1. Small Business Information Systems Professor Barry Floyd
Revenue Cycle
Small Business Information Systems
Professor Barry Floyd

2. Objectives Understand the notion of a ‘business process’
Identify activities and documents in the standard ‘revenue’ / ‘money in’ business process
Have a general understanding the Data Flow Diagram technique of representing an information system process
Discuss how the appropriate design of revenue cycle tasks can provide value
Identify key reports to assess process and organizational performance in the revenue cycle
Identify potential business risks (we’ll discuss how to handle them later in the quarter)
See (and know) how to use QB in handle the revenue cycle

3. References http://en.wikipedia.org/wiki/Enterprise_resource_planning

4. Agenda Understand notion of activity and process
Overview of Revenue Cycle

5. Business Activities Our goal is to identify the various activities which take place in our business and to assign a person to be responsible for assuring that activity is accomplished effectively.
A business activity ...
produces some clearly identifiable result (product, idea, decision, and so on).
An activity has clear boundaries--there is a beginning and an ending. Activities don’t overlap.
An activity is carried out as a unit, by a single person or a team.
Once initiated, an activity proceeds largely independently of other activities.

6. Example Business Activities
Add a customer to our customer list
Send a bill to a customer
Throw out broken lamp from inventory
Select a new vendor to purchase from
Update the credit amount for a customer
and more!

7. Grouping Business Activities
Business activities are typically grouped into what are called business processes (and subprocesses) and can also be referred to as a cycle
Historically business processes are typically grouped into what are called business functions.
For example...
We could have a group of activities such as
evaluate vendors
select vendor
generate purchase order
grouped into the business process PURCHASING
where Purchasing was one process in the function MATERIALS MANAGEMENT
The issue now, is that we have business processes that span business functions … for example marketing should talk more with production to both build and sell products.

8. So What?
Your goal in your business is to determine where information technology can be effective. Given that the business is new, you need to `create it’. To create it, I ask that you describe the main activities of your business and assign them to someone in your organization.
You can do this at the level that makes sense to you -- activities, processes or functions.
Later, you will evaluate which activities QuickBooks and Great Plains supports.

9. QuickBooks Money In

10. Key activities/processes in the revenue cycle
The primary objective of the revenue cycle is to provide the right product in the right place at the right time for the right price
Accounting oriented tasks include:
Sales Order Entry
Shipping
Billing and accounts receivable
Cash collections
What marketing / analysis tasks exist? We’ll talk about this a bit later …

11. Data Flow Diagram of Revenue Cycle
Overview Diagram
What is a dataflow diagram?
Level 0 Diagram
Level 1 Diagram – Order
Level 1 Diagram – Pick
Level 1 Diagram – Billing

12. Data Flow Diagrams
A diagramming to show how a system ‘works’ by showing four different part of the system:
Processes
activities like entering a sales order
Data stores
Files, databases, file folders … anything that holds data
Data flows
Movement of data from one activity to another
External entities
People, departments, companies … who receive data from us or send data to us and we are not concerned about what they do to give us the data or what they do when they get our data

13. Different ‘levels’ of DFDs
The process B is broken into
three smaller substeps …
This ‘leveling’ is done to reduce
the complexity of a diagram on
a page. A D z x B C y x
B.2 z
B.1
B.3 y

14. Key Documents
Estimate – offer of goods/services at a price for a specific period of time
Invoice – request to pay
Credit Memo – supports adjustments to customer accounts
Bill of Lading – legal doc to transfer ownership to shipping company
Packing slip – states what is send
Order – customer request for goods / services
Backorder – out of stock … buy more
Remittance advice – receive cash
Sales Return Authorization – Approval document that return is allowable

15. Technology
Take a few minutes and discuss with those at your table, places in this business process where you think technology can play a role to …
Reduce costs.
Add additional value to the customer.
Provide better information to management.

16. QuickBooks’ Response
Let’s see how QuickBooks supports the Revenue Process.

17. QuickBooks Tasks Add a new product
Add an income account for this product
Create an estimate for a customer
Change the status of the estimate
Do the work
Invoice the customer
Receive payment
Deposit the $$$ into our bank account

18. Some Key Decisions
How could you improve customer service? What information does Marketing need to perform its tasks better?
How could you identify your most profitable customers and markets?
How can you improve your monitoring of credit accounts? How would any changes in credit policy affect both sales and uncollectible accounts?
How could you improve its cash collection procedures?

19. Reports
What would you want to know about this process to see if it is performing ‘well’?
What metrics are important to you? Why?
Which ones are most important to your business? Why?
What reports does QuickBooks provide? Are they adequate?

20. Summary
The revenue cycle is an important cycle to understand. Failure to manage your business’ cash flow leads to failure.
Understanding the use of technology is important for both reducing costs and for improving customer service and differentiating your business from your competitors.