Customer Order and Account Management Business Processes Chapter 7

Describe the customer order management business process. Learning Objective 1 Describe the customer order management business process.

Customer Order Management Business Process Inquiry (optional) Contract creation (optional) Order entry Shipping Billing

Customer Order Management Business Process Contract creation Inquiry Optional Steps Order entry Shipping Billing

Enterprise Resource Planning ERPs are information systems capable of storing and processing information pertaining to the customer order management business process. What is SAP R/3? It is a registered trademark. (http://www.sap.com)

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.

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

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.

Data Fields Customer master records are created by inputting information into R/3. 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?

Data Fields Initial screen Customer address Control data Marketing Payment transactions Unloading points

Data Fields Foreign trade Contact person Account management Payment transaction Correspondence Insurance

Data Fields Sales Shipping Billing Taxes Output Partner functions

One-time Customers R/3 allows for the creation of a single master record “dummy” for a one-time or infrequent customers.

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.

Illustrate controls that apply to order processing. Learning Objective 2 Illustrate controls that apply to order processing.

Order Entry Customer Enter order order Create order Sales order Master price list Order database Sales order

Credit Sales order Approve credit Credit processing Retrieve Credit files Approved order released for further processing Credit processing Order database Retrieve new orders Approved sales order

Finished Goods Picking list Pick order Delivery processing Prepare Inventory database Delivery processing Order database Prepare picking list Picking list with goods To shipping

Shipping Picking list with goods Packing List Match ship order Finished goods Picking list with goods Packing List Match ship order Delivery processing Order database Packing list with goods Bill of lading Customer

Billing Billing Prepare list invoice Invoice Invoice processing Customer Billing list Prepare invoice Invoice processing Order database Invoice Prepare journal entry Periodically Journal voucher General ledger

Describe the customer account management business process. Learning Objective 3 Describe the customer account management business process.

Customer Account Management Business Process The customer account management business process includes accounts receivable processing through the collection of customer payments on account.

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.

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.

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

Illustrate controls that apply to accounts receivable processing. Learning Objective 4 Illustrate controls that apply to accounts receivable processing.

Controls in the Accounts Receivable Business Process Cash Receipts Customer Receiving General Ledger Returned goods Remittance advices Control total Post

Controls in the Accounts Receivable Business Process Receiving Credit Billing Accounts Receivable General Ledger Invoices Control totals Sales return memo Independent count Approve sales return Journal voucher Sales return memo

Controls in the Accounts Receivable Business Process Customer Credit Billing Accounts Receivable Aged trial balance Periodic processing Credit memo Post Statements

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.

Write-Off Accounts Receivable General Ledger Accounts Receivable Treasurer Credit Internal Audit Aged trial balance Control total of write-offs Write-off memo 1 Write-off memo 1 Write-off memo 1 2 3 Write-off memo 3 File Worthless account list Confirmation of write-off sent to customer

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.

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.

Cash-Received-On-Account Business Process The major control feature of cash-received- on-account business process is the separation of the following functions: Mailroom Cash receipts Accounts receivable General ledger Bank Internal audit

Lock-Box Collection Systems What is float? 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.

Cash Sales Business Process The significant difference between a cash sales business process and a cash-received- on-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.

Cash Sales Business Process What is customer audit? It is a general term used to describe procedures in which the customer acts as a control over the initial documentation of a transaction.

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

End of Chapter 7