CHPT 14

what is the revenue cycle?

it is a recurring set of business activities and related information processing operations associated with providing goods/services to customers & collecting cash in payment for those sales

for the revenue cycle, who is the primary external exchange of information with?

customers

information about revenue cycle activities flow to what other accounting cycles?

the expenditure and production cycles, the human resources/payroll cycle, the general ledger and reporting function

what is the primary objective of the revenue cycle?

to provide the right product at the right place at the right time for the right price

whatre the revenue cycle business activities?

sales order entry, shipping, billing, and cash collections

describe the sales order entry activity

take the customers order (produce source document, sales order). approve the customer’s credit. check inventory availability. respond to customer inquiries

in the sales order entry activity, describe “take the customers order”

orders can be received through phone, in person, website, or mail. order must include items, qty, price, salesperson. IT can help by enabling customers to enter data themselves, EDI, VMI, and choiceboards

in the sales order entry activity, describe “check credit”

there is usually a credit limit. good customers are those with low age of outstanding unpaid invoices. other customers may include new customers, good customers in excess of credit limit, and customers with outstanding past due balances

in the sales order entry, describe the “checking inventory balance”

will include the information available like qty on hand, already committed, qty available. also includes back order and picking ticket

in the sales order entry, describe the “response to customer inquiries”

CRM (customer relationship management) is a tool used to improve level of customer service. keeps things efficient and gives a personalized service. helps retain customers. and prints targeted coupons

in the shipping activity, describe the “pick and pack the order”

involves picking the ticket, recording the qty of each item actually picked, transferring inventory to the shipping department, and utilizing tech like RFID and barcodes

in the shipping activity, describe “ship the goods”

includes these documents: packing slip, bill of lading, and freight bill

in the billing activity, describe the “invoicing”

essentially repackages and summarizes information from the sales order entry & shipping activities (creates a source document called sales invoice). shipping includes the items and quantities, while sales includes the prices and sales terms

in the billing activity, describe “update accounts receivable”

involves the open invoice method, balance forward method, cycle billing, exceptions, and creates source documents called credit memo and monthly statements

in the cash collections activity, describe the “possible approaches to collecting cash”

turnaround documents forwarded to A/R. lockbox arrangements. electronic lockboxes. electronic funds transfer (ETF) and bill payment. financial electronic data interchange (FEDI). accept credit cards or procurement cards from customer. universal payment identification code (UPIC)

revenue cycle reporting includes what?

sales analysis reports, profitability analysis reports, cash budget, A/R aging schedule