Question

In: Finance

In your facility, what department is responsible for each part of the revenue cycle? (use any...

In your facility, what department is responsible for each part of the revenue cycle? (use any facility like an example, or your working are)

How do they interact to complete the process?

Solutions

Expert Solution

The answer is based on the organization I used to work for.

_____

In our organization, there was an independent accounts receivable section that was responsible for the revenue cycle management. Accounts receivable indicates the value of sales/services that have been provided on credit to the customers, that is, for which the cash has not been received by the company. There were various teams in this department such as sales order generation team, invoice processing team, cash collection team and reconciliation team. The process of revenue cycle used to start with the generation of a sales order as the per the requirements of the customer after the prices and other terms and conditions have been finalized. Once the sales order has been booked in the system, the goods were supplied to the customer. As soon as the goods were supplied, an accounts receivable (equivalent to the value of goods supplied) was booked in the system by issuing an invoice to the customer. The customer was contacted just before and at the end of the credit period for collection of amount due which was later on reconciled with the value of invoice and sales order. The entire process was automated and these teams used to interact through mails/conference calls to ensure that the activities in the department were getting performed as per the company's policies and there were no critical issues in the management of revenue cycle. The system used to perform checks like invoices were getting issued only against valid sales orders and the customers were notified in a timely manner on the amount due from them. All the sales orders used to have an expiry period after which the approval of the department head was required for any kind of extension. Similarly, if the customer had returned some goods, the invoicing team was responsible for ensuring that a credit note was issued (to the customer), thereby, reducing the amount due from the customer.


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