AIS Assignment on Revenue and Expenditure Cycle PDF

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Summary

This piece of writing emphasizes on the revenue and expenditure cycle within any form of organization and ways in which any risks in these two areas can be resolved....

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ASSIGNMENT COVER PAGE For use with online submission of assignments Please use this sheet as the first page of each file of your assignment – do not send it as a separate document. Your assignments must be submitted as either Word documents, text documents with .rtf extension or as .pdf documents. If you wish to submit in any other file format please discuss this with your lecturer well before the assignment submission date.

Program Title:

ACCOUNTING AND FINANCE

Program Code:

IBSUBAF

Students Name:

Christine Komba

Student ID:

20180133

Unit Title:

Accounting Information Systems

Unit Code:

AF0307

Lecturer’s Name:

Mr. Nathan Andy Kwasam

Assignment No.:

2

Assignment Title:

Revenue and Expenditure Cycle

Due date:

06/09/2021

Date submitted:

06/09/2021

Declaration: I have read and understand the Rules Relating to Awards (Rule AGAP Section 18 – Academic Misconduct Including Plagiarism) as contained in the IBSU Academic, Grading and Accreditation Policy. I understand the penalties that apply for plagiarism and agree to be bound by these rules. The work I am submitting electronically is entirely my own work. Signature with Date: (Christine Komba - 20180133)

1. Revenue Cycle The Revenue Cycle is a set of recurring company operations and related data processing procedures associated with selling products and services to customers and receiving cash payment (Romney & Steinbart 2006, p. 354). The basic purpose of the revenue cycle is to deliver the appropriate product at the right time and place for the right price (Romney & Steinbart 2006, p. 355). Profitability is determined by the revenue cycle, which is comprised of four major business activities: sales order entry; shipping; billing; and cash collections. According to Wilkinson et al. (2000, p. 419), revenue cycle documents include a picking list, bill of lading, shipping notice, sales invoice, remittance advice, deposit slip, back order, credit note, credit application, salesperson call report, overdue notice, write-off notice, and cash register receipt. 1. Approval of customer credit To begin, you'll need a system - a set of uncomplicated and transparent rules for granting loans and collecting debt on time. To accomplish this, you must: 

If a prospective customer is purchasing low-volume items for a short period of time, a basic internal evaluation may be sufficient to determine their credibility. If a new customer wishes to buy large quantities on a regular basis, you may need to go through a more thorough screening process, such as a thorough background and credit check.

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Make an agreement to approve or decline credit applications in a certain timeframe. Consistency of how long credit applications should be processed is usually lacking in organizations. If the deadline is missed, sales could be lost, and the relationship between salespeople and finances could be strained — a relationship that requires cooperation if businesses are to succeed in the long run.

2. Information about the customer It's time to start assigning specific consumers with credit limits and payment terms, along with any other relevant requirements (i.e. delivery addressee-mail address, etc.) in your billing and collection systems, they must be accurately reflected in your billing and collection systems. Whether they are eligible for volume discounts or advertising credits, as well as any other relevant terms and conditions. You should perform the following to get the most out of your data:

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Determine who will be in charge of customer data in the end by centralizing the data management process.

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Keep track of and share any changes to client information. Changes should be approved by finance and operations because they can have a significant impact on cash flow forecasts.

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Implement controls to verify data accuracy and provide employees read-only access so they can't change client data without proper approval.

3. Invoicing and Billing Units of measure, pricing, customer accounts, and other master data that is mistakenly recorded are some of the most common invoice errors. Some companies fail to generate invoices on time – or at all. Organizations should consider the following techniques to achieve this: 

Automation can save time and eliminate human mistake.

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Timely and effective invoice creation and reporting: can ensure that billing is completed on a timely basis and that reports are relevant to the end-user.

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Exception reports: can assist in the detection of account abnormalities.

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Customers can save time dealing with cash applications, disputes, and collections, among other things, by using a customer database.

4. The procedure for obtaining cash When clients pay their invoices is another topic of concern. When payments come in, it's vital that they're applied to the relevant customers and bills. This needs to be done on a regular basis so you know which accounts are recent and which are long overdue. To avoid this, take the following steps: 

Instead of just crediting the customer account, allocate funds to individual invoices.

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Don't merely pay the oldest invoices; apply funds to the proper invoices.

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If you get a payment, apply it to each account on the same day.

5. Procedure for collection While every business enjoys the ability to collect money, not all businesses take aggressive measures to guarantee receivables are paid on time. This necessitates a thorough accounting procedure. Other options for increasing receivables collection include: 

Making regular and persistent efforts to collect. This involves improving staff skills if they don't know how to collect money owed to them from obstinate customers.

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Developing payment plans that comply with the company's collection rules.

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Ensure that any discounts offered are advantageous to the company and are carried out correctly.

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Improving systems to allow for accurate reporting

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Automating operations to avoid human mistake in data entering.

To conclude, using quantitative measurements and key performance indicators is critical in revenue cycle as an accounts receivable officer. Your standard revenue and profit tracking reports can give you a clear picture of things like the number of days sales outstanding, the percentage of late payers and invoices, the number of invoices or customers gone through your system, unreconciled items or accounts as well as write-offs and collection rates for bad receivables. This will enable you to keep track of performance over time.

2. Expenditure Cycle Romney and Steinbart (2006, p. 410) define the expenditure cycle as a regular set of business operations and associated data processing procedures linked to the purchase and payment of products and services. The main purpose of the expenditure cycle is to lower the total cost of purchasing and managing stocks, supplies, and the numerous services that the company requires to function (Romney & Steinbart 2006, p. 410). Additionally, to make it easy to swap currencies with vendors for necessary things (materials) and services (Wilkinson et al. 2000, p. 469). Ordering goods, supplies, and services, receiving and storing goods, supplies, and services, and payment of goods, supplies, and services are the three core business operations in the expenditure cycle. According to Wilkinson et al. (2000, p.472), purchase requisitions, purchase orders, receiving reports, supplier invoices, disbursement vouchers, disbursement checks, debit memorandums, new supplier forms, and request for proposal are among the spending cycle papers to be listed.

1. Process of selecting vendors One of the first steps toward building a comprehensive accounts payable system is to create preferred supplier lists to reduce irregular purchasing and position your company to get the best possible terms. There are various actions you may take during the vendor selection process to negotiate terms that will help you maximize your current account balance. 

Set priorities for vendor negotiations and invite key employees and decision-makers to participate.

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Create strategic vendor performance evaluations and use them to encourage suppliers to improve product or service quality, customer service standards, and/or price during negotiations.

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Negotiate longer payment arrangements if you are in a position of strength.

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On a frequent basis, look for opportunities to negotiate better costs.

2. The process of establishing supplier master data. Once you've reached an agreement with a provider, it's vital to appropriately collect and store data. Mistaken data entry can have farreaching consequences that go beyond payments. To avoid these outcomes, take the following steps: 

Make sure your purchasing and payables systems appropriately represent all service level agreements. Supplier information system should include product/service details, quality

standards, delivery schedules, supplier obligations, and any regulatory compliance regulations that apply. 

On a regular basis, update payment terms and the availability of volume discounts, trade credits, and any continuing or periodic refunds. The supplier master data must be updated if the terms of a supplier's contract change or are renegotiated.

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Keep a copy of your supplier contracts in a secure location. Document management solutions are designed to help speed this process and make searching for information easier.

3. Contract review procedure To minimize inaccurate – or even fraudulent – vendor billing practices that could result in overpayment or duplicate payment, it's necessary to monitor vendor contracts on a frequent basis: 

Assign data management to a central data base team that can ensure that it is comprehensive, accurate, and compliant with standard criteria. This team must monitor vendor performance on a regular basis to ensure that the terms of the contract are being followed.

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Put a disclaimer in supplier contracts that makes them liable for penalties if they are discovered to be in breach of contract.

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In addition to comparing vendor contracts to industry standard conditions on a regular basis, review vendor contracts in a timely manner.

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It's important to ask your legal team to assess vendor access restrictions, contract terms, and regulatory compliance.

4. Procurement Process A thorough review of internal buyer procedures will help you avoid purchase control overrides by ensuring that buyers only engage with pre-approved vendors and stay under allowed expenditure limits. Here are a few ideas to get you started: 

As soon as you receive a new order, create a purchase order so that you may double-check it, secure payment in advance, and compare invoices with previous purchase orders to verify suppliers charge according to the terms you agreed to in the first place.

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Track outstanding payables by vendor and payment terms to ensure they are paid on time

5. Invoicing Process Managing the invoicing process efficiently is another way to increase your cash flow. In order to boost your processing, consider the following tactics: 

For the sake of your supplier relationships, do not pay invoices before they are due.

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Create a central processing office to provide a systematic and consistent way for determining relevant follow-up tasks for aging accounts payable listings.

6. Process of accounting and reporting As a preliminary step, make sure that your financial records appropriately reflect current accounts payable balances. Without this information, many companies have no idea how much, how often, and when they pay their vendors. Following are some steps you can take to optimize your accounting and financial reporting procedures: 

Invoices from suppliers should be compared with contract terms and purchase orders to confirm that they are accurate.

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Track down and resolve unreconciled items as soon as possible, and apply payments to each invoice on the due date.

As a result, firms may simplify their operations and establish a working capital culture by enhancing accounts payable governance, developing clear management processes, and continuously measuring important indicators.

Reference 1. Romney M, & Steinbart, P 2006, Accounting Information Systems, 10th edn, Pearson Education New Jersey 2. Wilkinson, JW, Cerullo, MJ & Wong-On-Wing B 2000, Accounting Information Systems, 4th edn, John Wiley & Sons, USA...