Matakuliah
Tahun
: F0642 / Perancangan Sistem Akuntansi
: 2009
The Billing /Accounts Receivable / Cash
Receipts (B/AR/CR) Process
Pertemuan 04 - 05
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
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Horizontal View B/AR/CR
1. Shipping
department
informs the
accounts
receivable
department
(billing
section) of
shipment.
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Horizontal View B/AR/CR
2. Accounts
receivable
department
(billing) sends
invoice to
customer.
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Horizontal View B/AR/CR
3. Accounts
receivable
department
(billing)
informs
general ledger
process that
invoice was
sent to
customer.
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Horizontal View B/AR/CR
4. Customer,
by defaulting
on amount
due, informs
credit
department of
nonpayment.
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Horizontal View B/AR/CR
5. Credit
department
recommends
write-off of
the receivable
and informs
accounts
receivable
department.
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Horizontal View B/AR/CR
6. Credit
department,
by changing
credit limits,
informs sales
order
department to
terminate
credit sales to
customer.
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Horizontal View B/AR/CR
7. Accounts
receivable
department
informs
general ledger
process of
write-off.
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Horizontal View B/AR/CR
8. Customer
makes
payment on
account.
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Horizontal View B/AR/CR
9. Cashier
informs
accounts
receivable
department
(cash
applications
section) of
payment.
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Horizontal View B/AR/CR
10. Cashier
informs
general ledger
process of
payment.
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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.
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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
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represents the elimination of float.
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
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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
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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.
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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.
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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
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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
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• 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
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Control Matrix
for Billing
Process
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Cash
Receipts
System
Flowchart
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Cash Receipts
Control Matrix
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