Welcome to the Revenue Cycle ATG 383 - Spring 2002

1. Welcome to the Revenue CycleATG 383 - Spring 2002 Provides goods & services to customers. Collects cash payments

2. Typical Activities • Handle orders from customers. • Ship goods • Bill customer • Collect cash

5. Typical Activities 1.0 Handle orders from customers. 1.1 Respond to inquiries 1.2 Check credit for orders received 1.3 Check inventory 2.0 Ship goods 3.0 Bill customer 4.0 Collect cash

6. Typical Activities 1.0 Handle orders from customers. 2.0 Ship goods 2.1 Pick order 2.2 Ship order 3.0 Bill customer 4.0 Collect cash

7. Typical Activities 1.0 Handle orders from customers. 2.0 Ship goods 3.0 Bill customer 3.1 Verify that order = shipment 3.2 Prepare invoice 4.0 Collect cash

8. More on Invoicing Customers • Two types of billing systems • Postbilling: create invoice after item is shipped • Prebilling: create invoice when order is entered

9. More on Invoicing Customers • Customers may also be sent statements • Open-invoice: payments applied to specific invoices • Balance forward: payments applied to total account balance • Independent follow-up on billing and statement errors.

10. Typical Activities 1.0 Handle orders from customers. 2.0 Ship goods 3.0 Bill customer 4.0 Collect cash 4.1 Separate advices from checks 4.2 Update A/R using advices 4.3 Deposit checks

11. More on Cash Collection • If company processes own cash receipts, it must establish control ASAP. • Compare cash deposited in bank to amount received. • Independent reconciliation of statement. • Alternative is to use bank lockbox.

12. Other Revenue Cycle Activities • Sales Returns • First objective is to prevent returns. • No credit given unless receipt of goods documented on receiving report. • Collection of Past Due A/R • Several reminders. • Independent authorization to write-off.