ACCOUNTING INFORMATION SYSTEM (AIS) - REVENUE CYCLE

REVENUE CYCLE BUSINESS ACTIVITES

There four  basic business activities performed in the revenue cycle:

1. Sales order entry
2. Shipping
3. Billing
4. Cash collection

1. SALES ORDER ENTRY

The revenue cycle begins with the receipt of orders from customers. The sales order department, which reports to the vice president of marketing (refer back to figure 10-1), performs the sales order entry process. Figure 10-4 shows that the sales order entry process entails three steps:

-          Taking the customer’s order

-          Checking and approving customer credit

-          Checking inventory availability

Figure 10-4 also includes and important related event that may be handled either by the sales order department or by a separate customer service department (which typically also reports to the vice president of marketing), that of responding to customer inquires.

1. Taking customer order
2. Credit approval
3. Checking inventory availability
4. Responding To Customer Inquiries
1. SHIPPING
1. PICK AND PACK THE ORDER
2. SHIP THE ORDER
2. BILLING
1. Invoicing
2. Maintain accounts receivable
3. CASH COLLECTIONS

INFORMATION PROCESSING PROCEDURES

1. Real – time order entry detects errors, such as missing data, as the order is being entered, and when it is easiest to correct those errors.
2. Credit approval decisions can be made at the time the customer places the order. If special approval is required, the credit manager is notified by e-mail or IM and can immediately make that decision
3. Inventory records are more accurate and timely, enabling sales order entry staff to provide customers accurate information about expected delivery dates.
4. The warehouse and shipping department can better plan activities to minimize the time required to fill customer orders
5. The system compares data that the shipping entered with the sales order file, thereby detecting and facilitating correction of any errors prior to shipment.
6. Cash receipts are processed more quickly, improving cash flow
7. Reports and performance measures are timelier, enhancing management’s ability to monitor and improve efficiency and effectiveness.