Revenue Cycle-Chapter 12(1) (1)

7/21/2019 Revenue Cycle-Chapter 12(1) (1)

http://slidepdf.com/reader/full/revenue-cycle-chapter-121-1 1/35

Accounting Information Systems

Revenue Cycle

Romney Chapter 12

Paul Sager

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• Capture (input) and process data

• Store and organize (information) the data fordecisions.

• Providing controls to safeguard resources(including data).

Basic AIS Functions

ata

Storage

ataProcessing

!nformation"utput

ata!nput

INTERNAL CONTROLS

2



Enterprise Resource Planning (ERP) Systems

!ntegrateddata#ase

Revenue Cycle("rder to

Cash)

ProductionCycle $%&Reporting

'R&PayrollCycle

('ire to retire)

penditureCycle

(Procure toPay)

!ndustrySpecific

*



• +anufacturing&,holesale&Retail (-*/ ofeconomy)

• 0inancial services

• !nformation (entertainment and media)

• 'ospitality (hotel restaurants)

• Professional services (consulting outsourcing)• ransportation (freight people)

• 3tilities

Different Industries

/ 2445 3S Census conomic ata

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Revenue Cycle Participants(Segregation of Duties)

-

S a l e s

O r d e r

C u s t o m e r

S e r v i c e

V P o f M a r k e t i n g

W a r e h o u s e S h i p p i n g

V P o f M a n u f a c t u r i n g

B i l l i n g

D e p t .

A c c o u n t s

e c e i v a ! l e

C o n t r o l l e r

C r e d i t

M a n a g e r

C a s h i e r

" r e a s u r e r

C # O

C $ O



Revenue and E$penditure Cycles""one party sells% t!e ot!er party &uys

Revenue Cycle penditure Cycle

Sales opportunity Purchase need&re;uisition

Sales "rder (;uote&negotiateapprove)

Purchase "rder (;uote&negotiateapprove)

Ship $oods (pull from inventory pac9ship pac9ing slip)

Receive $oods (receive pac9ing slipunpac9&inspect add to inventory)

!nvoice to customer (update sales <ournal =R ledger)

!nvoice from Supplier (updatepurchases <ournal =P ledger)

Receive cash (match to invoice updatecash <ournal&=R ledger)

Pay cash (match invoice receipt P"update cash <ournal&=P ledger)

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ec!nology in Revenue Cycle• 7mail>must verify sender and secure content

8 igital signatures data encryption confirmation

• !nternet customer interface8 Catalog order entry invoice customer service

• lectronic ata !nterchange (!)8 Structured data formats over secure net?or9

• lectronic 0unds ransfer (0)8 irect transfer #et?een #an9 accounts8 Coupled ?ith loc9#o remittance data for

0inancial ! (0!)

@



'ore ec!nology in Revenue Cycle

8 Credit or de#it cards8 Aar codes and Radio 0re;uency !dentification

(R0!) rac9 movement in supply&distri#ution chain %in9 ?ith customer data (e.g. grocery store)

8 Boice or phone data response

8 "ptical Character Recognition ("CR) formprocessing

8 ocument imaging for retention&retrieval ofpaper documents



RFID Retail Inventory Process

• R0! in Retail (start 1D44)8 httpD&&???.youtu#e.com&?atchEvF6e"r4Pf?0gs

• =pparel (start 1D*4)• httpD&&???.youtu#e.com&?atchEvFd$9ad+GH9IfeatureFPlay%istIpF5*6=0:=41-*IindeF1

• Seidenstic9er• httpD&&???.youtu#e.com&?atchEvFR#Jz0K9?7g

• 'o? it ?or9s• httpD&&???.youtu#e.com&?atchEvF+==Lp$rao3

14

http://www.youtube.com/watch?v=4eOr0PfwFgs


http://www.youtube.com/watch?v=TdGkadMZDXk&feature=PlayList&p=734A9F6AE0ED15D3&index=1

http://www.youtube.com/watch?v=RbNzF_kw-Dg

http://www.youtube.com/watch?v=MAA9JpGraoU

http://www.youtube.com/watch?v=MAA9JpGraoU

http://www.youtube.com/watch?v=RbNzF_kw-Dg

http://www.youtube.com/watch?v=TdGkadMZDXk&feature=PlayList&p=734A9F6AE0ED15D3&index=1





Revenue Cycle System Design

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!e Revenue Cycle"#rder to Cas!

• he end7to7end processes necessary to convertservice or product sales into cash8 $ive goods&services $et cash

1. a9e "rder

2. Process order (deliver service or products)

*. !nvoice6. Collect cash

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Sales #rder Process"Data Flo Diagram

1*

16



Sales #rder Process

• 'andled #y sales department8 Separate from inventory cash and accounting

8 !nteracts ?ith customer

• Current technology uses !nternet ! H+%8 $oal is to eliminate re79eying data

8 Customer enters order computer edits• Chec9 availa#ility of items re;uested&ordered

8 +ust have accurate perpetual inventory records

16

1-



Credit Approval*ey Control

• Credit approved #y Credit +gr&reasurer

• "#tain customer financial data and grant credit8 0inancial IA reports past eperience

• sta#lish credit limit8 $eneral =uthorization

8 Compare =R outstanding M ne? order to limit• Past due =R eceeds limit changes in limit

8 Specific =uthorization

1-

1:



• Credit +anager approves N14444 credit limit

Credit %imit 14444.44

=R Aalance 2-44.44

Je? "rder 5444.44

("ver)&3nder limit -44.44

• =ny =R #alances O:4 days outstandingE

Credit C!ec+

1:

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Customer Relations!ip 'anagement (CR')

• rac9ing information a#out your customers8 Current and potential

• irect sales support8 Salesforce.com httpD&&???.youtu#e.com&?atchEvFKr1'5"@lzQ

• Customer support service upsell

8 %emonade stand httpD&& ???.youtu#e.com&?atchEvFQaKRJSH-Ho

15

1@

http://www.youtube.com/watch?v=_r1H7OK8lzY


http://www.youtube.com/watch?v=YEa_RNSX5Xo







Sales #rder !reats and Controls!ncomplete&inaccurate orders 7ata entry edit controls

7Restrict access to master data

!nvalid orders 7igital or ?ritten signatures

7=c9no?ledge and confirm3ncollecti#le accounts 7Credit evaluation approval and limits

7Prepare and revie? =R =ging7=ggressively pursue past due accounts

Stoc9outs or ecess inventory 7Perpetual inventory system7Aar7code R0! automated handling7Physical counts of inventory>reconcile7Sales forecasts integrated ?ith production

%oss of customers 7Aest in class customer service (CR+ self7help ?e#sites customer comes first)

1@

1



Process #rder""Pic+% Pac+% S!ip

• Pic9 items from inventory>,arehouse ept8 Pic9ing ic9et created from sales order

8 Record items pic9ed into perpetual system

• Ship items to customer>Shipping ept8 Count&match items to pic9ing tic9et&sales order

8 Record items shipped&create pac9ing slip8 Pac9 items and ship&Create #ill of lading

8 Record freight information

• %ogistics (shipping)>optimize or outsource

1

24



• =mazon ,arehouse>2448 httpsD&&???.youtu#e.com&?atchEvFi:'5nf'<'tQ

8 httpsD&&???.youtu#e.com&?atchEvF:R<uuBGs8 2414D httpD&&???.youtu#e.com&?atchEvFG2As4n;By;s

• Schaefer Systems• httpD&&???.youtu#e.com&?atchEvF:3HTR'"#<1TIfeatureFA0aIlistFP%*@12CA-6*:*462IlfFresultsKmain

•

• httpD&&???.youtu#e.com&?atchEvF4Pr*7@6te4TIfeatureFA0aIlistFP%*@12CA-6*:*462IlfFresultsKmain

• • httpD&&???.youtu#e.com&?atchEvF-<L$Rvp9cIfeatureFA0aIlistFP%*@12CA-6*:*462IlfFresultsKmain

Automated ,are!ouses

24

21

https://www.youtube.com/watch?v=i6H7nfHjHtY

https://www.youtube.com/watch?v=6KRjuuEVEZs

http://www.youtube.com/watch?v=Z2Bs0nqVyqs

http://www.youtube.com/watch?v=6UXQRHObj1Q&feature=BFa&list=PL381D2CB5436E3042&lf=results_main


http://www.youtube.com/watch?v=0Pr3-84te0Q&feature=BFa&list=PL381D2CB5436E3042&lf=results_main

http://www.youtube.com/watch?v=5EjJGRKvpkc&feature=BFa&list=PL381D2CB5436E3042&lf=results_main

http://www.youtube.com/watch?v=5EjJGRKvpkc&feature=BFa&list=PL381D2CB5436E3042&lf=results_main

http://www.youtube.com/watch?v=0Pr3-84te0Q&feature=BFa&list=PL381D2CB5436E3042&lf=results_main



http://www.youtube.com/watch?v=Z2Bs0nqVyqs




https://www.youtube.com/watch?v=i6H7nfHjHtY



Pic+% Pac+% S!ip !reats and ControlsPic9 ?rong item or ;uantity 7Aar7code R0! automated handling

7Reconcile pac9ing list to sales order

heft of inventory 7Restrict access to physical items

7ocument inventory transfers>#oth sides sign7Physical counts of inventory>reconcile

Shipping errors 7Reconcile docsD sales order pic9ing slipspac9ing slips7=ccount for pre7num#ered documents7ata entry automation and edit chec9s

7=pplication control chec9s for duplicate orders

21

22



Stop !ere

22

2*



Billing

• !nvoice created from sales order and itemsshipped

• o not #ill for items not shipped (#ac9 order)

• !nvoice creates accounting entry for revenue&=R 8 ,hat happens if invoices are delayedE

Sales in ?rong period

+ismatch ?ith cost of sales (inventory transfer)

• 3se ! !nternet or email to send invoices

2*

26



Invoice and AR ec!ni-ues

• "pen !nvoice>pay each invoice

• Aalance for?ard>pay all invoices for #illingperiod (eg. monthly statement)

• Cycle Ailling>Aill 2- of customers each ?ee9 8 3sed #y utilities credit card companies

26

2-



Ad.ustments to Accounts Receiva&le

• ypes of =d<ustments (credit memos)8 Returns and refunds

8 =llo?ances&price ad<ustments for damaged goods

8 3ncollecti#le ?rite7offs

8 Ailling errors (void invoice and reissue)

• Credit +anager should authorize (approve)8 Ailling prepares invoice

8 =R records entries

8 Credit +anager approves ad<ustments

2-

2:



Revenue Cycle Participants(Segregation of Duties)

2:

S a l e s

O r d e r

C u s t o m e r

S e r v i c e

V P o f M a r k e t i n g

W a r e h o u s e S h i p p i n g

V P o f M a n u f a c t u r i n g

B i l l i n g

D e p t .

A c c o u n t s

e c e i v a ! l e

C o n t r o l l e r

C r e d i t

M a n a g e r

C a s h i e r

" r e a s u r e r

C # O

C $ O

25



Billing !reats and Controls0ailure to #ill 7Segregation of dutiesD #ill record ad<ustments

7Reconcile invoice sales order pic9ing tic9etsshipping documents7=ccount for pre7num#ered documents

Ailling errors 73se soft?are to create invoice #ased on salesorder price and ;uantity shipped7Restrict access to pricing data

Posting errors in =R 7ata entry edit controls7!ntegrate posting ?ith RP&=!S soft?are

7+ail monthly statements to customers7Reconcile =R Su#sidiary %edger to $%

!naccurate or invalid creditmemos

7Segregate approval to credit manager7=pplication control re;uires evidence of returnor specific authorization

25

2@



Collect Cas!• heft of cash is a significant threat

• Separate handling from recording

8 Cashier ?ithin reasurerUs office

8 3se Remittance =dvice copies of chec9s listsinput&stored data to communicate to =R ept

8 %apping can occur if =R handles cash and records

• +a9e sure all chec9s are deposited8 Restrictively endorse immediately

8 Consider t?o people opening mail creating lists orentering data

2@

2



/oc+&o$es and ec!nology• %oc9#oes are controlled at #an9

8 Copies or lists of payments is sent

8 Can #e paper or electronic

• lectronic 0unds ransfer (0)7 A2A8 Can #e difficult to match payment to customer =R

• 0inancial ! com#ines 0 and !8 0unds are ?ired #et?een #an9s and =R data sent

via !

• Credit card payments>fees up to 6

*4



Credit Card Processing• PC! Security Standards Council

8 %aunched in 244:

8 0ounding Payment Arands =+H iscover B!S= +astercard LCA

!nternational (Lapan Credit Aureau)

8 Sets standards and facilitates consultants andsupport

8 nforcement is responsi#ility of Payment Arands• httpsD&&???.pcisecuritystandards.org&inde.php

*

*1

https://www.pcisecuritystandards.org/index.php






*

*2



Cas! 'anagement• Cash is ing

• ,hoever has the gold ma9es the rules

• CanUt collect until you send the invoice

• Balue of a #usiness is future cash flo?s

• Cash flo? #udget is essential management tool

8 =ctual results reporting>some trac9 dailyV

*

**



Cas! !reats and Controlsheft of Cash 7Segregation of utiesD cash and =R

7Reconcile #an9 account to $%>!ndependentperson7liminate cash handlingD 0 0! loc9#oes

7!mmediately endorse chec9s7Count cash and compare to point of sale ortransaction report>!ndependent person7Point of sale systems7aily deposits at #an9

Cash 0lo? Pro#lems 7Cash flo? #udgets and actuals70ollo?7up on past due =R 7iscounts for prompt payment70 0! loc9#oes credit cards

**

*6



0eneral !reats and Controls!nvalid or inaccurate masterdata

7Restrict access7Segregation of +aster 0ilechanges and recording7ata entry and processing controls7Revie? all master file changes

3nauthorized disclosure ofsensitive information

7Chapters 5I@D encryption access controlsauthorization controls

%oss of destruction of data 7Chapters 5I@D disaster recovery plan offsite #ac9ups insurance

Poor performance 7'ire competent people and train them7Performance reports to identify non7conformance

*6

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Pro&lems page 123• 12.2

• 12.5

• 12.11

Revenue Cycle-Chapter 12(1) (1)

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