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The Billing /Accounts Receivable / Cash Receipts (B/AR/CR) Process Pertemuan 12 – 13 - 14. Matakuliah : F0204 / Sistem Akuntansi Tahun : 2007. Introduction.
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The Billing /Accounts Receivable / Cash Receipts (B/AR/CR) ProcessPertemuan 12 – 13 - 14 Matakuliah : F0204 / Sistem Akuntansi Tahun : 2007
Introduction • The billing/accounts receivable/cash receipts (B/AR/CR) process is an interacting structure of people, equipment, methods, and controls designed to create information flows and records that accomplish the following: • Support the repetitive work routines of the credit department, the cashier, and the accounts receivable department • Support the problem-solving processes of financial managers • Assist in the preparation of internal and external reports
Horizontal View B/AR/CR 1. Shipping department informs the accounts receivable department (billing section) of shipment.
Horizontal View B/AR/CR 2. Accounts receivable department (billing) sends invoice to customer.
Horizontal View B/AR/CR 3. Accounts receivable department (billing) informs general ledger process that invoice was sent to customer.
Horizontal View B/AR/CR 4. Customer, by defaulting on amount due, informs credit department of nonpayment.
Horizontal View B/AR/CR 5. Credit department recommends write-off of the receivable and informs accounts receivable department.
Horizontal View B/AR/CR 6. Credit department, by changing credit limits, informs sales order department to terminate credit sales to customer.
Horizontal View B/AR/CR 7. Accounts receivable department informs general ledger process of write-off.
Horizontal View B/AR/CR 8. Customer makes payment on account.
Horizontal View B/AR/CR 9. Cashier informs accounts receivable department (cash applications section) of payment.
Horizontal View B/AR/CR 10. Cashier informs general ledger process of payment.
Cash Receipts Management • In the billing function, the goal is to get invoices to customers as quickly as possible; with the hope of reducing the time it then takes to obtain customer payments. • Having the B/AR/CR process produce invoices automatically helps ensure that invoices are sent to customers shortly after the goods have been shipped. • Float, when applied to cash receipts, is the time between the customer tendering payment and the availability of good funds. • Good funds are funds on deposit and available for use.
Cash Receipts Management • The following procedures are designed to reduce or eliminate the float associated with cash receipts: • Checks • High-speed electronic equipment is able to read the magnetic ink character recognition MICR code and sort checks at speeds approaching 100,000 checks per hour • A charge card or credit card • A third party, for a fee, removes from the collector the risk of noncollection of the account receivable. • The retailer submits the charges to the credit card company for reimbursement. • The credit card company bills the consumer • A debit card • Authorizes the collector to transfer funds electronically from the payer’s to the collector’s balance. • Some retailers find the notion of direct debit attractive because it represents the elimination of float.
Other solutions to float problems • Electronic funds transfer • Automated clearing house • Lockbox and electronic lockbox services • Electronic checks • Electronic cash • See Technology Summary 11.1
The Fraud Connection • Many result from improper segregation of duties • Custody of cash • Recording of cash transactions • Lapping • Employee pockets cash/check received from customer A • So that customer A doesn’t complain about missing payment, employee credits customer B’s payment to A’s account • So that customer B doesn’t complain about missing payment, employee credits customer C’s payment to B’s account • This scheme comes unraveled when the employee runs out of hours in the day
Data Descriptions in B/AR/CR • A/R master data • The accounts receivable master data is a repository of all unpaid invoices issued by an organization and awaiting final disposition. • Two types of accounts receivable systems exist: • (1) Balance-only system • (2) Open item system
Balance-only system • In a balance-only system, AR records show a customer’s current balance due, past-due balance, and the finance charges and payments related to the account. • Each month, unpaid current balances are rolled into the past-due balances. • Electric and gas utility companies typically use balance-only systems.
Open-item system • The open-item system appropriate in situations where the customer typically makes payments for specific invoices when those invoices are due. • In the AR master data, each record consists of individual open invoices, to which payments and adjustments are applied. • On the customer statement of account, a “lump sum” beginning balance is not shown. • Instead, all invoices that are yet to be settled continue to be listed, along with payment details. • Also, each open invoice is grouped by aging category and aged individually. • Monthly, or at specified times, the customer accounts are aged and an aging schedule is printed.
Data Descriptions in B/AR/CR • Sales event data • one or more invoice records (details contained in invoice data) • A/R adjustments data • write-offs, estimated doubtful a/c, sales returns, etc. • Journal voucher #, trans. code, authorization • Cash receipts data • details of customer payments
Post-billing system Invoices are prepared after goods are shipped and shipping notice compared to sales order notice There may be a delay between receiving the order and shipping Post-billing is assumed in Ch. 12 diagrams Pre-billing system Invoice prepared upon receipt of order (after inventory and credit checks) There is little or no delay between receiving order and shipping Types of Billing Systems
