1. Sales/Collection Process
Chapter 11
Sales/Collection Process
McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Outline Objectives Porter’s value chain
Steps in the sales / collection process
Documents
Internal controls
Information technology
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3. Objectives When you finish this chapter, you should be able to:
Explain the elements of Porter’s value chain
Explain the role and purpose of the sales / collection process
List and discuss, in order, the steps in the process
Identify and describe documents commonly used in the process
Suggest and evaluate internal controls associated with sales / collection activities
Explain how information technology can make the sales / collection process more effective and efficient
Create and interpret systems documents related to sales and collections
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4. Porter’s value chain
A way of conceptualizing common activities organizations use to create value for their stakeholders
Two parts
Primary activities
Support activities
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5. Porter’s value chain Primary activities Support activities
Inbound logistics: transporting raw material and inventory from a supplier
Operations: transforming that material into goods for sale
Outbound logistics: shipping the goods to the point of sale
Marketing and sales: motivating customers to buy the goods
Service: following up after the sale
Support activities
Information technology: computers and other IT that support the organization
Human resource management: managing the people in the organization
Infrastructure: organizational structure, control systems and culture
Procurement: the purchasing function
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6. Steps in the sales / collection process
Take customer order
Approve customer credit
Fill the order based on approved credit
Ship the product
Bill the customer
Collect payment
Process uncollectible receivables as necessary
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7. Steps in the sales / collection process
Figure 8.2
Sales / collection DFD
1.0
Take order.
Customer
Order info
2.0
Check credit.
Order total
Credit info
3.0
Fill & ship order
Approved credit
Delivered goods
4.0
Bill client.
Billing info
5.0
Receive payment
Payment
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8. Documents Customer order Picking list
Summarizes items ordered and prices
Originates in sales department
Terminates in warehouse
Picking list
Guides selection of items from warehouse
Originates in warehouse
Terminates in shipping department
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9. Documents Packing list Bill of lading Specifies contents of shipment
Originates in shipping department
Terminates with customer
Bill of lading
Specifies freight terms
FOB destination or shipping point
Freight prepaid or collect
Originates in shipping department
Terminates with common carrier
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10. Documents Customer invoice Customer check Remittance advice
Bills client
Originates in billing department
Terminates with customer
Customer check
Remits payment
Originates with customer
Terminates with cash receipts department
Remittance advice
Provides source document for AIS
Originates with customer
Terminates with accounting
Deposit slip
Transmits cash receipts to bank
Originates with cash receipts department
Terminates with bank
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11. Internal controls Establishing a formal credit approval process
Maintaining adequate inventory
Incorporating independent order checking
Insuring goods in transit
Matching documents prior to billing
Separating duties: authorization, custody, recordkeeping
Endorsing checks restrictively
Reconciling the bank statement
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12. Information technology
Maintain customer lists
Generate sequentially-numbered forms
Look up inventory status
Identify unpaid and past-due invoices
Record transactions in the accounting information system
Report financial information with XBRL
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