The Revenue Cycle: Sales to Cash Collections - Chapter 14

Basic Revenue Cycle Activities

1. Sales order entry

2. Shipping

3. Billing

4. Cash Collections

Sales Order Entry Processing Steps

1. Take the customer order

2. Approve customer credit

3. Check inventory availability

4. Respond to customer inquiries

Sales Order Entry Processing Threats and Controls

1. Incomplete/inaccurate orders > data entry edit controls and restriction of access to master data

2. Invalid orders > signature to authorize sale

3. Uncollectible accounts > credit limits checked and aging accounts receivable

4. Stockouts and excess inventory > RFID or bar code technology and training

5. Loss of customers > CRM systems and proper evaluation of customer service rating

Shipping Process Steps

1. Picking and packing the order

2. Shipping the order

Shipping Process Threats and Controls

1. Picking wrong item/quantity to ship > barcode technology

2. Theft > restrict physical access to inventory and document inventory transfers

3. Shipping errors > Use RFID system to identify delays and configuration of ERP system

Billing Process Steps

1. Billing Customers

2. Updating Accounts Receivable

Billing Process Threats and Controls

1. Failure to bill customer > separate shipping and billing functions

2. Billing errors > restrict access to master price data and reconcile shipping docs/sales order

3. Posting errors in accounts receivable > Mail monthly statements

4. Inaccurate or invalid credit memos > segregation of authorization and recording function for credit memos

Cash Collections Process Steps

Electronic lockboxes, electronic funds transfer (EFT), financial electronic data interchange (FEDI), and accept credit cards/procurement cards from customers

Cash Collection Process Threats and Controls

1. Theft of cash > Use of EFT, FEDI, and lockboxes

2. Cashflow problems > lockbox and discounts for early payment