REVENUECYCLE

[SalesorderentryShippingBilling&A/RCashcollections]

AISmustprovideadequatecontrolssothatthefollowingobjects
aremet:
(1)Transactionsareproperlyauthorized.
(2)Recordedtransactionsarevalid.
(3)Allvalid,authorizedtransactionsareaccuratelyrecorded.
(4)Assetsaresafeguardedfromlossortheft.
(5)Businessactivitiesareperformedefficientlyandeffectively.
Thefollowinghelpachievetheabove:
Simple,easytocompletedocumentswithclearinstructions.
Appropriateapplicationcontrols(e.g.,validityorfieldchecks).
Signaturespaceforpersonsresponsibleforcompletionand
reviewofdocuments.
Prenumberingofthedocuments.

RevenueCycleMajorthreats&control
(1)Salestocustomerswithpoorcredit(uncollectablesales
andlossesduetobaddebts).Preventionindependent
creditapprovalfunctionandgoodcustomeraccounting.
(2)Shippingerrorswrongquantities,items,oraddress:mad
customers.Preventionreconcileshippingnoticesand
pickingtickets,barcodescanners,dataentrycontrols.
(3)Theftofinventorylossofassets>inaccuraterecords.
PreventionSecureinventoryanddocumenttransfers,good
Accounting420RevenueCyclepage1

accountabilityforpickingandshipping,andfrequently
reconcilerecordswithphysicalcount.
(4)Failuretobillcustomerslossofinventory,anderroneous
dataabout:sales,inventory,andreceivables.Prevention
Separateshippingandbilling.Prenumberofshipping
documentsandreconciliationofallsalesdocuments.
(5)Billingerrorspricingmistakes,overbillingforitemsnot
shippedorbackorderedlossassetsandmadcustomers.
Preventionreconciliationofpickingticketsandbillsof
ladingwithsalesorders,dataentryeditcontrols,andprice
lists.
(6)TheftofcashlossofassetsandoverstatedA/R.Prevention
separationofduties:handlingcashandpostingto
customeraccounts;handlingcashandauthorizingcredit
memos&adjustments;issuingcreditmemosand
maintainingcustomeraccounts.UselockboxesandEFT.
Mailcustomerstatementsmonthly.Usecashregistersin
retail.Depositcashintactdailyinthebank.Bank
reconciliationdonebynoncashhandler.
(7)A/Rincorrectlypostedmadcustomers,incorrectrecords,
andpoordecisions.Preventionreconcilesub.A/Rledgers
withgeneralledger,monthlystmts.tocustomers,andedit
andbatchtotals.
(8)Lossofdatalossofconfidentialinfo.,andpoordecision
making.Preventionregularonsite&offsitebackup,
logicalandphysicalaccesscontrolstopreventleakageto
competitors.
Accounting420RevenueCyclepage2

(9)Poorperformanceinefficientandineffectiveoperations.
Preventionsalesandprofitabilityanalysis,A/Raging,and
cashbudgetstotrackoperations.

Accounting420RevenueCyclepage3

REVENUECYCLEINFROMATIONNEEDS&DATAMODEL
AISneedstoprovideusefulinformationabout:
Customerinquiriesaboutaccountbalancesandorderstatus.
Extensionofcredittospecificcustomers.
Inventoryavailability.
Creditterms.
Prices
Salesreturnsandwarrantypolicies.
Alternativemerchandisedeliverymethods.
Strategicandperformanceevaluationinformation.
..................thisisvaluablestuff.
Responsetimetocustomerinquires.
Timetofill&deliverorders.
%ofbackorders.
Customersatisfaction.
Overallrevenuecycleperformancemeasure=
RevenueMargin=GMallsellingcosts
REArevenuecycledatamodel:
Resourcescashandinventory.
Eventsorders,shipments,billing,andcashcollections.
Agentsprimaryexternalagentisthecustomer,various
internalagents.
A/Rinthedatamodel:balanceisthedifferencebetweensalesand
cashcollectionsforsales.NoneedforanA/Raccount(file).

Accounting420RevenueCyclepage4

Benefitsofthedatamodel:
Integrationoftraditionalaccountingdataandoperationaldata.
Additionaldatasuchasthetimeofdayofasalecanbe
collected,analyzedandusedindecisionmaking.
Linksofinternalandexternalinformation(e.g.,creditratings)
ispossible.
Flexible/powerfulquerybySQLifrelationalDB.
Dataminingfortargetmarketing.
RDBallowsyoutosliceanddicedatainanywaythatyouwant.
ThiswasnotpossiblewithanonRDB.
Internalcontrolanddatabases:
Foreignkeyandreferentialintegrityensurestheexistenceof
primarykeyrecordsinrelatedtables.
Effectiveaccesscontrolsareveryimportantinadatabase
environment.
REAdiagramshighlightincompatiblefunctionsandsystem
canbeprogrammedtorejectanyattempttoperform
incompatiblefunctionsbyasingleemployee.Whenmultiple
rolesareperformed,auditorscancheckforcompensating
controls.
UseofDBMSmakesbackupanddisasterrecoveryprocedures
essential.

Accounting420RevenueCyclepage5