Chapter 14

revenue cycle

the recurring set of business activities and data processing operations associated with providing goods and services to customers and collecting cash in payment for those sales

sales order

the document created during sales order entry listing the item numbers, quantities, prices, and terms of the sale

Electronic Data Interchange (EDI)

the use of computerized communications and a standard coding scheme to submit business documents electronically in a format that can be automatically processed by the recipient's information system

credit limit

the maximum allowable credit account balance for each customer, based on past credit history and ability to pay

accounts receivable aging schedule

a report listing customer account balances by length of time outstanding

back order

a document authorizing the purchase or production of items that is created when there is insufficient inventory to meet customer orders

picking ticket

a document that lists the items and quantities ordered and authorizing the inventory control function to release that merchandise to the shipping department

Customer Relationship Management (CRM) systems

software that organizes information about customers in a manner that facilitates efficient and personalized service

packing slip

a document listing the quantity and description of each item included in a shipment

bill of lading

a legal contract that defines responsibility for goods while they are in transit

sales invoice

a document notifying customers of the amount of a sale and where to send payment

open-invoice method

method for maintaining accounts receivable in which customers typically pay according to each invoice

remittance advice

a copy of the sales invoice returned with a customer's payment that indicates the invoices, statements, or other items being paid

balance-forward method

Method of maintaining accounts receivable in which customers typically pay according to the amount shown on a monthly statement, rather than by individual invoices. Remittances are applied against the total account balance, rather than specific invoices.

monthly statement

a document listing all transactions that occurred during the past month and informing customers of their current account balance

cycle billing

producing monthly statements for subsets of customers at different times

credit memo

a document, approved by the credit manager, authorizing the billing department to credit a customer's account

remittance list

a document listing names and amounts of all customer payments received in the mail

lockbox

A postal address to which customers send their remittances. The company's bank open's the lockbox, deposits the customer checks in the company's accounts, and sends a list of customer remittance to the company.

electronic lockbox

A lockbox arrangement (see lockbox) in which the bank electronically sends the company information about the customer account number and the amount remitted as soon as it receives payments.

Electronic Funds Transfer (EFT)

the transfer of funds through use of online banking software

Financial Electronic Data Interchange (FEDI)

the combination of EFT and EDI that enables both remittance data and funds transfer instructions to be included in one electronic package

factoring

selling receivables at a discount to a firm that specializes in collections of past-due accounts

universal payment identification code (UPIC)

a number that enables customers to remit payments via an ACH credit without requiring the seller to divulge detailed information about its bank account

cash flow budget

a budget that shows projected cash inflows and outflows for a specified period