Customer Order and Account Management Business Processes

1. Customer Order and Account Management Business Processes Chapter 7

2. Describe the customer order management business process. Learning Objective 1

3. Customer Order Management Business Process Customer Order Management Business Process: Inquiry (optional) Contract creation (optional) Order entry Shipping Billing

4. Optional Steps Order entry Inquiry Shipping Contract creation Billing Customer Order Management Business Process

5. Enterprise Resource Planning ERPs are information systems capable of storing and processing information pertaining to the customer order management business process. What is SAP R/3? It is a registered trademark. (http://www.sap.com)

6. Enterprise Resource Planning SAP R/3 stores and processes data related to the customer order management business process. The customer order management business process is part of SAP’s sales and distribution module.

7. Customer Master Records These records have to be created before processing sales orders. SAP R/3 requires four types of master records: 1. Sold-to customer 3. Ship-to customer 4. Bill-to customer 4. Payee customer

8. Customer Master Records When a new sold-to-customer master record is created, the other three master records are automatically created. Customer master records should be unique. SAP R/3 requires that a customer has been approved for sales prior to the creation of master records.

9. Data Fields Customer master records are created by inputting information into R/3. R/3 guides the input process by displaying a series of customer screens on a video monitor. Each screen collects a category of data. What are these Create Customer screens?

10. Data Fields • Initial screen • Customer address • Control data • Marketing • Payment transactions • Unloading points

11. Data Fields • Foreign trade • Contact person • Account management • Payment transaction • Correspondence • Insurance

12. Data Fields • Sales • Shipping • Billing • Taxes • Output • Partner functions

13. One-time Customers R/3 allows for the creation of a single master record “dummy” for a one-time or infrequent customers.

14. Standard Order Processingin SAP R/3 Standard order processing describes the customer order management business process in which customer orders are filled from an inventory of finished goods. A customer master record has to exist before a sales order can be created.

15. Illustrate controls that apply to order processing. Learning Objective 2

16. Enter order Create order Master price list Order database Sales order Order Entry Customer order

17. Sales order Approve credit Credit files Credit processing Order database Approved order released for further processing Approved sales order Credit Retrieve new orders

18. Picking list Pick order Inventory database Delivery processing Order database Picking list with goods To shipping Finished Goods Prepare picking list

19. Picking list with goods Match ship order Finished goods Delivery processing Order database Packing list with goods Bill of lading Customer Shipping Packing List

20. Customer Prepare invoice Invoice processing Invoice Order database Periodically Prepare journal entry Journal voucher General ledger Billing Billing list

21. Describe the customer account management business process. Learning Objective 3

22. Customer Account Management Business Process The customer account management business process includes accounts receivable processing through the collection of customer payments on account.

23. Customer Account Management Business Process Accounts receivable also maintains customer credit and payment history information. This information is essential in the customer order management business process.

24. Customer Account Management Business Process A subsidiary ledger of individual accounts is maintained, with a control account in the general ledger. Remittance advices are routed from the cash receipts functions. Credit memos and other invoice adjustments are routed from the billing department.

25. Customer Account Management Business Process There are two basic approaches to an accounts receivable application. What are these approaches? 1. Open-item processing 2. Balance-forward processing

26. Illustrate controls that apply to accounts receivable processing. Learning Objective 4

27. Customer Receiving Cash Receipts Accounts Receivable General Ledger Returned goods Remittance advices Remittance advices Control total Control total Post Controls in the AccountsReceivable Business Process

28. Control totals Control totals Independent count Approve sales return Sales return memo Sales return memo Journal voucher Journal voucher Sales return memo Controls in the AccountsReceivable Business Process Receiving Credit Billing Accounts Receivable General Ledger Invoices

29. Periodic processing Aged trial balance Aged trial balance Credit memo Credit memo Post Statements Statements Controls in the AccountsReceivable Business Process Customer Credit Billing Accounts Receivable

30. Write-Off Accounts Receivable The basic feature in a write-off process is an analysis of past-due accounts. This is usually done with an aged trial balance report.

31. Treasurer Credit Accounts Receivable General Ledger Internal Audit Aged trial balance Aged trial balance Control total of write-offs Control total of write-offs Write-off memo Write-off memo Write-off memo Write-off memo 1 1 3 1 2 3 Worthless account list Worthless account list File Confirmation of write-off sent to customer Write-Off Accounts Receivable

32. Cash-Received-On-Account Business Process A cash-received-on-account business process is used when there is an existing customer account balance. Cash received on account typically comes into a business through the mail or is paid in person to a central cashier or a cash window.

33. Cash-Received-On-Account Business Process Customer payments should always be acknowledged. The recorded receivable that exists prior to the payment enhances control over payments received.

34. Cash-Received-On-Account Business Process The major control feature of cash-received- on-account business process is the separation of the following functions: Mailroom Cash receipts Accounts receivable General ledger Bank Internal audit

35. Lock-Box Collection Systems What is float? It is the time between the signing of the payment check by the customer and the moment the firm has use of the funds. A lock-box system reduces the float by having the checks deposited to a firm’s account before the firm processes them.

36. Cash Sales Business Process The significant difference between a cash sales business process and a cash-received- on-account business process is that there is no previous asset record in a cash sales business process. Cash sales are recorded in a cash register or other secure device to provide documentation.

37. Cash Sales Business Process What is customer audit? It is a general term used to describe procedures in which the customer acts as a control over the initial documentation of a transaction.

38. Cash Sales Business Process What are some of these procedures? Pricing in such a way that the customer expects change Awarding a customer free items if the receipt has a mark

39. End of Chapter 7