept or reject the cash payments immediately to avoid fraud within the company (Sagner, 2010). The organization should also ensure that all the cash payments are not handled by one individual. This can be avoided through lock-boxing, thereby reducing fraudulent payments. Recommended Changes to the Inventory Management System According to Arnold, the company had never had any inventory sales since its inception (Sagner, 2010).

However, the development of the company’s inventory system significantly reduced the cash flow of the company. Accordingly, there are some changes that could be adopted within the company’s inventory management system in order to realize the benefits. The benefits of the inventory management system include tracking the inventory, sales, orders and deliveries within the company (Sagner, 2010). In addition, the system can also be used to create a work order and other documents which are related to production.

Widget Manufacturing Company could use the system to regulate its stock thereby reducing overstock and outages. Some of the recommended changes would include acquiring an inventory tracker or a SOS Inventory to manage its inventory in many locations and to track the items based on their serial numbers. However, the company risks a lot by not taking the vendors’ discounts. Although the amount seems small, since the company is involved in the payment of many small invoices, the amount would be significant.

Recommended Changes to the Collections and Disbursement Systems The plant needs to adopt a collection and disbursement system that supports a number of activities at the same time, such as outgoing and incoming payments. The system should also process high volume transactions and ensure faster processing of the data. In conclusion, Arnold Parks should ensure that it adopts fraud prevention and detection strategies to ensure the company does not lose resources to deceitful employees. Arnold Parks should employee an internal auditor to keep track of all the company’s expenditures and receipts.

In addition, he should also hire a financial advisor to assist him manage his working capital appropriately. Reference List Sagner, J. (2010). Essentials of working capital management. New York: John Wiley & Sons.