Question

Explain, on what criteria or by what internal controls in place, where Billing could be responsible for issuing invoices, sales journal, AR update (for both billing and payment received).

Answer 1

Internal controls are the checkpoints in every process. Internal controls are placed in a process to ensure that the transactions are completed correctly and accurately. They also reduce the risk of fraud and human error.

Billing is a significant part of the Accounts Receivable Process and is concluded once the invoice raised in collected. It's also covered under Order to Cash (O2C) process in terms of process outsourcing. Following is the stage-wise progress of activities in Order To Cash:

• Customer signs contract and deliverables are defined therein.
• Once deliverables are made/services provided, invoices are raised by Billing Team.
• Accounting Team accrues revenue entry based on sales journal.
• Collections Team follows up for payment of dues and collects payment.
• Accounting Team updates the Accounts Receivable based on collections received.

Although the process requires coordination among various departments including billing, accounting & collections, it's quite possible that all these functions can be performed by the same team. It's possible if:

• There's a small business with entire process handled by either an individual or small team.
• In case of project based teams, one team is responsible for entire O2C cycle for their project.
• In case of cloud based ERPs where real-time updation is done and the entries are passed automatically, same team performs all functions since the entire process in embibed in ERP with subsequent journals passed.
• In outsourcing environment, the service provider takes end-to-end ownership of the execution of O2C cycle.