The Sales/Collection Business Process

1. The Sales/Collection Business Process Chapter 8

2. Chapter Learning Objectives • Identify activities and documents common to sales/collection business processes for various enterprises • Recognize similarities and differences between different types of revenue-generating enterprises • Identify the components of the REA ontology in the sales/collection business process • Explain how the sales/collection business process fits into an enterprise’s value system • Explain how the sales/collection business process fits into an enterprise’s value chain • Create a REA business process level model for an enterprise’s sales/collection business process • Create queries to meet common information needs in the sales/collection process

3. Sales/Collection Process in an Enterprise Value System

4. Sales/Collection Business Process in Enterprise Value Chains

5. REA Sales/Collection Business Process Level Pattern

6. Sales/Collection Process Events • Instigation Events in the Revenue Cycle • Marketing events – internally instigated • Customer inquiries – externally instigated • Resource - type

7. Sales/Collection Process Events • Mutual Commitment Events in the Revenue Cycle • Involve the enterprise and an external business partner agreeing to exchange resources at a defined future time • Internal agents - sales or customer service representatives and/or order entry clerks • External agents - customers

8. Sales/Collection Process Events • Economic Decrement Events in the Revenue Cycle • Represent the revenue generating activities • Resources vary for different types of businesses • Inventory, Labor ,Temporary use of asset • Internal Agents -- salespeople, shipping clerks, delivery clerks, and service engagement personnel • External Agents -- customers or clients

9. Sales/Collection Process Events • Economic Increment Events in the Revenue Cycle • Almost always is a Cash Receipt event • External agent transfers ownership of cash (or a cash equivalent) to the enterprise • Resource is typically cash • Internal agents -- cashiers, accounts receivable clerks, or other financing personnel • External agents -- customers or clients

10. Sales/Collection Process Events • Economic Decrement Reversal Events • Events in which previous economic decrement events are reversed or negated • Although similar in mechanics, such events are inherently different from economic increment events • Getting something back that you were happy you had given up (and for which you now have to give back the thing you were originally happy to get) is not the same as getting something you wanted to get in exchange for giving up something you were willing to give up • Resources, Internal Agents, and External Agents are the same as those for economic decrement events

11. Sale Return Event • Title (ownership) for products that were previously transferred from seller to buyer is transferred back from buyer to seller • Symbolized by sales return authorization, receiving report and credit memo documents or data entry screens that summarize information about the event

12. Sales/Collection Process Relationships • Fulfillment relationships • Between Marketing, Sales Call, or Customer Inquiryand Sale Orderevents • Between Sale Orderand Sale(or Rental or Service engagement) events • Duality relationships • Between Sale (or Rental or Service engagement) and Cash Receipt (or Receipt of Bartered Goods/Services) events • Reversal relationships • Between Sale and Sale Return events • Participation relationships • Between each event and each internal and external agent

13. Sales/Collection Process Relationships • Proposition relationships • Between Marketing, Sales Call, or Customer Inquiry event and Inventory (or Inventory Type or Service Type) • Reservation relationships • Between Sale Order, Rental Contract, or Service Contract and Inventory (or Inventory Type or Service Type) • Also between Sale Order, Rental Contract, or Service Contract and Cash • Stock flow relationships • Between Sale (or Rental or Service Engagement) and Inventory (or Inventory Type or Service Type) • Between Sale Return and Inventory (or Inventory Type) • Between Cash and Cash Receipt

14. Resource Query Types • Detailed status information at one or more points in time for each resource instance • Detailed status information at one or more points in time for only those resource instances meeting specified criteria • Summarized status information at one or more points in time for all resource instances • Summarized status information at one or more points in time for only those resource instances meeting specified criteria

15. Event Query Types • Detailed information about each event instance • e.g., what happened, when and where did it happen, etc. • Detailed information about each event instance that meets specified criteria • e.g. events of a specified type that occurred during a specified time period or that occurred at a specified location • Summarized information for all instances of an event type for a specified time period • e.g. total of the event instances during a specified time period • Summarized information for only those instances of an event type for a specified time period that meet specified criteria • e.g. average dollar value of the event instances for a specified location during a specified time period

16. Agent Query Types • Detailed status information at one or more points in time for each agent instance • Detailed status information at one or more points in time for only those agent instances meeting specified criteria • Summarized status information at one or more points in time for all agent instances • Summarized status information at one or more points in time for only those agent instances meeting specified criteria

17. Duality Relationship Query Types • Identification as to whether a specified exchange is completed • Identification of completed exchanges for a specified time period • Identification of incomplete exchanges for a specified time period • Calculation of the amount of claims, e.g. prepaid expenses, payables, unearned revenues, or receivables, either in total or for a specified exchange event • Calculation of the total or average length of the timing difference(s) between the events involved in one or more exchanges

18. Accounts Receivable Query Steps • Conceptually • Dollar value of sales or service engagements for which cash receipt has not yet occurred in full, adjusted for any sale returns and sale discounts. • Practically • Total sales/service engagements through balance sheet date minus total cash receipts through balance sheet date that applied to sales/service engagements. Also subtract sales returns and discounts through balance sheet date. • MUST include ONLY ending date constraint (balance sheet item reflects cumulative data from beginning of company through balance sheet date). • Use sale/service engagement date to determine which revenues to include. • Use cash receipt date and duality relationship to determine which cash receipts to include. Be sure to aggregate cash receipts that apply to same sale BEFORE subtracting from sale amount • Likely need for outer join and Nz function in Access (for sales with no matching cash receipts • Note: Sales minus Cash receipts from Customers not acceptable (because you might get non-sale related CR from customers)

19. Stockflow Relationship Query Types • What resources or resource types were increased or decreased by an economic event? • What quantity of a resource or resource type was increased or decreased by an economic event? • What dollar value of a resource or resource type was increased or decreased by an economic event? • When did an event increase or decrease a specific resource or resource type? • Where did an event increase or decrease a specific resource or resource type?

20. Fulfillment Relationship Query Types • Identification of unfulfilled commitments or instigation events • Identification of fulfilled commitments or instigation events • Identification of commitment events that were not preceded by instigation events, or identification of economic events that were not preceded by commitment events • Calculation of length of time between instigation and commitment events or between commitment and economic events • Identification of causes of commitments and/or of economic events • Identification of results of instigations and/or of commitment events

21. Proposition Relationship Query Types • What resources or resource types does the instigation event propose to increase or decrease? • What quantity of a resource or resource type is the proposed increase or decrease for an instigation event? • When did an instigation event propose to increase or decrease a specific resource or resource type?

22. Reservation Relationship Query Types • What resources or resource types is a commitment event agreeing to increase or decrease? • What quantity of a resource or resource type is a commitment event agreeing to increase or decrease? • What dollar value of a resource or resource type is a commitment event agreeing to increase or decrease? • When did an event commit to increase or decrease a specific resource or resource type? • Where did an event commit to increase or decrease a specific resource or resource type?

23. Participation Relationship Query Types • Which agent(s) participated in a specified event? • How many events of a specified type has a specified agent participated? • What is the total dollar value of events of a specified type in which a specified agent has participated for a specified time period? • When did a specified event in which a specified agent participated occur? • Where did a specified event in which a specified agent participated occur?

24. Multiple-Relationship Revenue Cycle Queries • Which sale orders have been partially filled? • requires stockflow, reservation, and fulfillment-sale-order-sale relationships • What is the total dollar value of accounts receivable for a specified customer at a point in time? • requires duality, participation-customer-sale, and participation-customer-cash receipt relationships • What inventory types have been presented to a specified customer in sales calls during a specified time period? • requires proposition and participation-customer-sales-call relationships

25. More Multiple-Relationship Revenue Cycle Queries • Which salesperson presented a specified inventory type to a specified customer? • requires proposition, participation-customer-sales call, and participation-salesperson-sales-call relationships • What is the total dollar amount of sales of a specified inventory type that have been made to customers in a specified region? • requires stockflow and participation-customer-sale relationships • In what region have sales calls involving a specified inventory type been the most successful? • requires proposition, fulfillment-sales-call-sale-order, and reservation relationships

26. Summary • We discussed the sales/collection (revenue) process and how it fits in at the value system and value chain levels • We discussed the extended REA pattern at the business process level • We examined documents typically used to represent events and discussed related resources and agents • We examined examples of relational database tables for the revenue cycle and discussed data input into those tables • We systematically discussed types of queries for the sales/collection process to support decision-makers in various functional areas • We provided selected examples of queries of various types

27. Chapter 8 End of Chapter