Transcript Chapter 11

Chapter 1
The
Billing/Accounts
Receivable/Cash
Receipts
(B/AR/CR)
Process
1
Learning Objectives
•
•
•
•
•
•
Understand relationship between B/AR/CR
and its environment
Understand relationship between B/AR/CR
and management problem solving at
various levels of the organization
Become familiar with some of the
technology used in implementing the
B/AR/CR process
Achieve a reasonable level of
understanding of the logical & physical
characteristics of the process
Gain a foundation level of understanding
as to how enterprise systems impact the
processing of information in the B/AR/CR
process
Recognize some plans commonly used to
control the B/AR/CR process
B/AR/CR
Process
B/AR/CR Spoke on AIS Wheel
• In this chapter we
spotlight one business
process, (B/AR/CR)
process.
• We will describe the
various users of the
(B/AR/CR) process, each
having their own view of
the enterprise system and
enterprise database.
• In addition, we will
analyze the process
controls related to the
(B/AR/CR) process.
3
Introduction
•
The billing/accounts receivable/cash receipts
(B/AR/CR) process is an interacting structure of
people, equipment, methods, and controls designed
to create information flows and records that
accomplish the following:
1. Support the repetitive work routines of the credit
department, the cashier, and the accounts receivable
department
2. Support the problem-solving processes of financial
managers
3. Assist in the preparation of internal and external reports
4
Horizontal View B/AR/CR
1. Shipping
department
informs the
accounts
receivable
department
(billing
section) of
shipment.
5
Horizontal View B/AR/CR
2. Accounts
receivable
department
(billing) sends
invoice to
customer.
6
Horizontal View B/AR/CR
3. Accounts
receivable
department
(billing)
informs
general ledger
process that
invoice was
sent to
customer.
7
Horizontal View B/AR/CR
4. Customer,
by defaulting
on amount
due, informs
credit
department of
nonpayment.
8
Horizontal View B/AR/CR
5. Credit
department
recommends
write-off of
the receivable
and informs
accounts
receivable
department.
9
Horizontal View B/AR/CR
6. Credit
department,
by changing
credit limits,
informs sales
order
department to
terminate
credit sales to
customer.
10
Horizontal View B/AR/CR
7. Accounts
receivable
department
informs
general ledger
process of
write-off.
11
Horizontal View B/AR/CR
8. Customer
makes
payment on
account.
12
Horizontal View B/AR/CR
9. Cashier
informs
accounts
receivable
department
(cash
applications
section) of
payment.
13
Horizontal View B/AR/CR
10. Cashier
informs
general ledger
process of
payment.
14
CSS: Customer Self-Service Systems
• CSS is an extension of CRM that allows a customer to
complete an inquiry or perform a task without the aid
of the organization’s employees
– ATMs, Speedpass, Automated telephone systems
• A major extension: interconnection of CSS systems
with enterprise systems
– In some cases, customers can check their orders during the
manufacturing process or check inventory before placing orders.
– Some of the more advanced systems also allow customers to check
production planning for future manufacturing to determine if goods will be
available when they are needed.
• Why are companies so interested in customer selfservice systems?
– The payback on such systems is huge
– Reduction of staffing needs for call centers is particularly beneficial
15
Digital Imaging Processing Systems
• Because of the quantity of paper documents
that typically flow through the B/AR/CR
process, the ability to quickly scan, store,
add information to, and retrieve documents
can significantly reduce:
– labor costs for filing
– costs of physical storage space and structures
necessary for storing paper-based files.
16
Cash Receipts Management
• In the billing function, the goal is to get invoices to
customers as quickly as possible; with the hope of
reducing the time it then takes to obtain customer
payments.
• Having the B/AR/CR process produce invoices
automatically helps ensure that invoices are sent to
customers shortly after the goods have been shipped.
• Float, when applied to cash receipts, is the time between
the customer tendering payment and the availability of
good funds.
• Good funds are funds on deposit and available for use.
17
Cash Receipts Management
• The following procedures are designed to reduce or
eliminate the float associated with cash receipts:
– Checks
• High-speed electronic equipment is able to read the magnetic ink
character recognition MICR code and sort checks at speeds
approaching 100,000 checks per hour
– A charge card or credit card
• A third party, for a fee, removes from the collector the risk of
noncollection of the account receivable.
• The retailer submits the charges to the credit card company for
reimbursement.
• The credit card company bills the consumer
– A debit card
• Authorizes the collector to transfer funds electronically from the
payer’s to the collector’s balance.
• Some retailers find the notion of direct debit attractive because it
represents the elimination of float.
18
Other solutions to float problems
•
•
•
•
•
•
Electronic funds transfer
Automated clearing house
Lockbox and electronic lockbox services
Electronic checks
Electronic cash
See Technology Summary 11.1
19
The Fraud Connection
• Many result from improper segregation of duties
– Custody of cash
– Recording of cash transactions
• Lapping
– Employee pockets cash/check received from customer A
– So that customer A doesn’t complain about missing
payment, employee credits customer B’s payment to A’s
account
– So that customer B doesn’t complain about missing
payment, employee credits customer C’s payment to B’s
account
– This scheme comes unraveled when the employee runs out
of hours in the day
20
B/AR/CR Context Diagram
21
B/AR/CR
Level 0
DFD
22
B/AR/CR Process Diagram 1
Perform Billing
23
Sample SAP Invoice Data Screen
24
B/AR/CR Process Diagram 2
Manage Customer Accounts
25
B/AR/CR Process Diagram 3
Receive Payment
26
Data Descriptions in B/AR/CR
• A/R master data
– The accounts receivable master data is a
repository of all unpaid invoices issued by an
organization and awaiting final disposition.
– Two types of accounts receivable systems
exist:
– (1) Balance-only system
– (2) Open item system
27
Balance-only system
• In a balance-only system, AR records
show a customer’s current balance due,
past-due balance, and the finance charges
and payments related to the account.
• Each month, unpaid current balances are
rolled into the past-due balances.
• Electric and gas utility companies typically
use balance-only systems.
28
Open-item system
• The open-item system appropriate in situations
where the customer typically makes payments for
specific invoices when those invoices are due.
• In the AR master data, each record consists of
individual open invoices, to which payments and
adjustments are applied.
• On the customer statement of account, a “lump sum”
beginning balance is not shown.
• Instead, all invoices that are yet to be settled continue
to be listed, along with payment details.
• Also, each open invoice is grouped by aging category
and aged individually.
• Monthly, or at specified times, the customer accounts
are aged and an aging schedule is printed.
29
Data Descriptions in B/AR/CR
• Sales event data
– one or more invoice records (details
contained in invoice data)
• A/R adjustments data
– write-offs, estimated doubtful a/c, sales
returns, etc.
– Journal voucher #, trans. code,
authorization
• Cash receipts data
– details of customer payments
30
E-R
Diagram
(Partial)
for
B/AR/CR
31
Types of Billing Systems
• Post-billing system
– Invoices are prepared
after goods are shipped
and shipping notice
compared to sales order
notice
– There may be a delay
between receiving the
order and shipping
– Post-billing is assumed in
Ch. 12 diagrams
• Pre-billing system
– Invoice prepared upon
receipt of order (after
inventory and credit
checks)
– There is little or no delay
between receiving order
and shipping
32
Billing
Function
System
Flowchart
33
Control
Matrix for
Billing
Process
34
Cash
Receipts
System
Flowchart
35
Cash
Receipts
Control
Matrix
36