Bebe Co is a small company that manufactures and sells high-quality blouses. Its customers are mainly fashion boutiques.

Bebe Co has two directors, one of who is non-executive. The other is involved in the day-to-day administration of the company. There are ten other employees. Six of these work in the factory, one works in the warehouse, one is a sales representative and two are accounts staff. The accounts staff consist of Miss Ines, who is responsible for processing sales and receivables, and Mrs. Evie, who is the purchases and wages clerk. Mrs. Evie works part-time, five mornings a week. The companys sales representative visits shops throughout the region. He takes orders from customers which he records on a pre-numbered two-part order form. He passes the completed forms to the accounts department. Miss Ines files one copy of the order form in numerical sequence and passes the other to the warehouse.

The completed order is dispatched from the warehouse by the carrier, accompanied by one copy of a dispatch note. The other copy is sent to Miss Ines, who prepares an invoice based on the information it contains and on the companys price list. She sends one copy of the invoice to the customer, and a second copy of the invoice is retained.

Each Friday, Miss Ines inputs the weeks invoices to the computerized sales ledger. She then files the invoices alphabetically by customer name. Dispatch notes are not retained because filing space is limited. Miss Ines opens the post daily and lists remittances received from credit customers. Every Friday, she inputs the information listed to the sales ledger. Cheques received are banked daily by the executive director.

Miss Ines reviews the sales ledger balances every month and writes to customers who have not paid within 90 days of receiving goods. The sales ledger is printed out annually for year-end purposes. Otherwise, no hard copy is printed, and Miss Ines reviews the sales ledger on the computer screen. The companys computer package includes the facility to produce a sales day book and sales ledger control account. These are not used because Miss Ines considers that the low volume of transactions (10-15 invoices per week) makes them unnecessary.

Required

Please be guided with the following questions in answer the above case study:

(a) State, with reasons, what you consider to be the potential weaknesses in Bebe Cos present system of accounting for sales and receivables.

(b) Suggest controls that a small firm such as Bebe Co could feasibly adopt to overcome the weaknesses you have identified.