Sales
process
 INTRODUCTION
 Business firms and non – for – profit
organizations depend on revenues from
customers for their continued existence .
 Revenues arise because the business firms
and organizations determine the needs of
certain customers and finds ways to serve
these needs.
 In the simplest form , the revenue cycle is
the direct exchange of finished goods or
services for cash in a single transaction
between seller and a buyer .
 more complex revenue cycle process sales
on credit , many days or weeks may pass
between the point of sale and the
subsequent receipt of cash .
 RELATIONSHIPS TO THE ORGANIZATION


The main organizational units involved in the sale transaction
processing cycle : the marketing / distribution
And Finance / accounting functions
The two units interact closely to perform the processing steps with
the sale cycle .
 RELATIONSHIPS TO THE ORGANIZATION

Marketing management objectives :
1.
2.
Determining and satisfying the needs of customers .
Generating adequate revenue to cover costs and expenses , replace
assets , and provide an adequate return on investment .
 RELATIONSHIPS TO THE ORGANIZATION

The top marketing manager is often a vice – president , whose
responsibilities typically involve :

Market research focus on the market for the firm’s products or services

by studying customer’s attitudes , preference , and spending power .
Promotion and advertising improve the market's awareness of the
firm’s products or services by establishing and executing promotional
strategies such as direct mailings , telemarketing , and dealer motivation.
 RELATIONSHIPS TO THE ORGANIZATION

Customer services handles customer inquiries and complaints about
products and services .



product or services development and planning focus on the product or
services lines , including styling , packaging , and performance
Sales concentrates on the selling effort through sales forecasts and
evaluation of sales performance .
Shipping and transportation provide the distribution support for the
marketing function to ensure the orders goods are delivered to customer
promptly , in good condition , and in accordance with customer specification .
 RELATIONSHIPS TO THE ORGANIZATION

the objective of financial and accounting management
relate broadly to funds , data , information , planning , and
control over recourses
 RELATIONSHIPS TO THE ORGANIZATION

The top financial manager in many firms is the vice- president of finance –
tow managers are often directly to this top manager :
treasurer
Budgeting
And cash
planning
Aids in
Developing
Short-range
And long –
Range
Budgets and
Cash
forecasts
Credits
And
collections
Develops
Credit and
Collection
Policies and
administrates
The policies
With respect to
Individual
customers
cash
Receipt
An arm of the
Cashier,
Deposits
Cash received
And maintains
The related
Records .
controller
Belling
Prepares
The sales
Invoice
Inventory
control
Maintains the
Records
pertaining to
Inventory
Balances .
Accounts
Receivable
Maintains the
Accounts of
Individual
Customers
General
Ledger
maintains the
ledger of all
Balance sheet
And income
Statement
Accounts from
Which financial
Reports are
prepared
 OBJECTIVE OF THE SALE PROCESS
 The primary objective in processing
revenues is to achieve timely and efficient
cash collection.
 Objectives of the AIS for the Sales
Process :
 tracking sales of goods and / or services
to customer .
 Filling customers orders .
 Billing for goods and services .
 Collecting payment for goods and
services .
 Forecasting sales and cash recipes .
INPUTS TO THE SALE PPROCESS

Sales order :
a formal , multicopy form
prepared from the
customer order , at the
time a customer contracts
for goods or services.
INPUTS TO THE SALE PPROCESS

Sales invoice :
the document that sent to
customer to reflect the
product or products
purchased, price, and the
terms of payment.
INPUTS TO THE SALE PPROCESS

remittance advance :
a document that shows
the amount of the cash
receipt from a customer
You have probably seen
a remittance advice
before. When you pay
your Visa or MasterCard
bill.
INPUTS TO THE SALE PPROCESS

packing slip : a copy of the sales order or picking list enclosed
with the goods when they are packaged for
shipping order

Shipping notice : often a copy of the sales order or a separate
shipping document that serves as proof
that the goods were shipped .
INPUTS TO THE SALE PPROCESS

Debit/credit
memoranda :
are source documents
affecting both the sales
and purchasing process. An
organization issues these
memoranda to denote the
return of damaged goods of
discrepancies about the
amount owed.
INPUTS TO THE SALE PPROCESS

Business organizations are beginning to recognize
the value of the data they collect about their
customers and sales transactions in terms of
improving customer satisfaction and profitability.
As a result, they are purchasing or developing
customer relationship management (CRM) systems
to gather, maintain, and use these data.
 EVENTS IN THE SALES PROCESS
 The data flow diagram presents an overview of the logical activates
that constitute the sale order processing system
 EVENTS IN THE SALES PROCESS
 The high- level
system flow chart
provides an overview
of the AIS for the
sales process
 This view assumes
an online sales
order. Notice the lack
of paper documents
– e-mail and
electronic images
replace written
documents.
 The flowchart also
assumes that the AIS
uses a centralized
database that
integrates all the data
files..
 BENEFITS OF THE ONLINE INPUT
BATCH PROCESSING SYSTEM
1)
2)
3)
4)
Sales are processed and shipped more
quickly → so that customers should be better
satisfied with the service and more likely to
place orders in the future .
Sales data update records as soon as orders
are received , thereby keeping key order and
inventory information more up-to-date .
Data are validated upon entry → so that errors
are detected more quickly and reprocessing
delays due to undetected errors are reduced.
Paperwork flows are reduced , as when sales
order data are entered from phone calls or
orders are transmitted via electronic data
interchange networks ..
 BENEFITS OF THE ONLINE INPUT
BATCH PROCESSING SYSTEM
5)
6)
7)
Accounting related updating runs (i.e.. Billing,
cash receipt) are efficient and better controlled,
since sales and cash receipt transactions are
handled in batches with control totals .
accounting-related processing is also
simplified , since transaction are posted
without sorting and since the relevant files are
on-line and integrated.
Information that is both current and integrated
can be easily retrieved by clerks and managers
; thus , inquiries (e.g., from customers) can be
answered quickly and correctly, and control
reports and summaries can be generated for
managers as needed .for instance, the
accounts receivable aging schedule and sales
analysis can be viewed or printed as often as
desired .
 OUTPUT ( REPORT )

Financial statement information
An AIS uses some of these outputs to
produce external accounting reports, such
as financial statements, as well as internal
reports, such as management reports.

Customer billing statement
This statement summarizes outstanding
sales involves for a particular customer
and shows the amount currently owed.
 OUTPUT ( REPORT )

The aging report
shows the accounts receivable balance
broken down into categories based on
time outstanding.

The bad debt report
contains information about collection
follow-up procedures for overdue
customer accounts. This allows
management to track the effectiveness or
collection efforts.
 OUTPUT ( REPORT )

Cash receipts forecast.
Data such as sales amounts, terms of
sale, prior payment experience for
selected customers, and information
from aging analysis reports and cash
collection reports are all inputs to this
forecast.

Customer listing
This report is likely to show customer
ID numbers (for uniquely identifying
each customer), contact name,
shipping and billing addresses, credit
limits, and billing terms.
 OUTPUT ( REPORT )

Sales analyses report
By capturing detailed
data about each sale,
the AIS produces
reports to help
management monitor
sales activities and
plan production and
marketing effort.
 OUTPUT ( REPORT )

Demand managerial report
the information they contain is used
primarily for managerial decision making
and control .

Types of managerial decisions
1.
2.
marketing decision
Financial decision
 OUTPUT ( REPORT )
Marketing decisions
1. Which types of markets and customers are to
be served ?
2. Which specific products are to be provided to
customers, including new products to produce?
3. What prices are to be charged , and what
discounts are to be allowed ?
4. What after-sales services are to offered ?
5. What channels of distributions are to be
employed?
6. What marketing plans and budgets are to be
established for the coming year ?
 OUTPUT ( REPORT )
financial decisions
1. What criteria are to be employed in generating
credit to potential customers ?
2. What collection methods are to be employed in
minimize bad debts ?
3. What accounts receivable records are to be
maintained concerning amounts owed by
customers ?
4. What sources , other than receipts from sales
are to be employed in obtaining needed funds
for operations ?
5. What financial plans and cash budgets are to be
established for the coming year ?
 INTERNAL CONTROL


RISK EXPOSURES transaction with in the sales
revenue cycle are exposed to several types of risk .
For example :
1. Credit sales made to customers who
represent poor credit risks
 Losses from bad debts
2.

3.

Unrecorded or unbilled shipments
Losses of revenue , overstatement of inventory and
understatement of accounts receivable in the
balance sheet .
Accessing of accounts receivable , merchandise
inventory , and other records by unauthorized
persons .
Losses of security over such records , with
possibly detrimental use made of the data accessed
.
 INTERNAL CONTROL

In order to counteract such risk exposures , a firm must establish a
Varity of internal control

Several key control objectives are to be ensure that :







All customers who are accepted for credit sales are creditworthy .
All ordered goods are shipped and all services are performed by
dates that are agreeable to both parties .
All shipped goods are authorized and accurately billed within the
proper accounting period .
All sales returns and allowances are authorized and accurately
recorded and based on actual returns of goods .
All cash receipts are recorded completely and accurately .
All credit sales and cash receipts transactions are posted to
proper customers accounts in the accounts receivable ledger
All accounting records , merchandise inventory , and cash are
safeguarded .
 INTERNAL CONTROL

General controls concerning the sale revenue
cycle can be categorized as :







Organizational controls
Documentation controls
Asset accountability controls
Management practices control
Data center operations controls
Authorizations controls
Access controls
 References

CORE CONCEPT OF ACCOUNTING INFORMATION SYSTEM
STEPHEN MOSCOVE , MARK SIMKIN , NANCY BAGRANOFF
EIGHTH EDITION
 ACCOUNTING INFORMATION SYSTEMS , JAMES A.HALL
INTERNATIONAL STUDENT FORTH EDITION
 ACCOUNTING INFORMATION SYSTEMS (ESSENTIAL
CONCEPTS AND APPLICATIONS ) , WILKINSON , CERULLO
, RAVEL , WONG-ONE-WING , FOURTH EDITION
 ACCOUNTING INFORMATION SYSTEMS (ESSENTIAL
CONCEPTS AND APPLICATIONS ) , JOSEPH W. WILKINSON
, MICHAEL J. CERULLO , THIRD EDETION