THE REVENUE CYCLE

A recurring set of business activities and related information processing operations associated with providing goods and services to customers and collecting cash in payment for those sales.

All accountants need to know something about the revenue cycle. The revenue cycle is one of many processes used in an effective accounting information system (AIS). If a company is to stay in business, their accountants need to be able to implement a way of keeping track of the sales and profits. Technology is also changing the face of the revenue cycle, and the AIS in general.

These are The Four Basic Revenue Cycle Business Activities that all accountants should know something about.

• Sales Order Entry

  Shipping

  Billing

  Cash Collections

Many aspects of each step in the revenue cycle are listed below.

SALES ORDERS

• The main employees involved in this step work in the sales order department.
• Responses are made to customer inquiries.
• The customer's credit is then checked before a purchase can be made.
• Finally, the inventory must be checked to see if the item is available.

SHIPPING

• Customer orders are filled by the warehouse workers.
• The shipping department then sends out the merchandise.

BILLING

• The workers in the billing department send out invoices to customers.
• Employees in the accounts receivable division are in charge of maintaining customer accounts.

CASH COLLECTIONS

• The cashier takes the remittances from the customers and deposits them in the bank.
• The accounts receivable employees then credit the customers' accounts when the payment is received.

Ways Technology Influences the Revenue Cycle

Many companies now offer accounts receivable software packages. Below are a few programs that can be found on the internet.

• R*Kom
• Accura Software
• Cougar Mountain Software
• Cpak
• Medisoft Patient Accounting

On-line computer networks have lead the way to Electronic Data Interchange, or EDI for short.

In Electronic Data Interchange computers are linked together, allowing for a computer to computer exchange of information. This enables companies to exchange business documents, such as those used with a customer.

There are many advantages to EDI.

• The need for data entry is eliminated, resulting in a decrease in costs, errors, and order processing time.
• Many large stores have point-of-sale (POS) systems that record sales and resulting decrease in inventory by scanning a product's bar code. EDI would link the retailer and its supplier, automatically recognizing when inventory was low and replenishing it. This helps to improve inventory and production management.
• Using EDI to bill customers speeds up the billing process, and cuts processing costs.
• Strategic business partnerships can also be forged through the use of EDI.

Premenos is a company that sells EDI software. Their site offers information on many of the basics of EDI, and also lists many of the standards for using EDI.

EIDX is an Electronic Industry Data Exchange Association is a non-profit organization composed of many companies in the electronics industry. Their goal is to provide a framework for the electronic industry in meeting the challenges of using technology for information exchange.

Electronic Funds Transfer (EFT)

In electronic funds transfer customers can send their payments electronically to the company's bank. This process eliminates the delay associated with mail delivery. The delay associated with clearing a check is also eliminated.

Hopefully this page will help anyone who would like information on the revenue cycle, or how technology may help to implement or update an existing accounting information system.