As margins are low but turnovers high, Tegan must utilize its payment strategy with regards to its accounts payable to help boost profits by availing of supplier discounts with prompt payment. Industry practice allows for 1% to 2% for prompt payments but the other side of the coin is to make a payment only when it is due or when it becomes absolutely necessary without losing the payment discount. This means the A/P must be managed in a very precise manner using an antiquated accounting software. Tegan's new higher volume transactions require it to update its current system because it can no longer handle the increased load (Upton & Staats 2).
Background of the Case – As a result of this big increase in its order transactions, the present A/P accounting system at Tegan is straining under its increased load. What is more is this is not yet the peak season and the system is already showing some signs of a breakdown with frequent re-boots, blocking of records and unexplained run-time errors. These events are clearly detrimental to the company's operations which are hinged on the founder's principles of integrity, honesty and speed. The accounting computer system had to be fixed early enough in time for the Christmas holiday season in December 2008 (ibid. 2) and fixed quickly. . Business Information System - Types of Outsourcing Relationships.
Upton, David M. and Bradley R. Staats. Hrad Technika. Harvard Business Case No. 9-609-039 (21 Oct. 2008). Boston, MA: Harvard Business School. 1-5. Print.
Upton, David M. and Bradley R. Staats. Tegan c.c.c. Harvard Business Case No. 9-609-038 (31 Oct. 2008). Boston, MA: Harvard Business School. 1-5. Print.
Valacich, Joseph and Christoph Schneider. Information Systems Today: Managing the Digital World, 4th ed. Upper Saddle River, NJ, USA: Prentice-Hall, 2009. Print.
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