Empower Your Business with airSlate SignNow's Sales Order System in United Kingdom

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chapter four is all about the revenue cycle so it is in its simplest form the revenue cycle is a direct exchange of finished goods or services for cash in a single transaction between a seller and a buyer now what are our objectives for this chapter first is to understand the fundamental tasks performed in the revenue cycle regardless of the technology used second to be able to identify the functional departments involved in revenue cycle activities and trace the flow of revenue transactions through the organization third is to be able to specify the documents journals and accounts that provide audit trails promote the maintenance of historical records support internal decision making and sustain financial recording fourth is to understand the risks associated with the revenue cycle and recognize the controls that reduce those risk lastly is to be aware of the operational and control implications of technology used to automate and re-engineer the revenue cycle so this is the overview of the revenue cycle so we have here the revenue cycle is triggered by the sales order followed by the credit or customer service then the shipping then the billing department or accounts receivable and lastly the cash collection or receipts and then once there is collection it would go back again to sales order so this is the summary of what the revenue cycle is about and we will be talking deeper into each of the departments or each of the system or processes involved in the revenue cycle so if you can see or if you remember in this in the figure in the previous slide but you have the following departments involved now how do we recognize the entries involved in the revenue cycle so for instance in the billing department they prepare the journal voucher wherein they recognize the sales of the um the recognize the sale that happened or that and at the same time recognizing the accounts receivable now on the inventory control department they are the ones who recognize the inventory that is credited so of course there is sale so inventory and also they recognize the cost of goods sold well the cash receipts department is the one that recognizes the collection of um payment by the customers now these are the following databases that you will encounter or you will use during the revenue cycle so the for the following master fast so you will already know or we've already discussed in our previous discussions what are master files transaction files label our reference file so you already know what are these but in here it's just specific to the revenue cycle itself so for the master files that we will be using in the revenue cycle we have the customer master file where in of course it um contains the data on all about the or data information about the customer like the billing address or um the current credit limit of the customer and so on next is we have the accounts receivable master file where of course it contains all the accounts receivable transactions you also have the merchandise inventory master file which is the source of data for us to know the current inventory level of the organization now we also have the following transaction and open document files we have the sales order transaction file and which is an open or open says order transaction file so either way so it is the file that starts the um what do you call this revenue cycle the bottles of first stage sales order we also have the sales invoice transaction file which triggers or which informs the customer about the bill that he that they are to pay next is the cash receipts transaction file which is already made during the collection and then we also have the following files involved we have the shipping and price data reference file credit reference file which may not always be needed salesperson file which may be a master file it depends on the um kind of industry of the business if it relies heavily on salesperson or like there is a commission basis but it comes to their sales so salesperson file can be a master file we also have the sales history file cash receipts history file and the accounts receivable reports files so let us now start with the first procedure in the revenue cycle which is the sales order processing system so you have here as you can see in your screen that is the data flow diagram of the sales order process now the sales order process or the sales order procedure includes the tasks involved from involved in receiving and processing a customer order filling the order and shipping products to the customer billing the customer at the proper time and correctly accounting for the transaction so we will discuss this system one by one so first let us start with the customer so of course the customer is mumexia customer order so once the customer orders once if the customer orders and once it is received by the organization or by the company so honey and then it doesn't receive order so the sales process begins with the receipt of a customer order which indicates the type and the quantity of the merchandise so at this point the customer order is not in a standard format and may not be physical may not be a physical document there may be instances that the customer would just call beforehand like ask the company hello is this is product a available at the moment so you as a company is that you will also try to sit you will wait once you receive the customer order so you have confirmation and then is it okay if i will order this much product and so on and so forth so other orders as i mentioned are as the one i give example is done by telephone while others arrive by mail or by fax or if they send a representative so there are other ways or there are different ways in which the company can receive the order now when the customer is also a business entity the order is often a copy of the customer's purchase order now again a purchase order is an expenditure cycle document which we'll discuss in future chapters now customer order or if again if it is a business entity another term used is purchase order so meaning the company um the business organization would like to purchase something from the from your company now because the customer order is not the standard form or is not really issued by your company or by your entity of course so it is or the organization then would transcribe it or make it formal through the use or through having a formal sales order so the sales order then so arias are receiving is sales order now the sales order captures vital information such as the customer's name address account number the description of the items the quantities and the unit price of all those items so all of those are included in the sales order now at this point financial information such as taxes discounts um shipping charges are not yet included in the sales order so basically another sales order is the basic information about the customer about basic relevant information about the customer and about the items that are being ordered so after creating the sales order a copy of it of it is placed in the customer open file customer open file which or customer open order file for future references now the task of filling an order and getting the product to the customer may take days or even weeks now during this period customers may contact their suppliers to check the status of their orders the customer record in the open order file is updated each time the status of the order changes such as credit approval if there are any orders or if there is already the shipment thus the open order file enables customer service employees to respond promptly and accurately to customer service so again um explicitly state there you know include dairy and customer order file but basically it's a customer customer service is that he or she can just check on the customer open order file okay ready for pick up and so on and so forth receive new now before processing the order itself or before as i mentioned before you process the order is that the customer's credit worthiness needs to be established first so ari patahana does receive order so in order to establish that is the next which is the check credit so here a copy of the sales order department so there are instances or circumstances of the sale where there needs to be a specific degree of credit that is allowed so for example a new customer may undergo a full financial investigation to establish a line of credit now once the credit once a credit limit is set however credit checking on subsequent sales may be limited to ensuring that the customer has a history of paying his or her bills and that the current sale does not exceed the pre-established limit now the credit approval process is considered as an authorization control again the credit approval process is considered as an authorization control and should be performed as a function separate from the sales activity so in the conceptual system the receive order task sends the cs order the credit copy oh okay says order no so the credit copy is sent to the credit department for approval now the return approved or relent approaches order then triggers the continuation of the sales process by releasing sales order information to various departments so appealing why do you need to check the credit of the certain company it is because when you um when a certain business entity applies for credit there are instances where in or this is a safety control for the company parameter manila that become that the customer is really a good um that already but if mumbai at baggage on time especially if the customer is a customer and then you see in previous histories of the consumer is that he pays each order on time the vaso meaning the chug credit score so you you as a company can trust the customer therefore there are instances you must hire a credit limit now there are must higher in credit limit almost at a lower amount especially if bhagavapalaiman consumer so if diligent by mubayad or if he pays full on time diva or mangalet and anna so it is a safety precaution to the organization now again the approved sales order then triggers the next processes of the sales order so so the receive order activity forwards the stock release document also called the picking ticket to the pick goods function in the warehouse so remember semancia's order is aside from the sales order is magbuhatpunna receiving department or receiving department name or katosa receiving aggressive order or stock release the document or another term for the stock release document is the picking ticket so unsung this document identifies the items of inventory that must be located and pick from the warehouse shelves it also provides formal authorization for warehouse personnel to release the specified items so again canadians receive order in a um department is kabab or marketing business sales order like for example in my previous company nama said money naming in the order for that specific customer so for example see warehouse person a is assigned c asa orders me customer z so anasiya social now once the are after picking the stock the order is verified for accuracy and the goods and verified stock release document are sent to the ship goods tasks so if the inventory level if the inventory levels are insufficient to fill the order a warehouse employee adjusted adjust the verified stock release to reflect the amount actually going to the customer then the employee prepares a back order record which um which stays on file until the inventories arrive from the supplier now back order items are shipped be before new sales are processed which is shipping department and then now the warehouse employee adjust the stock records to reflect the reduction in inventories as i mentioned now these stock records are not the formal accounting records for controlling inventory assets so it's delicious stock records personal or recorded warehousing which then will be used by reconciling yeah for another control now assigning asset custody an accounting record keeping responsibility to the warehouse clerk would violate a key principle of internal control which is of duties