The Billing /Accounts Receivable / Cash Receipts (B/AR/CR) Process Pertemuan 12 – 13 - 14 Matakuliah: F0204 / Sistem Akuntansi Tahun: 2007.

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Presentation transcript:

The Billing /Accounts Receivable / Cash Receipts (B/AR/CR) Process Pertemuan 12 – Matakuliah: F0204 / Sistem Akuntansi Tahun: 2007

Bina Nusantara Introduction The billing/accounts receivable/cash receipts (B/AR/CR) process is an interacting structure of people, equipment, methods, and controls designed to create information flows and records that accomplish the following: 1.Support the repetitive work routines of the credit department, the cashier, and the accounts receivable department 2.Support the problem-solving processes of financial managers 3.Assist in the preparation of internal and external reports

Bina Nusantara Horizontal View B/AR/CR 1. Shipping department informs the accounts receivable department (billing section) of shipment.

Bina Nusantara Horizontal View B/AR/CR 2. Accounts receivable department (billing) sends invoice to customer.

Bina Nusantara Horizontal View B/AR/CR 3. Accounts receivable department (billing) informs general ledger process that invoice was sent to customer.

Bina Nusantara Horizontal View B/AR/CR 4. Customer, by defaulting on amount due, informs credit department of nonpayment.

Bina Nusantara Horizontal View B/AR/CR 5. Credit department recommends write-off of the receivable and informs accounts receivable department.

Bina Nusantara Horizontal View B/AR/CR 6. Credit department, by changing credit limits, informs sales order department to terminate credit sales to customer.

Bina Nusantara Horizontal View B/AR/CR 7. Accounts receivable department informs general ledger process of write-off.

Bina Nusantara Horizontal View B/AR/CR 8. Customer makes payment on account.

Bina Nusantara Horizontal View B/AR/CR 9. Cashier informs accounts receivable department (cash applications section) of payment.

Bina Nusantara Horizontal View B/AR/CR 10. Cashier informs general ledger process of payment.

Bina Nusantara Cash Receipts Management In the billing function, the goal is to get invoices to customers as quickly as possible; with the hope of reducing the time it then takes to obtain customer payments. Having the B/AR/CR process produce invoices automatically helps ensure that invoices are sent to customers shortly after the goods have been shipped. Float, when applied to cash receipts, is the time between the customer tendering payment and the availability of good funds. Good funds are funds on deposit and available for use.

Bina Nusantara Cash Receipts Management The following procedures are designed to reduce or eliminate the float associated with cash receipts: –Checks High-speed electronic equipment is able to read the magnetic ink character recognition MICR code and sort checks at speeds approaching 100,000 checks per hour –A charge card or credit card A third party, for a fee, removes from the collector the risk of noncollection of the account receivable. The retailer submits the charges to the credit card company for reimbursement. The credit card company bills the consumer –A debit card Authorizes the collector to transfer funds electronically from the payer’s to the collector’s balance. Some retailers find the notion of direct debit attractive because it represents the elimination of float.

Bina Nusantara Other solutions to float problems Electronic funds transfer Automated clearing house Lockbox and electronic lockbox services Electronic checks Electronic cash See Technology Summary 11.1

Bina Nusantara The Fraud Connection Many result from improper segregation of duties –Custody of cash –Recording of cash transactions Lapping –Employee pockets cash/check received from customer A –So that customer A doesn’t complain about missing payment, employee credits customer B’s payment to A’s account –So that customer B doesn’t complain about missing payment, employee credits customer C’s payment to B’s account –This scheme comes unraveled when the employee runs out of hours in the day

Bina Nusantara Data Descriptions in B/AR/CR A/R master data –The accounts receivable master data is a repository of all unpaid invoices issued by an organization and awaiting final disposition. –Two types of accounts receivable systems exist: –(1) Balance-only system –(2) Open item system

Bina Nusantara Balance-only system In a balance-only system, AR records show a customer’s current balance due, past-due balance, and the finance charges and payments related to the account. Each month, unpaid current balances are rolled into the past-due balances. Electric and gas utility companies typically use balance-only systems.

Bina Nusantara Open-item system The open-item system appropriate in situations where the customer typically makes payments for specific invoices when those invoices are due. In the AR master data, each record consists of individual open invoices, to which payments and adjustments are applied. On the customer statement of account, a “lump sum” beginning balance is not shown. Instead, all invoices that are yet to be settled continue to be listed, along with payment details. Also, each open invoice is grouped by aging category and aged individually. Monthly, or at specified times, the customer accounts are aged and an aging schedule is printed.

Bina Nusantara Data Descriptions in B/AR/CR Sales event data –one or more invoice records (details contained in invoice data) A/R adjustments data –write-offs, estimated doubtful a/c, sales returns, etc. –Journal voucher #, trans. code, authorization Cash receipts data –details of customer payments

Bina Nusantara Types of Billing Systems Post-billing system –Invoices are prepared after goods are shipped and shipping notice compared to sales order notice –There may be a delay between receiving the order and shipping –Post-billing is assumed in Ch. 12 diagrams Pre-billing system –Invoice prepared upon receipt of order (after inventory and credit checks) –There is little or no delay between receiving order and shipping

Bina Nusantara Billing Function System Flowchart

Bina Nusantara Control Matrix for Billing Process

Bina Nusantara Cash Receipts System Flowchart

Bina Nusantara Cash Receipts Control Matrix