The primary source of every single business operational cash flows is sales. Therefore important to protect, regulate and monitor incomes using internal controlling software. The revenue cycle, hence, plays a role in facilitating proper management of revenue (Anderson, 2017). The cycle begins when a company takes an order, and it’s not complete until the payment is accepted for the ordered articles. There’re several steps involved in the revenue cycle. The first step is sales order processing. The sales order should be processed in an organized and efficient way to ensure timely and adequate deliveries.
The next step is the point of sale procedure. At this step, the sales procedures are adequately conducted to assure that all the sales collectible are worked on. It also involves posting the right effect of inventory and cash. The next step in the revenue cycle is credit card approval. Organizations should evaluate the credit rating before extending any credit sales to eliminate collection problems (Anderson, 2017). The fourth step in the revenue cycle is sales order acceptance. Companies should adequately evaluate and approve sales order before entering them into an accounting system. Once the sales orders are accepted, the next step is shipping of the goods. The products should be delivered in ways that maintain the highest service quality for the customers. Once the goods are shipped, the next step within the revenue cycle is invoicing of the accounts receivable. Invoices should be prepared and distributed in the right time to optimize customer payments and cash flow collection.
After the invoices have been sent a company should proceed to collect the accounts receivable. Trade receivables should be collected on time to ensure that an organization does not have cash flow problems. It is usually the last step in the revenue cycle unless there are customer returns. The given article is relevant since it outlines the sources of data used in an accounting information system. The controls within the cycle prevent revenue leaks and ensure that accurate data is processed. Furthermore, it provides that the maximum revenue is received at the minimum cost. Control on the revenue cycle ensures that payments are collected in time and that organizations do not have cash flow glitches.
Anderson, C. (2017). What is the Revenue Cycle? Bizmanualz. Retrieved from https://www.bizmanualz.com/strengthen-your-financials/what-is-the-revenue-cycle.html