J.C. Penney Gift Certificate Concerns Essays - E-commerce

J.C. Penney Gift Certificate Concerns J.C. Penney Gift Certificate Concerns J.C. Penney Company, Inc. has recently introduced a new point of sale (POS) system developed by NCR Corporation into their stores. In the first six months of operation, it has become apparent that there are unanticipated problems with the accounting and control functions pertaining to gift certificates. The new POS system does not provide for adequate tracking or control of the certificates on the sales floor, store level sales audit has inadequate procedures or data capture capabilities in place to track sales accurately and assign responsibility for missing certificates, and corporate accounting has no control over the gift certificate accounting on the store level and are constantly struggling to reconcile gift certificate information. Problems on the Sales Floor At the POS terminals on the sales floor, gift certificates are being stored underneath the cash register in a drawer with no security or control. The security and control of gift certificates has been overlooked during the drafting of the procedures for the new POS system. As a result, the security and control on gift certificates on the sales floor that had been in place with the old system has simply stopped. Employees are purely on the honor system. When sales associates ring up a gift certificate sale they have to key 1) the appropriate twelve-digit SKU from a list of 3 choices, and 2) a dollar value for the gift certificate shown on the face. For example, SKU #1 represented the $25 gift certificate, SKU#2 represented the $50 gift certificate, and SKU #3 represented the $100 gift certificate. After the sales transaction is complete, the sales associate must manually record the dollar value of the gift certificate on their cash audit report. During times of high volume, sometimes this final step is overlooked. Typically, the cashiers are just keying SKU #1 for any gift certificate sale and keying in the appropriate dollar value from the face of the gift certificate. The SKUs are not electronically tied to a dollar value. This is a limitation of the previous POS system that was not addressed during the testing stage of the new system. Therefore, the error rate is very high and discrepancies in gift certificate sales are common. At the close of the shift, an electronic cashier report is generated on the register that just shows a total dollar amount tied to a SKU. This electronic cashier report is returned to the cash room along with the receipts and the hand-written cash audit report. Problems in Store Level Sales Audit When the cash audit report comes back to the office with the bag of receipts and the electronic cashier report, calculations are performed on the manual cash audit report to identify the amount of gift certificates sold. This is compared to the electronic cashier report. If there are discrepancies, sales audit clerks are required to use the electronic cashier report as the correct report for auditing purposes. The dollar amount of the gift certificates sold is recorded on a monthly gift certificate log and a new running monthly balance is calculated. Any new gift certificates received from the corporate office are recorded on another log and the acknowledgement of receipt (from inside the book) is signed by a member of management and returned to corporate accounting. At the end of the month, records of gift certificate receipts (disbursements from corporate), records of gift certificate sales, and other accounting records are forwarded to corporate accounting for verification after a n attempt on the store level for reconciliation. Problems in Corporate Accounting Store managers are responsible for calling and authorizing a book of gift certificates to be dispersed for their store. When this occurs, the gift certificates are retrieved from the vault, the book number is logged, and the dollar value of the book is tentatively charged to the store. When the acknowledgement of receipt from the store is received, it is compared against the stores records, the charge for the gift certificates is confirmed, and then the acknowledgement is filed away. Once a month, corporate accounting receive sales audit information from the stores and attempts to reconcile, but typically have no better luck than the store level audit clerks. Analysis of Problem It is very evident that there