Chapter 8

Packing

Packaging of the goods in the order for shipments and loading the shipment onto vehicles for transportation to the customer

Bolero Trusted Trade Platform

Platform where you can electronically exchanged electronic bills of lading and other documents, digital signatures are used in place of pen-and-ink signatures

3 Required Fields that Identify a Sales Area

1. Sales Organization 2. Distribution Channel 3. Division

4 Types of Master Records Required in SAP ERP

1. Sold-To-Customer Records 2. Ship-To-Customer Records 3. Bill-To-Custoemr Records 4. Payee-Customer Records * When a new Sold-To-Customer Records is created, the other 3 master records are created automatically using the same information

Create Sales Order Screen

2 parts: a document header (contains fields for items that describe the entire order) and an area for item data (contains the product number and order quantities), SAP ERP does an automatic availability check as items are entered, if an items is not available it will propose options such as partial delivery

Division

A code that identifies a subgroup in the sales organization

Blanket Order

A contract to provide goods over a period of time

Creating a Sales Order

A customer master record has to exist before a sales order can be created, SAP ERP can copy info from the master record into the sales order as necessary

Balance-Forward Processing

A customer's remittances are applied against the customer's total outstanding balance rather than against the customer's individual invoices, has the advantage of operational simplicity, the disadvantage is that its inherent simplicity may not be appropriate to the business process and thus it might not support detailed reporting requirements

Quotation

A document that is prepared and sent to a potential customer to inform him or her of product prices, product availability, and delivery information, it is prepared when a potential customer has made a fairly specific request for details concerning a potential order, information entered into the order-entry system to prepare the quotation document is store and can be reused subsequently if the customer places an order

Customer Hierarchy Assignment

A representation of the customer's organization structure that determines pricing information used in SAP ERP (example: a chain of stores inherits pricing agreements from its main office, hierarchy assignment would include a distribution channel, type of industry and geography location )

Query

A request for information in a database, SAP ERP features powerful query capabilities

Open-Item Processing

A separate record is maintained in the accounts receivable system for each of the customer's unpaid invoices, as customer remittances are received they are matched to the unpaid invoices

Accounts Receivable Procedure

A subsidiary ledger of individual accounts is maintained, with a control account in the general ledger, remittance advices are routed from the cash receipts function, credit memos and other invoice adjustments are routed to the accounts receivable department from the billing department, debits and credits are posted to the individual accounts, periodically statements that summarize accounts are prepared and sent to customers, this function also includes periodic preparation of aging schedules of outstanding customer account balances.

Standard Order Processing

A term that describes the sales business process in which customer orders are filled from an inventory of finished goods, a quotation may be first issued to the customer, if theres no quotation then an order is created when a customer requests delivery of goods or services , after an order has been created and processed then delivery document is created

Credit Memo

After an allowance has been approved and authorized, billing issues a credit memo to document the reduction to the customer's account

Optional Scheduling Screen

Allows editing of individual items in the order

Optional Pricing Screen

Allows editing of pricing conditions

Optional Business Data Header

Allows editing of shipping and billing data for the entire order, the delivery block field will block an order from further processing, SAP ERP automatically places a block order if the customer's credit limit is exceeded

SAP ERP Application

An integrated ERP software manufactured by SAP AG that targets business software requirements of medium and large organizations in all industries and sectors, it is the success product to SAP R/3, worldwide market share leader

Contracts

An outline agreement to provide goods or services to a customer, usually specifies quantities and a general time frame for deliveries, typically neither mandatory nor required as a matter of company policy. If they are required, however, then this is the next activity in the sales business process.

General Ledger Controls

Billing is responsible for invoicing individual orders (don't have access to financial records), accounts receivable posts invoices prepared by billing to the accounts receivable ledger (maintain customer-account information and send periodic statements of account to customers), a common control procedure is to reconcile the total of posting to the accounts receivable ledger that is sent to the general ledger function by the accounts receivable function to the journal voucher sent from the billing function to validate posting to the general ledger

Department Code Field

Contact Person Screen, filled by choosing from a list that has entries such as "0001 Managing Director"

Department Function Field

Contact person screen, identifies the contact's function (Example: "01 Executive Board")

Customer Master Records

Contain all the information that pertains to a customers, have to be created before processing sales orders in SAP ERP because the information in these records is used in sales order processing, it is necessary to check that a customer is not already in the system before the creation of a new customer master record, you must know the customer's hierarchy assignment prior to creating a master record, SAP ERP also requires that a customer has been approved for sales prior to the creation of master records

Delivery Document

Created to arrange for the delivery of goods to the customer, all of the information that is required to prepare and deliver the goods to the customer is contained in here, usually prepared at the production or distribution location, the ERP automatically copies information from the sales order into the delivery document, processed to prepare a schedule for shipping

Cash Receipts Function

Customer remittance slips are forwarded to accounts receivable for posting from cash receipts, accounts receivable doesn't have access to the cash or checks that accompany customer remittances

Mailroom Function

Customer remittances on account are received in the mailroom, the mail is opened and the checks and remittance advices are separated, checks are restrictively endorsed and totaled, a remittance list is prepared, copies of the remittance list and the remittance advices are forwards to accounts receivable, the checks and a control total are forwarded to cash receipts for deposit, checks are combined with cash receipts from cash sales and a deposit slip is prepared, the remittance list and control total received are balanced with the deposit slip, and agreement of these accounts is approved, the remittance list is then used to post the amount of the payments received into the cash receipts journal, a journal voucher is prepared and forwarded to the general ledger

Create Customer: Control Data Screen

Depend on a company's specific needs, transport zone field is the only required field, it identifies the regional zone where the ship-to party is located (can also input location number, industry train station, etc for transport information. In the account control sections you can input vendor, trading partner, authorization, and group key. The tax information section has tax code, fiscal address, country code, city code, VAT registration number, etc.)

Remittance List

Documents the payments received, balanced to the total of the checks received

Standard Order: Overview Screen

Each activity in the sales business process generates a document, this screen lists and displays all the documents related to a particular sales order

Auditing Standard No. 5 "An Audit of Internal Control over Financial Reporting that is Integrated with an Audit of Financial Statements"

Establishes requirements and provides direction that applies when an auditor is engaged to perform an audit of managers assessment of the effectiveness of internal control over financial reporting and the preparation of financial statements for external purposes, top-down approach

Picking

Filling the order and the selection of goods from the plant or warehouse to be prepared for shipment

SEC Interpretive Guidance "Management's Report on Internal Control over Financial Reporting"

Focuses management on internal controls that best protect against risk of material misstatement in financial reporting

Credit Controls

General authorization applies to all customers (established general requirements to be met in determining customers' credit limits), specific authorization pertains to individual transactions for individual customers (approval of a specific order for a specific customer), a customer's credit standing should be verified prior to the shipment of goods

Credit Function

Include the approval of sales returns and allowances and other adjustments to customer accounts, the review and approval of the aged trial balance to ascertain the creditworthiness of customers, and the initiation of write-off memos (documents) to charge accounts to bad-debt expense

Customer Account Management Business Process

Includes accounts receivable processing through the collection of customer payments on account

Distribution Channel

Includes direct sales, retail sale, and wholesale

ERP Sales and Distribution Module

Includes the sales business process, contains a vast amount of information pertaining to this process

Shipping

Initiated with the preparation of a shipping document called a delivery

Inventory Controls

Inventory picks the order as described on a packing list, the packing list is prepared from the delivery document that is prepared by the order database to process the approved order, inventory records are updated to reflect the actual quantities picked and to be forwarded to shipping

Billing Function

Invoices, credit memos, and other invoice adjustments are routed to accounts receivable for posting to the customer accounts, this maintains a separation of functions

Invoice

Issued to the customer, marks the end of the sales business process, in many cases the goods are shipped before the customer is invoiced

Genera Ledger Function

Journal voucher from cash receipts and control total from accounts receivable are compared, the amounts are posted to the general ledger, the journal voucher is the source of posting to the general ledger

Bill of Lading

Legal document signed by a transporter of goods (example: carrier) and issued to the shipper, provides the shipped a receipt for the goods and serves as a contract for shipment, prepared to document the loading of goods onto vehicles for transportation to the customer

General Ledger Function

Maintains the accounts receivable control accounts, debits and credits are posted to the accounts receivable control account from the journal vouchers and matching control totals that are received from billing and cash receipts, these control amounts are reconciled to the control totals sent to the general ledger directly from accounts receivable

Cash-Sales Business Process

No previous asset record (customer account balance), the generation of initial documentation of cash sales is thus the focal point of the control system, once a record has been prepared then cash sales are subject to accounting control

Allowances

Occur when, because of damaged merchandise, shortages in shipments clerical errors, or the like, the customer and the seller agree to reduce the amount owed by the customer (the amount of the allowance is negotiated between the customer and the sales order department (or salesperson), allowance should be reviewed and approved by an independent party (usually the credit department)

Sales Return

Occurs when a customer actually returns goods that have been shipped, this procedure is initiated by the receiving department, they should take a count of the goods and return them to inventory, then receiving forwards a sales return memo or similar document to the credit department, credit approves the sales return memo and forwards it to billing, this authorizes billing to issue a credit memo for the return of goods

Nielsen ID Field

On marketing screen, specifies a regional division according to marketing categories created by the A.C. Nielsen Company and is used for marketing analysis

Order Entry Controls

Once credit has been approved for a customer, the order is released for processing, the order-entry function initiates the processing of customer orders with the preparation of the sales order document (contains descriptions of products ordered, prices, name of customer, shipping address, etc.), if the time between receiving order and actual shipment is significant, an acknowledgement notice may be sent to customer to information them that their order has been received and is being processed, prices entered on sales order should be approved by management or an organization function that is independent of the sales order function, the sales order is primarily an internal document

Primary Function of the Sales Business Process

Order fulfillment (orders are created when a customer requests goods or services from a firm, customer orders are filled from an inventory of finished goods)

Good Issue Notice

Posted when goods have shipped, updates the relevant delivery document, the ERP uses this information to update inventory as necessary based on the shipment, also initiates the billing process

Packing List

Prepared for each shipment, and a copy is usually included in the shipment to document what has been shipped

Picking List

Prepared to guide picking activities

Order Entry

Prepares the sales order document, usually involves pricing and availability checking

Sales Business Process

Primary revenue cycle application in many organizations. Activities include: - Inquiry (optional) - Contract creation (optional) - Order Entry - Shipping - Billing

Create Customer: Address Screen

Promopts for customer's address, company name, company number, indicated customer language (example: "E" is for English)

Initial Screen: Create Customer

Prompts for a customer # (assigned externally when the person who is inputting the data selects the number or internally when performed by SAP ERP which assigns the next number in a sequence), company code, and organization data that identify the sales area

Internal Audit Function

Receives the periodic bank statement, an independent bank reconciliation is an important control in a cash-received-on-account business process

Lock-Box Deposit System

Reduces the float that usually occurs because the bank does not allows the firm to have use of out-of-state checks until they have been cleared through the customer's bank, this process can take up to a week, this system has the checks deposited to a firm's account before the firm processes them

Accounts Receivable Function

Remittance Advices are posted tot her croutons receivable ledger, these postings are total, the control total is balanced to the remittance list, agreement of these amounts is approved, a copy of the control total is forward to the general ledger

Aged Trial Balance (AKA Aging Schedule)

Reports outstanding customer account balances classified by their "age", aging schedule are forwarded to the credit function in order that there will be follow-up on slow and doubtful accounts

Accounts Receivable

Represents the money owed by customers for merchandise sold or services rendered on account, often represents the majority of an organization's working capital, also maintains customer credit and payment history information

Write-Off Procedures

Requires an analysis of past-due accounts, usually done with an aged trial balance report, a number of techniques are used including sending the customer a series of follow-up letters and the use of collection agencies to approach the customer for payments, however some accounts ultimately are worthless and have to be written off, the credit department initiates a write-off by preparing a write-off memo that is approved by the treasurer or some other independent functions, accounts receivable is authorized to write off the account on receipt of the approved write-off memo, a copy of the approved memos is also sent to an independent third part for purposes of record keeping

SOX Accounts Receivable Business Process

Requires that companies maintain an adequate internal control structure over the business processes that support financial reporting, risk assessment of the accounts receivable business process will be necessary for compliance with SOX

Accounts Receivable Function

Responsible for maintaining the subsidiary accounts receivable ledger, debits and credits are posted to customer accounts from the remittance advices, invoices, and other documents received from billing and cash receipts, maintains a separation of functions

One-Time Customer Record

SAP ERP allows for the creation of a single master record dummy for one-time or infrequent customers, all are passed through this one-time record, contains minimals information

SOX: Sales Business Process

SOX 2002 requires that companies maintain an adequate internal control structure over the business processes that support financial reporting

Pricing Procedure

Sales screen, a SAP ERP term for the type and sequence of pricing conditions used to price a sales order

Product Proposal Number Field

Sales screen, used for defaulting products into the customer's orders if the customer routinely orders the same products

Field

Search term used to input a phrase that can be used to search for the company when the company number s required for input

Shipping Controls

Shipping accepts the order for shipment after matching the order as described on the picking list that accompanies the goods to the order as it is described on the packing list that is generated for the order from the order database, shipping documentation is prepared and the order database is updated for the shipment, shipping typically prepares a bill of lading (documentation exchanged between shipper and a carrier) for the delivery

Inquiry

Similar to a quotation but does not contain delivery information, information entered into the order-entry system to prepare the inquiry document is store and can be reused subsequently if the customer places an order

Customer Relationship Management (CRM) Systems

Software solutions that help an organization manage customer relationships in an organized manner. The goal is to identify, acquire, and retain customers

Shipping Advice

Synonymous for a goods issue notice

Cycle Billing Plan

The accounts receivable file is subdivided by alphabet or account number, the idea is to distribute the preparation of statements over the working days of the month (example: A through H is billed on the 10th, etc.)

Dunning Procedure

The action taken to collect payment from customers who are late in making payments on their account

Bank Function

The bank accepts the deposit and validates a copy of the deposit slide, the validated copy is return to internal audit

Sales Organization

The company unit that is responsible for the sale

Billing & Accounts Receivable Controls

The customer purchase order, sales oder, and the shipping report are necessary to process a completed sales transaction, billing completes the order process by preparing invoices for orders that appear on the billing list, the billing list is prepared from the information concerning orders that have been shipped to customers, billing verifies the orders and then prepared the invoice (contains charges for actual quantities shipped, freight charges, and taxes), invoices are recorded in the order database and the notice is sent to account receivable in order that customer account balances may be updates

Create Customer: Shipping Screen

Used to specify shipping details, includes fields for shipping plant code and a delivery priority level

Float

The time between the signing of the payment check by the customer and the moment the firm has use of the funds

Create Customer: Account Management Screen

Used to specify account reconciliation data, a reconciliation account is a general ledger account that is updated parallel to accounts receivable posting, control account used for reconciliation

Create Customer: Output Screen

Used to change the default output specifications for various documents that can be produced for the customer, fields collect data concerning details such as output type, language, transmission medium, send time, and numbers of copies produced, items can be added, changed, or deleted

Create Customer: Correspondence Screen

Used to establish a dunning procedure and other correspondence with the customer

Create Customer: Sales Screen

Used to identify areas within the company that are responsible to the customer, one must specify a currency for settlement of accounts

Create Customer: Billing Screen

Used to input data concerning billing, identifies international trading terms, "FOB" --> Freight On Board

Create Customer: Taxes Screen

Used to input data concerning the customer's tax liability, tax classification fields

Create Customer: Contract Person Screen

Used to input data relating to a contact person or persons (fields provided for name, telephone number, department code, etc.)

Create Customer: Foreign Trade Screen

Used to input data relating to export controls

Create Customer: Insurance Screen

Used to input data relating to export credit insurance, fields are provided for policy numbers, amounts insured, insurance company, lead months, and deductible percent

Creates Sales Order: Initial Screen

Used to input information for the sales area, there are 3 mandatory fields: sales organization field (identifies the unit responsible for sale), distribution channel field (classifies the order as direct sales, retail sale, or wholesale), and division code field (used to identify a subgroup in the sales organization)

Create Customer: Marketing Screen

Used to input statistical and demographic data concerning customer

Create Customer: Payment Transactions Screen

Used to input the customer's banking information, data may be input for several different banks, collects data for payment transactions including automatic payment transactions

Create Customer: Unloading Points Screen

Used to input where the customer unloads received goods and the customer's factory calendar, which specifies what days and hours the customer accepts deliveries

Cash-Received-On-Account Business Process

Used when there is an existing customer account balance, cash received on account typically comes into a business through the mail or is paid in person to a central cashier or cash window, customers should receivable receipts and monthly statements showing amounts paid

Partnering

When a customer have several shipments to an address and these records are linked to the sold-to-customer master records

Create Customer: Partner Functions Screen

When a sold-to-customer record is created, SAP ERP automatically creates bill-to, payer, and ship-to master records for the same customer using the same information, these master records are partnered on this screen. If a sold-to customer has multiple or different partners for billing, paying, or shipping, then the customer numbers of those partners are entered. However, if the partners do not have master records, then such records must be created before the partner's numbers can be entered in this screen, this is the final "Create Customer" screen

Factoring

When companies sell their accounts receivable at a discount to collection agencies, avoids record-keeping costs, can help small companies finance larger sales by providing the necessary working capital to continue operations