The expenditure cycle is defined as the series of activities a business undertakes from ordering and receiving goods and services all the way to disbursing cash payments for the same. These goods can be meant for purposes of trade or may be supplied for the business’s operations. Upon ordering and receiving goods or services, the business approves vendor invoices and disburses cash payments. The expenditure cycle interacts with the production cycle, stock/inventory control, and the revenue cycle, with payment data from this cycle eventually ending up in the general ledger and reporting system. The advent of modern computing heralded revolutions in Information Technology (IT), and these changes have significantly influenced the business world and the activities that occur therein. The expenditure cycle and activities within it have also been influenced immensely by advances in technology with changes having a positive effect. This paper will discuss how a particular technology has influenced the expenditure cycle by examining a specific innovation in Information Technology. In this case, cloud computing has been chosen . The essay will thus explore activities within the expenditure cycle that have been influenced by cloud computing including the associated threats and controls.
Cloud technology: An overview
Cloud computing came to the fore around 2009. This happened in the backdrop of advances in networking as well as the growth of the internet. It is a model of computing that p rovides shared processing resources and data to computers and other devices on-demand across a computer network and the internet (Darrow, 2017; Reuters, 2017) . The sharing model allows cloud computing to attain economies of scale as the processing resources and data services can be used by multiple firms . Data sets from individual companies are secured through access control technologies and encryption, and only the physical storage and process facilities are shared . Cloud computing appeal lies in its scalability (Darrow, 2017). In this case, firms can scale up and then scale down as computing needs vary. T hus , these c ompanies do not need to invest in expensive IT infrastructure upfront . Consequently, the setup durations are shorter and the costs can be earmarked for operational expenses instead.
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How Cloud technology has i nfluenced b usiness p rocesses
Cloud computing allow s for on - demand access to data by authorized users . T hus , the users are not limited as to when they can work since they can access the information they need at short notice and at any time (Darrow, 2017) . This is not always the case where data is stored on workstations in the workplace because physical access may be limited to regular working hours even in workplaces with internet gateways. Cloud services also allow for shorter work cycles as more worker input per unit time is made possible at the place of work . Data can be handled by multiple authorized users concurrently allowing for real-time updates to a project or database and inputs from various sources . This enhances productivity at the work
Cloud computing has also led to greater efficiency at the workplace as resources are allocated on a need - be- basis . This model thus minimizes misallocation of resources and prevents wastage which allows for distribution of resources to areas where they can be of maximum impact. One area where this can be seen is the reduction of physical server infrastructure, with resources being transferred to equipping workers on the client end with resources to enhance employee flexibility and productivity. This has also promoted collaboration as data can be exchanged between geographically dispersed locations. Staff can work on the same project from opposite ends of the globe, and the processes taking place in different locations can be monitored in real time (Reuters, 2017) . This allows companies with staff and locations dispersed over diverse locations to coordinate their operations in spite of distance. Such operations can then be regulated via solutions such as Enterprise Resource Planning ( ERP ) software. Globally, more companies are embracing such models including solutions where the enterprise management software itself is run over the cloud . This model is referred to as Software as a Service (SaaS).
Software as a Service reduces downtime and provides redundancies unavailable to smaller enterprises . This is because c loud services providers avail multiple data storage locations and server crossover abilities that allow cloud-based software to run even when some of the cloud infrastructure experiences shutdowns ( Reuters, 2017 ).
Effect of Cloud s ervices on the e xpenditure c ycle , cycle activities, threats, and controls
The expenditure cycle consists of activities such as ordering, receiving of goods, approval of invoices and distribution of cash. Every one of these stages is associated with various risks . O ver time , business es have developed various controls to mitigate such risks and prevent losses to the firm . For instance, o rdering of goods and services is critical as it is the processes through which materials enter the business. Risks associated with this include ordering insufficient or excessive quantities, inferior qualities of materials or ordering goods at inflated prices. These errors may be occasioned where orders are placed without sufficient information from across the business units. There may also be irregular updates of pricing information by various suppliers.
C loud services allow business units to share stock and inventories in real time. This will provide the purchasing units with the necessary information to order appropriate quantities. Sharing information over the cloud will also allow geographically dispersed business units to appraise and advise each other on the best supplier quality - wise hence enhanc ing the purchasing decisions (Reuters, 2017) . It also allows for buyers to obtain current prices and run comparative analyses for the best price solution. Moreover, i t reduces the purchasing decision loop as the purchasing department can review information much faster and make appropriate purchases in a short time thus facilitating business continuity. In conclusion, cloud computing has significantly impacted e xpenditure c ycle a ctivities, t hreats, and c ontrols .
References
Darrow, B. (2017, Feb 22). Cloud Adoption Is Growing But Forecasts Differ on How Much. Fortune.com. Retrieved from http://fortune.com/2017/02/22/cloud-growth-forecast-gartner/
Reuters (2017, Mar 17). U.S. Financial Firms Have Found Billions of Reasons to Embrace the Cloud. Fortune.com. Retrieved from http://fortune.com/2017/03/17/us-banks-shared-cloud-services/
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