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

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 2 Learning Objective 1 Describe the customer order management business process.

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 3 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 7 – 4 Customer Order Management Business Process Orderentry Shipping Billing Contractcreation Inquiry OptionalSteps

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 5 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. (

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 6 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 7 – 7 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 4. Bill-to customer 3. Ship-to customer 4. Payee customer

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 8 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 7 – 9 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?

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 10 Data Fields  Initial screen  Customer address  Control data  Marketing  Payment transactions  Unloading points

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 11 Data Fields  Foreign trade  Contact person  Account management  Payment transaction  Correspondence  Insurance

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 12 Data Fields  Sales  Shipping  Billing  Taxes  Output  Partner functions

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 13 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 7 – 14 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 7 – 15 Learning Objective 2 Illustrate controls that apply to order processing.

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 16 Order Entry Customerorder Enterorder Createorder Salesorder Master price list Order database

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 17 Credit Retrieve new orders Salesorder Approvecredit Creditprocessing Credit files Approvedorderreleased for further processing Orderdatabase Approved sales order

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 18 Finished Goods Prepare picking list Pickinglist Pickorder Deliveryprocessing Inventorydatabase Orderdatabase Picking list with goods To shipping

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 19 Shipping Deliveryprocessing Packing list with goods Bill of lading Orderdatabase Customer PackingList Finished goods Picking list with goods Match ship order

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 20 Billing Billinglist Prepareinvoice Invoiceprocessing Orderdatabase Invoice Customer PreparejournalentryPeriodically Journalvoucher Generalledger

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 21 Learning Objective 3 Describe the customer account management business process.

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 22 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 7 – 23 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 7 – 24 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 7 – 25 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 7 – 26 Learning Objective 4 Illustrate controls that apply to accounts receivable processing.

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 27 Controls in the Accounts Receivable Business Process RemittanceadvicesRemittanceadvices Returnedgoods ControltotalControltotal Post AccountsReceivableCashReceiptsCustomerReceivingGeneralLedger

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 28 Controls in the Accounts Receivable Business Process AccountsReceivableBillingReceivingCreditGeneralLedger JournalvoucherJournalvoucher Invoices ControltotalsControltotals Sales return memo memo memoIndependentcountApprove sales return

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 29 Controls in the Accounts Receivable Business Process AccountsReceivableBillingCreditCustomer StatementsStatements Aged trial balance balancePeriodicprocessing CreditmemoCreditmemo Post

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 30 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 7 – 31 Write-Off Accounts Receivable GeneralLedgerAccountsReceivableTreasurerCreditInternalAudit Write-offmemo Write-offmemo 3 File Worthless account list Worthless Aged trial balance balanceControl total of write-offsControl write-offs Confirmation of write-off sent to customer Write-offmemo 1 Write-offmemo1

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 32 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 7 – 33 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 7 – 34 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

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 35 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 7 – 36 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.

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 7 – 37 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 7 – 38 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 7 – 39 End of Chapter 7