Sales/Collection Process

Outline
• Objectives
• Steps in the sales / collection process
• Documents
• Internal controls
• Information technology

11-2
 Objectives
When you finish this chapter, you should be able to:
– Explain the role and purpose of the sales / collection process
– List and discuss, in order, the steps in the process
– Identify and describe documents commonly used in the process
– Suggest and evaluate internal controls associated with sales /
collection activities
– Explain how information technology can make the sales /
collection process more effective and efficient
– Create and interpret systems documents related to sales and
collections

11-3
Steps in the sales / collection
process
1. Take customer order 5. Bill the customer

2. Approve customer 6. Collect payment

11-4
Steps in the sales / collection
process
Payment

Order info Customer

1.0
Take Billing info
order. Credit info
Delivered
goods

Order total

4.0
Bill client.

2.0 Approved credit

5.0
Receive
Figure 8.2 payment
Sales / collection DFD

11-5
 Documents
• Customer order • Picking list
– Summarizes items – Guides selection of
ordered and prices items from warehouse
– Originates in sales – Originates in
department warehouse
– Terminates in – Terminates in shipping
warehouse department

11-6
 Documents
• Packing list • Bill of lading
– Specifies contents of – Specifies freight terms
shipment • FOB destination or
– Originates in shipping shipping point
• Freight prepaid or
department
collect
– Terminates with
– Originates in shipping
customer
department
– Terminates with
common carrier

11-7
 Documents
• Customer invoice • Remittance advice
– Bills client – Provides source document
– Originates in billing for AIS
department – Originates with customer
– Terminates with customer – Terminates with accounting
• Customer check • Deposit slip
– Remits payment – Transmits cash receipts to
– Originates with customer bank
– Terminates with cash – Originates with cash
receipts department receipts department
– Terminates with bank

11-8
 Internal controls
• Establishing a formal • Matching documents
credit approval prior to billing
process • Separating duties:
• Maintaining adequate authorization,
inventory custody,
• Incorporating recordkeeping
independent order • Endorsing checks
checking restrictively
• Insuring goods in • Reconciling the bank
transit statement

11-9
 Information technology
• Maintain customer lists
• Generate sequentially-numbered forms
• Look up inventory status
• Identify unpaid and past-due invoices
• Record transactions in the accounting
information system
• Report financial information with XBRL

11-10
 IN AIS
SALES/COLLECTION
PROCESS
= Order entry/Sales +
Billing/accounts
recievable/ cash reciepts
11-12
 OE/S PROCESS
• The order entry/sales (OE/S)
process includes the first four
steps in the order-to-cash
process
1.pre-sales activities
2.sales order processing
3.picking and packing the goods
4.shipping
13
Horizontal View OE/S

1. Customer places
order

14
Horizontal View OE/S

2. Sales order
department requests
credit approval from
the credit department

15
Horizontal View OE/S

3. Credit department
informs sales order
department of
disposition of credit
request

16
Horizontal View OE/S

4. Sales order
department
acknowledges order
to the customer

17
Horizontal View OE/S

5. Sales order
department notifies
shipping department
of sales order

18
Horizontal View OE/S

6. Sales order
department notifies
warehouse and
B/AR/CR process of
shipment

19
Horizontal View OE/S

7. Warehouse sends
completed picking
ticket to shipping

20
Horizontal View OE/S

8. Shipping
department informs
sales order
department of
shipment

21
Horizontal View OE/S

9. Shipping
department informs
carrier, B/AR/CR
process, and general
ledger process of
shipment

22
23
Control Matrix for OE/S

24
OE/S Control Matrix, Cont’d.

25
 B/AR/CR PROCESS
• Shipping informs A/R (billing) of
shipment
• A/R send invoice to customer
• A/R informs GL that invoice sent to
customer
• Customer may default, sending
message to credit
• Credit changes CR limit; informs sales
dept. to terminate sales to customer
Cont..
26
 B/AR/CR PROCESS
• A/R informs GL of write-off
• Customer makes payment on
account
• Cashier informs A/R of
payment
• Cashier informs GL of
payment
27