Billing Process
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Billing Process

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Billing Process Billing Process Presentation Transcript

  • Chapter 1 The Billing/Accounts Receivable/Cash Receipts (B/AR/CR) Process
  • 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.
  • 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:
      • Support the repetitive work routines of the credit department, the cashier, and the accounts receivable department
      • Support the problem-solving processes of financial managers
      • Assist in the preparation of internal and external reports
  • Horizontal View B/AR/CR 1. Shipping department informs the accounts receivable department (billing section) of shipment.
  • Horizontal View B/AR/CR 2. Accounts receivable department (billing) sends invoice to customer.
  • Horizontal View B/AR/CR 3. Accounts receivable department (billing) informs general ledger process that invoice was sent to customer.
  • Horizontal View B/AR/CR 4. Customer, by defaulting on amount due, informs credit department of nonpayment.
  • Horizontal View B/AR/CR 5. Credit department recommends write-off of the receivable and informs accounts receivable department.
  • Horizontal View B/AR/CR 6. Credit department, by changing credit limits, informs sales order department to terminate credit sales to customer.
  • Horizontal View B/AR/CR 7. Accounts receivable department informs general ledger process of write-off.
  • Horizontal View B/AR/CR 8. Customer makes payment on account.
  • Horizontal View B/AR/CR 9. Cashier informs accounts receivable department (cash applications section) of payment.
  • Horizontal View B/AR/CR 10. Cashier informs general ledger process of payment.
  • 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 self-service systems?
      • The payback on such systems is huge
      • Reduction of staffing needs for call centers is particularly beneficial
  • 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.
  • 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.
  • 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.
  • 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
  • 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
  • B/AR/CR Context Diagram
  • B/AR/CR Level 0 DFD
  • B/AR/CR Process Diagram 1 Perform Billing
  • Sample SAP Invoice Data Screen
  • B/AR/CR Process Diagram 2 Manage Customer Accounts
  • B/AR/CR Process Diagram 3 Receive Payment
  • 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) B alance-only system
      • (2) O pen item system
  • 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.
  • 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.
  • 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
  • E-R Diagram (Partial) for B/AR/CR
  • 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
  • Billing Function System Flowchart
  • Control Matrix for Billing Process
  • Cash Receipts System Flowchart
  • Cash Receipts Control Matrix