AIS Ch12

Shipping Process - Opportunities for IT

Automated warehouse, bar codes, radio-frequency identification (RFID) Real-time shipping status Logistics scheduling software

Shipping Process Controls

Automated warehousing technologies limit errors and improve efficiency Keep inventory in a secure, restricted location, and document inventory Reconcile/count inventory amounts Barcode scanners Check sales order and picking tickets (reconcile all documents) Preventive, detective, and corrective training procedures for drivers Insurance

The basic document created in the billing process is called: sales order packing list bill of lading sales invoice

D

The integrated database underlying an ERP system results in which of the following general threats to the revenue cycle? Inaccurate or invalid master data Unauthorized disclosure of sensitive information Loss or destruction of data All of the above

D

_____ is not a basic activity of the revenue cycle. sales order entry shipping billing receiving

D

Billing - Opportunities for IT

EDI → electronic data interchange Invoiceless billing → customer knows how much they owe Image processing → Documents Integrated billing and marketing → coupons Electronic lockboxes → PO box, or bank box EFT/FEDI → electronic payment, processing, and data interchange

Shipping efficiency can often be improved by replacing RFID tags with bar codes. (T/F)

F

Threats in the billing process

Failure to bill Billing errors Posting errors in A/R Inaccurate or invalid credit memos

Shipping Process Threats

Ship the wrong goods or wrong quantity Theft of inventory Inventory gets broken Shipping errors such as wrong address, delay or failure to ship, duplication

Remittance advice

a copy of the sales invoice returned with a customer payment

Open-invoice method

customers typically pay according to each invoice Invoices are individually tracked and aged, can offer discounts per invoice

Balance-forward method

customers typically pay according to the amount shown on a monthly statement, rather than by individual invoices Monthly statement lists all transactions Used for businesses with lots of customers

The document a customer returns with their payment and that identifies the source and the amount of payment is called: credit memorandum remittance list remittance adivce debit memorandum

C

When a customer places an order (on account) for a certain product, what should be done before the order is checked for inventory availability? The sales order should be created and written to a file. A picking list should be generated for the warehouse. The customer's available credit should be checked. Shipping should be notified of an order in process.

C

Which activity is part of the sales order entry process? Setting customer credit limits Preparing a bill of lading Checking customer credit Approving sales returns

C Checking customer credit and inventory availability are two key parts of the sales order entry process.

Which of the following techniques is the most efficient way to process customer payments and update accounts receivable? EFT UPIC FEDI ACH

C FEDI integrates EFT, for processing customer payments, with EDI, for processing related remittance data to update accounts receivable.

Which of the following revenue cycle activities can potentially be eliminated by technology? Sales order entry Shipping Billing Cash collections

C The use of integrated ERP systems makes printing invoices superfluous, because both the seller and customer already know all the information included in the invoice. Some large manufacturers have already moved to invoiceless systems with their major suppliers.

For good internal control over customer remittances, the mailroom clerk should separate the checks from the remittance advices and send the customer payments to which department? Billing Accounts receivable Cashier Sales

C This is the cashier's job. The cashier function has custody of cash accounts.

Identify a useful tool for monitoring A/R? customer credit limit report ERP exception report A/R tolerance report A/R aging report

D

Cycle billing

monthly statements are prepared for subsets of customers at different times

IT opportunities for sales order entry

email web-site order entry input edit checks electronic data interchange (EDI) customer relationship management systems (CRM)

What documents are used in the revenue cycle?

sales order, picking ticket, packing slip, bill of lading, sales invoice,

Validity check

system returns information based on records and identification numbers

Risks in the Sales order entry process

too much inventory invalid orders incomplete/inaccurate orders stockouts loss of customers

Electronic data interchange (EDI)

use of computerized communications and coding to submit business documents electronically

A type of business document in which part of the original document is returned to the source for further processing is called a _____ document. turnaround returnabe closed-loop feedback

A

For good internal control, who should approve credit memos? Credit manager Sales manager Billing manager Controller

A

The _____ is a legal contract that defines responsibility for goods that are in transit. bill of lading picking list back order sales invoice

A

Which of the decisions below is not ordinarily found as part of the revenue cycle? How often should A/R be subjected to audit? What credit terms should be offered? How can customer payments be processed to maximize cash flows? What are the optimal prices for each product or service?

A

Which document is used to authorize the release of merchandise from the inventory control (warehouse) to shipping? Picking ticket Packing slip Shipping order Sales invoice

A A picking ticket is generated by a sales order entry, to authorize removal of inventory to be shipped to the customer.

Which method is most likely used when a company offers customers discounts for prompt payment? Open-invoice method Balance-forward method Accounts receivable aging method Cycle billing method

A The open-invoice method provides a means to offer discounts because it facilitates aging each invoice to verify whether a discount should be granted.

The _______ should always be included with a merchandise shipment to a customer. sales invoice packing slip remittance advice picking ticket

B

Which of the following provides a means to both improve the efficiency of processing customer payments and to enhance control over those payments? CRM Lockboxes Aging accounts receivable EDI

B The use of lockboxes eliminates the delays involved in processing customer payments and then depositing them. It also improves control because customer payments are not directly handled by any employees.

Which document often accompanies merchandise shipped to a customer? Picking ticket Packing slip Credit memo Sales order

B This document specifies what is being shipped.

Lockbox/electronic lockbox

PO box, or bank box Eliminates employees opening the mail (bank does) and lowers the chances of theft by own employees

Shipping steps

Picking and packing the order → technology has made this easier, faster, less costly, improve turnover and sales, and safer for the workers Shipping the order

What are the 4 steps of the transaction cycle?

Sales order entry Shipping Billing Cash collection

Cash collections controls

Segregation of duties because cash can be easily stolen Deposit cash on a daily basis (Bank reconciliations) Use of EFT, FEDI, and lockboxes to minimize handling of customer payments by employees Endorsement checks Having two people open all mail likely to contain customer payments

Controls in the billing process

Separating the shipping and billing functions and duties (Write offs and credit should not be done by same person) Email confirmations Validity checks Restrict employees ability to make changes to data (pricing) Data entry edit checks and controls Mailing monthly statements to customers (Balance-Forward) Customer payment processed in batches (batch controls) Reconciliation of shipping documents and invoices

steps in the sales order entry process

Take customers order check and approve customer credit check inventory available

Cash collection threats

Theft of cash Cash flow problems → not getting cash back fast enough from customers (Credit sales → lose profits)

Controls in the sales order entry process

completeness checks during customer orders digital signatures data entry controls to keep integrity of data credit approvals/credit limits Barcodes and other tags to trace inventory periodic inventory checks

Customer relationship management (CRM) systems

detailed information about customers to facilitate a more efficient and personalized service to improve customer relationships Used to attract new customers and keep current customers