Assignment 3: Audit Risk and Sampling Due Week 6 and worth 100 points In this assignment, you will prepare a two to three (2-3) page report that addresses the requirements specified in the case. Fully

Running head: REVENUE CYCLE 0

Flow of Revenue

Teisha Robinson

Professor Bunney Schmidt

Acc 562 Advanced Auditing Strayer University

April 20, 2020

In modern days, various firms sell various kinds of commodities and services. Due to these business activities, raising revenue has become more convenient. Revenue is defined as the value income derived from sales of commodities and services. Revenues from the starting of a firm`s income statement. Some processes form a revenue cycle. A revenue cycle is a recurring set of sales activities and other information related to offering products and services to consumers and cash collection in compensation for sales. It starts in marketing and customer location to the allocation of commodities and services and ends in customer`s settlements. Besides, revenue management and control policies are required to enhance proper run overall activities, including receipts and receivables. It is also important for ensuring good financial administration activities (Sandler., 2015). Therefore, the government should embrace control over revenues. There are five primary practices in the sales cycle. They include order sales, selling of products and services, shipping/delivery of goods and services, billing, and collection of revenues.

Sales Order

A sales order is a form created by a seller over receiving a buy order from a client specifying details on the commodities or services. The documents also determine the cost, nature, details of the customer, for instance, his or her location, billing address, means of settlement, and even terms and conditions (Zhao., 2017). At first, a customer sends a buy order to the seller describing the commodity or service, including delivery, mode of payment, delivery address, and terms and conditions. The sales order is essential because; it provides information on the catalog. It indicates the location and quality of commodities, and it is consulted by the billing department to verify details. It is also used by firms when reviewing income statements and considering loan qualifications. The sales order reduces work time, promotes client service, processes information anywhere, and enables in scaling up.

Customer Service

After a purchase order has been sent, the seller prepares a sales order. A seller identifies potential clients, approaches them, and gathers the information about these potential buyers. This step is crucial when running business activities; it includes events like a description of the products to the customers, demonstrations of the use, negotiating the price, and biding (Zeidan et al., 2017). It also includes the signing of the deal and contract and shipping of the commodity or service being bought to the shipping address given by the customer.

Shipping /Delivery

After purchasing and selling activities are done, the next step is the shipping process. The seller delivers goods and services to the buyers in the shipping address. Any delay in delivery affects the verification of contact (Sandler., 2015). The distribution of an order is vital to avoid costly blunders. In case a customer calls for a change in the delivery processes, a new deal may be signed to reflect the adjustment.

Billing

The billing step can be long or short, relying on how a firm function. Some firms receive settlements during the time of sales or after completion of a service or delivery of a commodity. Other firms function on credit and do not get payments until commodities and services have been shipped and received by the buyer, and after he accepts them (Zhao., 2017). A firm may be required to send a bill to a customer to acquire a settlement. The firm may need to bill the client`s credit card or bank account in this step if he or she has authorized so.

In this stage, a company tries to collect all pending invoices. If a customer does not complete the settlement in a period of 30days after acquiring a bill, the firm`s accounts receivable arranges a report outlining where the un-gathered revenue is. Some firms allow unsettled debts to be charged off (Zhao., 2017). Other firms pursue other gathering activities. By analyzing the revenue cycle in this stage, a firm can change other steps of the revenue cycle to collect cash more effectively.

In conclusion, the revenue cycle is a crucial component and is used in accounting and business activities. It describes the journey of commodities and services from the starting of sales. Revenues flow starts when firms and investments ship their commodities and services and end when a client makes full settlement.

References

Sandler, M. (2015). Revenue-cycle firms tackle value-based payment and ICD-10. Mod Healthc, 45(36), 35.

Zeidan, R., & Shapir, O. M. (2017). Cash conversion cycle and value-enhancing operations: Theory and evidence for a free lunch. Journal of Corporate Finance, 45, 203-219.

Zhao, R. (2017). Revenue benchmark beating and the sector-level investor pricing of revenue and earnings. Accounting Horizons, 31(2), 45-67.