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Business Processes 7

• Project management processes (projects) are used to plan and
execute large projects such as the construction of a new factory or
the production of complex products such as airplanes.
All these processes have an impact on an organization’s fi nance. This brings us
to the last two processes, which track the fi nancial impacts of processes.

• Financial accounting (FI) processes (track–external ) track the
fi nancial impacts of process steps with the goal of meeting legal
reporting requirements—for example, the Internal Revenue
Service (IRS) or the Securities and Exchange Commission ( SEC).
• Management accounting or controlling (CO) processes
(track–internal ) focus on internal reporting to manage costs and
revenues.

Each of these processes can include numerous subprocesses. For exam-
ple, each of the components of HCM, such as recruiting and benefi ts manage-
ment, is itself a process. Similarly, IWM can include complex processes for
receiving materials from a vendor and shipping products to a customer. In
addition, each process can impact other processes, as illustrated by the arrows
between the processes in Figure 1-3. These arrows represent process integra-
tion. For example, the procurement of raw materials has an impact on what
can be produced and when. Similarly, the production process has an impact on
what goods are available to sell and when. Going further, the arrows indicate
that all processes have an impact on the organization’s fi nancials, a concept we
explore throughout this book.
Clearly, then, in addition to understanding the details of how each process
works, it is essential to understand the interrelationships among the processes.
Signifi cantly, to prevent Figure 1-3 from becoming cluttered with arrows, we
did not include every possible integration point. Instead, we highlighted only
the key points.
In the next section, we briefl y describe the various business processes.
We subsequently consider each process at length in separate chapters, where
we also examine the linkages among the processes.

PROCUREMENT—BUY
The procurement process includes all of the tasks involved in acquiring needed
materials externally from a vendor. A very simple example of a procurement
process is diagrammed in Figure 1-4. As the fi gure illustrates, procurement is
comprised of fi ve steps that are completed in three different functional areas
of the organization.
The process begins when the warehouse recognizes the need to procure
materials, perhaps due to low levels of inventory. The warehouse then docu-
ments this need in the form of a purchase requisition, which it sends to the pur-
chasing department. In turn, the purchasing department identifi es a suitable
vendor, creates a purchase order, and sends it to the vendor. The vendor ships
the materials, which are received in the warehouse. The vendor then sends
an invoice, which is received by the accounting department. Accounting then
sends payment to the vendor, thereby completing the process.

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