The report summarizes the study of Bega Cheese Ltd. The company is an Australian company and provides various food products around the globe. The report studies the revenue and expenditure cycle of the company. The company's main revenue comes from Bega food products and also from the export business. There are certain internal weakness for the company that generates certain risks for the organization. SAP and XERO both are cloud-based accounting software, but SAP is a more suitable software for the organization to cover its internal weaknesses.
Table of Contents
Major activities involved in the revenue and expenditure cycle of the company.
Weak Internal Controls in Bega Cheeses.
Risks attached to weak control
Bega Cheese is a diversified Australian food company that has its sites for manufacturing at various places that include Queensland, Victoria, and New South Wales. The company is into the dairy and food processing industry and has its headquarters in Bega, Australia. The company got listed on ASX in the year 2011 and has been founded in the year 1899. The company is one of the largest in the dairy sector of Australia with a revenue of around A$1419152000 in the year 2019. The report is aimed at studying the business activities of the company that are involved in the revenue or expense cycle (Baga Cheese Annual Report 2019). Internal weak controls will be identified for the company in the report and the risks that are associated with weak controls. According to that a measure of cloud-based software will be suggested for the company from the most suitable vendor in the report.
Bega cheese is a brand that is on number one for cheese manufacturing in Australia. The company has been able to earn a reputation in the dairy industry as one of the major key players on a global scale. The company supplies natural and processed cheeses into both the retail and foodservice market. In the last six years, the company has doubled its size and has acquired Tatura milk industries and various other major cheese manufacturing and packaging in Australia. The company has a varied portfolio and is not limited to cheese. The company also produces around 100 SKU's that include formula for infants, nutritional dairy products, powder for milk, mozzarella, cheddar, and also cream cheese. The company is also the largest producer of lactoferrin which is a protein that binds iron and helps in the system of digestion for minimizing the infection. This helps in providing antibacterial activity to the infants of human. The company is particularly focusing on the Asian market as there is more opportunity for growth for the company. The company has a milk supply of approximately 750 million liters. The overall functionality of the company is spread across the globe and the company has seen a growth in its revenue from A$1252041000 in the year 2018 to A$ 1419152000 in the year 2019 (Annual Report Bega Cheese 2019).
The company's revenue has increased by 17% in comparison to the last year and the major contributor to the revenue was done by Baga business foods. 18% revenue of the company came from spreads and grocery while 9% was from Nutritionals. The maximum share of revenue was generated from the dairy consumer packaged goods that is 45% while 28% was from dairy and other ingredients. Also, Bega international showed an increase of 29%, comprising 30% of the overall sales. The basic or half of the revenue of Bega cheese comes from the spreads, dairy consumer packed goods. The products are sold under the flagship of the "Bega" brand that is holding 15.7% of the cheese market in Australia. Another major source of revenue for the company is the export segment of Bega cheese. The company's products are exported to around 40 countries around the globe and the products are available in most parts of the supermarkets and general stores. Another important segment of the business of Bega cheese is "core dairy ingredients". This includes cheese, powdered milk, and also the cream cheese that generates around 35% of the company's revenue (Bega Cheese Annual Report 2019). These are the major revenue cycles of the company.
The major expense that the company incurs is in its distribution cycle. The expense incurred on distribution is at $73490 thousand. This is the major expense that the company has incurred. It is the expense that the company incurs in delivering the product that is manufactured from the unit of production to the user who is supposed to consume it. Also, another major expense or the highest expense that the company incurs is on the administration. The administration expenses of the company are at $87694 thousand. Marketing expenses have also increased significantly for the company. The expenses of marketing are at $39123 thousand. Cost of sales refers to the cost that has been incurred by the company in producing various goods and services. It includes the cost of direct materials that is used in manufacturing the goods. Also, the labor cost involved directly in producing the goods is included. The cost of sales is the highest expense of the company. The cost of sales of the company stood at $1166329 thousand (Bega Cheese Annual Report 2019). It includes all the raw materials cost, labor cost, and the production cost of the company. These are the basic activities of the business that are included in the revenue and expenditure cycle of the company. The expenditure is incurred in producing the product and thereof revenue is generated from selling that product.
Weak internal control is the failure of the company in implementing effective controls. The lack of control can be in any part of the business. It might be related to the accounting section or any analytics part of the company. There are certain weakness that prevails in Bega Cheese too. The weak internal control of the company can be depicted as follows:
The company has various internal control weaknesses due to which various risks are attached to the functioning of the company. The risk attached to each weakness has a different effect on the company. The following are the risks attached with the weaknesses:
SAP provides help in the financial management of the company. It helps in improving the margin, reducing the errors, and also drives better decisions for profit-making. The software provides a complete set of tools that helps in streamlining the operations of finance.
Accounting is one such feature. SAP automates all the processes of accounting like journal, ledger, and other payables and receivables for the company.
SAP also controls or manages the cash flows for the company. It helps in tracking the fixed assets for the company and also help in controlling the budget and also monitor the projects of costs with better efficiency and accuracy (Lenz et. al. 2020).
It also simplifies the management for the fixed assets and eliminates the need for manual entry of data. Also, the software helps in creating a standardized report with the data that is real-time.
The software also helps in managing the sales and collecting all the data related to sales throughout the cycle of sale.
The software has another feature where it optimizes the practices of purchasing and also controls the cost by managing a cycle from order to pay and includes everything from receipts to payments and also the returns.
The software also creates reports based on the data that is available by the company. Also, it helps in taking better decisions by generating reports that may conclude appropriate results for the company. Also, it has certain industry-specific capabilities which are designed for small and medium scale business. Thus, SAP is a software that can help the company in overcoming its internal weakness and prepare better results.
This is an online site for SAP software and sells the software to the business or public.
Vendor: NTT data Business Solutions Pty Ltd
The vendor provides services of SAP all over Australia and for the business houses, they launch the software on the systems.
This is an online platform for XERO all around the globe and provides software as per the need of the business houses.
The vendor supplies the software online and the customer and supplier are connected through an online platform.
SAP and XERO both provide help to the organization in creating better results. They both help in the functioning of accounting, prepare reports and provide data to the company. Analytics is done on accounting and data is produced on a real-time basis by the software.
SAP in between the two will be a better choice for the company as SAP has some extra features that will help the company in getting a more appropriate view. It provides analytics for the company's data and depicts the trends. This will help the company is having better control. So, SAP will be the best option for the company.
Bega cheese is an Australian company producing cheese and milk products. The major activities that are involved in the revenue cycle of the company was Bega food products. Also, the company generates its revenue from the exports of its products. The main expenditure of the company includes the cost of sales and administration expenses. There are various weakness that is being faced by the company that includes no control over the finances, less budget to the quality, no appropriate prediction to the company's sales demand etc. SAP and XERO are the two accounting software that can help the company in controlling their weakness. SAP will be better software for the company as it provides data analysis for the demand and provides comparison within the industry. Thus, through this cloud-based software company will be able to attain better results.
Annual Report. 2019. Bega Cheese Annual Report. Available at: https://www.annualreports.com/Company/bega-cheese-ltd (Accessed on: 10th September 2020)
Gordon, A., 2017. Case study: formula safe foods—canned pasteurized processed cheese. In Food Safety and Quality Systems in Developing Countries, Volume 2 (pp. 149-184).
Lenz, L., Felderer, M., Schwedes, S. and Müller, K., 2020. Explainable Priority Assessment of Software-Defects using Categorical Features at SAP HANA. In Proceedings of the Evaluation and Assessment in Software Engineering (pp. 366-367).
Leung, H. and Furfaro, F., 2020. Comovement of dairy product futures and firm value: returns and volatility. Australian Journal of Agricultural and Resource Economics. Available at: https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-8489.12373 (Accessed on: 10th September 2020)
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