Customer Order and Account Management Business Processes Chapter

Customer Order and Account Management Business Processes Chapter 7 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7– 1

Learning Objective 1 Describe the customer order management business process. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 2

Customer Order Management Business Process Inquiry (optional) Contract creation (optional) Order entry Shipping Billing 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 3

Customer Order Management Business Process Optional Steps Order entry Inquiry Shipping Contract creation Billing 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 4

Enterprise Resource Planning ERPs are information systems capable of storing and processing information pertaining to the customer order management business process. It is a registered trademark. (http: //www. sap. com) 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 5

Enterprise Resource Planning SAP R/3 stores and processes data related to the customer order management business process. The customer order management business process is part of SAP’s sales and distribution module. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 6

Customer Master Records These records have to be created before processing sales orders. SAP R/3 requires four types of master records: 1. Sold-to customer 3. Ship-to customer 4. Bill-to customer 4. Payee customer 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7

Customer Master Records When a new sold-to-customer master record is created, the other three master records are automatically created. Customer master records should be unique. SAP R/3 requires that a customer has been approved for sales prior to the creation of master records. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 8

Data Fields Customer master records are created by inputting information into R/3 guides the input process by displaying a series of customer screens on a video monitor. Each screen collects a category of data. What are these Create Customer screens? 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 9

Data Fields v Initial screen v Customer address v Control data v Marketing v Payment transactions v Unloading points 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 10

Data Fields v Foreign trade v Contact person v Account management v Payment transaction v Correspondence v Insurance 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 11

Data Fields v Sales v Shipping v Billing v Taxes v Output v Partner functions 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 12

One-time Customers R/3 allows for the creation of a single master record “dummy” for a one-time or infrequent customers. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 13

Standard Order Processing in SAP R/3 Standard order processing describes the customer order management business process in which customer orders are filled from an inventory of finished goods. A customer master record has to exist before a sales order can be created. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 14

Learning Objective 2 Illustrate controls that apply to order processing. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 15

Order Entry Customer order Enter order Create order Master price list Sales order Order database 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 16

Credit Sales order Retrieve new orders Approve credit Credit files Credit processing Order database Approved sales order 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood Approved order released for further processing 17

Finished Goods Picking list Prepare picking list Pick order Inventory database Delivery processing Order database Picking list with goods To shipping 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 18

Shipping Picking list with goods Finished goods Packing List Match ship order Delivery processing Packing list with goods Bill of lading Order database Customer 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 19

Billing list Order database Customer Prepare invoice Invoice processing Invoice Periodically Prepare journal entry Journal voucher 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood General ledger 20

Learning Objective 3 Describe the customer account management business process. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 21

Customer Account Management Business Process The customer account management business process includes accounts receivable processing through the collection of customer payments on account. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 22

Customer Account Management Business Process Accounts receivable also maintains customer credit and payment history information. This information is essential in the customer order management business process. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 23

Customer Account Management Business Process A subsidiary ledger of individual accounts is maintained, with a control account in the general ledger. Remittance advices are routed from the cash receipts functions. Credit memos and other invoice adjustments are routed from the billing department. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 24

Customer Account Management Business Process There are two basic approaches to an accounts receivable application. What are these approaches? 1. Open-item processing 2. Balance-forward processing 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 25

Learning Objective 4 Illustrate controls that apply to accounts receivable processing. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 26

Controls in the Accounts Receivable Business Process Customer Receiving Returned goods Cash Receipts Accounts Receivable Remittance advices Control total Post 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood General Ledger Control total 27

Controls in the Accounts Receivable Business Process Receiving Credit Independent Approve count sales return Sales return memo Billing Invoices Accounts Receivable General Ledger Control totals Journal voucher Sales return memo 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 28

Controls in the Accounts Receivable Business Process Customer Credit Aged trial balance Billing Periodic processing Credit memo Statements Accounts Receivable Aged trial balance Credit memo Post Statements 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 29

Write-Off Accounts Receivable The basic feature in a write-off process is an analysis of past-due accounts. This is usually done with an aged trial balance report. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 30

Write-Off Accounts Receivable Treasurer Write-off memo 1 Credit Accounts Receivable Aged trial balance Write-off memo 1 Write-off memo 3 Worthless account list 2 General Ledger Control total of write-offs Internal Audit Control total of write-offs 3 File Confirmation of write-off sent to customer 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 31

Cash-Received-On-Account Business Process A cash-received-on-account business process is 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 a cash window. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 32

Cash-Received-On-Account Business Process Customer payments should always be acknowledged. The recorded receivable that exists prior to the payment enhances control over payments received. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 33

Cash-Received-On-Account Business Process The major control feature of cash-receivedon-account business process is the separation of the following functions: Mailroom Cash receipts Accounts receivable General ledger Bank Internal audit 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 34

Lock-Box Collection Systems It is the time between the signing of the payment check by the customer and the moment the firm has use of the funds. A lock-box system reduces the float by having the checks deposited to a firm’s account before the firm processes them. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 35

Cash Sales Business Process The significant difference between a cash sales business process and a cash-receivedon-account business process is that there is no previous asset record in a cash sales business process. Cash sales are recorded in a cash register or other secure device to provide documentation. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 36

Cash Sales Business Process It is a general term used to describe procedures in which the customer acts as a control over the initial documentation of a transaction. 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 37

Cash Sales Business Process What are some of these procedures? Pricing in such a way that the customer expects change Awarding a customer free items if the receipt has a mark 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 38

End of Chapter 7 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 39