REVENUE CYCLES
Dept involved sales dept, credit dept, warehouse, shipping, AR dept CASH SALES vs CREDIT SALES significant differences on payment terms
Customers order translated into sales order form by sales department. Sales order is a standard form facilitates document flow & identification of the items ordered Sales department checks goods availability prior issue sales order Prepare 5 copies of sales order warehouse, shipping, Cash Receipts, AR dept, filing
Checking Inventory
Sales personnel may confirming availability of oods over the phone Sales order sent to warehouse warehouse clerk check goods availability If available issue picking ticket/stock release used by warehouse employees to pick up and pack goods, update bin cards If unavailable/unsufficient goods:
inform sales office send sales order back to sales office mark unavailable or contact by phone/fax/text/colaborative tools sales office contact customers If customer still want the orders triggered back orders Warehouse informed for back orders warehouse issue purchase requisition to production department or purchase department If customers does not agree with terms, sales order is cancelled, stamped CANCELED
Warehouse issue 2 copies of packing slip filing, shipping dept (attach with packed goods)
DELIVERING GOODS
1. Delivering/shipping goods Customised goods a copy of sales order production department manufacture product finished goods sent to warehouse/store informed sales department warehouse packing goods shipping department dispatch to customer In-house delivery: Shipping department issue 3 copies of Shipping note/Delivery Note upon receiving approved Sales order filing, shipping note signed by customer will be send AR Dept, customers copy independent verification reconcile goods packed with Sales order, packing slip and Delivery Note Shipping employees pack goods suitable for delivery Deliver to customer Use other logistic/courier company services After packed goods suitable for delivery, shipping dept issue 2 copies bill of lading formal contract evidence transfer ownership BOL to record shipment in shipping log a copy send to billing department Courier company send goods
DELIVERING SERVICE
Services can be performed on Suppliers premises or Customers premises Suppliers premises Materials used picked from the stores and recorded, Labour hours spent is recorded. Invoice will charge based on the labour and used good in the service. Service goods are delivered to the customer with 2 copies of the delivery note 1 copy for the customer and 1 copy as an evidence of delivery of services. Customers Premises Labour hours spent are recorded on a job card, sign by the customer as acknowledgement service is rendered. Job card is used as evidence of delivery of labour. Materials used record on the job card also used as evidence of delivery of materials. If services is contracted with a fixed price, time sheet and material sheet is not needed. Acknowledgement of services satisfactory is formally obtained from customer for invoicing purposes.
Invoicing System
1. Pre-invoicing
invoices prepared as soon as sales order is approved. Ensure goods delivered to customer without delay adequate inventory is available by maintaining adequate records. Suitable for mail order companies. invoices are dispatched after the goods are delivered or shipped. Suitable for manufacturing organizations possible delivery delays high
2. Post-invoicing
Accounts receivable is to record the selling activities or provides services to customers which delay the payment at specified future date. Invoice is the source document used to record the amount owed by the customer to the organization in the sales journal. Each customer account in the accounts receivable ledger is posted from sales journal.
customer returns goods because or unsuitable or damaged Customer send goods to receiving department/customer service department Receiving dept issue 3 copies of Goods Received Note (GRN), records returned product details 1 copy to Billing dept, 1 customers copy, filing Billing dept prepares 3 copies of Adjustment Notes (Credit Notes), 1 send to customer, 1 send to AR dept (update AR accounts, records sales returns journal), filing
COLLECTING CASH
Cash register machine records sales transaction cashier is held accountable. Cash Sales
cashier punch key on cash register, records item and prices, machine calculate total confirm total payment should be paid by customer customer hand over cash cashier punch key for cash received cash register calculate balances cash register print cash receipt (till bill) and till opens cashier put cash in till, calculate cash to give to customer close till, cash register reset for next transaction Usually register records cash transactions in 2 sets of paper roll in the cash register, 1 for the customer as evidence of the purchase, 1 in the cash register (removed by supervisor or authorized person). Supervisor reconciles accumulated total of printout with cash in till. Overide button should be given to authorized personnel only.
Replaced by computers POS system with bar code scanner, enable credit card and debit card usage
COLLECTING CASH
Credit Sales Payment Cash Receipts Customer hand over cash to cashier in cash receipt dept or CSdept. Cashier calculate cash received issue official receipt (OR) update cash a/c Cheque Receipts Customer mails cheques, postal orders and money orders. Cheques are normally crossed, must be bank in. Mail clerk/receptionist opens mail, record particulars of receipts (date, cheque number, drawer, amount) received in 2 copies cheques register/listing. 1 copy attached with cheques sent to person responsible to deposit cheques to bank, 1 listing to cash receipts manager for reconciliation and audit puposes. Other forms of receipt Bank transfers , direct deposits, EFT appear in bank statements Online banking facilities quicker info to reconcile payment of EFT Remitter sends a remittance advice (RA) providing information (date, amount, invoice ref No.) through mail, email or collaborative tools mailing clerk receive RA records in Remittance Advice (RA) listing/register 2 copies RA listing 1 to update bank account, 1 for managers review
COLLECTING CASH
Cash & Cheque Deposit to Bank
Cash Receipt clerk prepare bank/cheque deposit slip, 2 copies Cash Proof form Cash Receipt clerk and despatcher (who sends cash and cheques to bank) signed cash proof form as evident asset custody transferred Cash Receipt clerk gives despatcher a copy of cash Proof form, bank deposit slip Despather bank in cash and cheques, a copy of stamped deposit slip by bank send to cash receipt clerk Cash receipt clerk reconcile cash proof form and stamped bank deposit slip and update bank account and file documents.
Method of crediting receipts Payment received from credit customers are credited to their accounts using 2 methods: 1. Open invoice method - AP clerk or customer determine payment for
specific invoices
Computer can used to make order and record the reservation of goods ordered before the dispatch documents are prepared. Computer also can provide information account unreserved stock available for future sales. Production planning report based on the information about orders on hand is produced for the use of the production department. Order completed reports and unfulfilled order reports are extracted periodically for the sales departments use to follow -up customer orders. Cash register fitted with electronic devices is example of typical application of a computer system. This devices reduce the labour required of salesperson. Normal cash register, the information from the price tag of the product will be entered by the salesperson. Using electronic device eliminates this process by reading bar codes that are printed on the package. When the operator passes the side of the package on which the code is printed over a scanner that is connected to the register, the number on the bar code is identified. The machine extracts the detailed information from the computers memory, such as description and price, for each bar code and prints the description and value of the goods purchased. Registers are also used as terminals of a computer, which collect information on the products sold for stock control purposes. When using a scanner, labour is saved because the price tag on each and every item does not need to be changed due to the price can be changed in the memory of the computer. The price changes are normally announced to customers through a price tag placed in front of the goods exhibited for sale. The automatic scanning process also prevents the underpricing of goods due to: 1.staff error when the staff neglect to update the price once the sale is over 2.customers intentionally replacing or swapping price tags. The computer system used in the revenue cycle can either be a single mainframe computer or a number of computers in which the output of one computer becomes input for the other computers.
ROUTINE REPORTS
Customer orders Analyse orders by customers (idetify loyal cutomers), salespeople (evaluate efficiency) Stock reports identify shortage or excess of inventory, slow moving/fast selling decide to focus certain products and promotions. Invoices Analysis how much of sales orders have been converted to invoices. Credit notes Analysis pattern on why they are created, behavior patterns of certain customers or sales staff who most frequently issue them. Cash receipts produce cash receipts pattern planning cash flows Customer statements indicate areas that credit control dept should focus maintain cash flows and prevent bad debts. Sales summaries Analysis of sales information which helps plan sales activities. Sales commission reports Reports indicate the efficiency of salespeople Aged analysis of AR helps credit department to function more effectively.
PERFORMANCE REPORT
Time lapse between each customer order and delivery report to monitor efficiency of sales processing or manufacturing to order Sales call expense in total and by salesperson compares expenses incurred by a salesperson with volume of sales created by that salesperson in order to identify their operating efficiency Time lapse between invoicing and cash collections provides evidence on debt collection efficiency and monitors whether customers are paying as agreed. Variation to average sales as a result of advertising and promotion details the effectiveness of advertising and promotional campaigns Bad debts compared with total credit sales gives efficiency of debt collection and credit control report