Question

What is Revenue Cycle and how does it function? Why is it important for managers to understand?

Answer 1

the revenue cycle is the entire process records transaction from sale to receipt of payment.

In the case of manufacturing companies revenue cycle begins when the production of goods is complete. After the goods to be produced is ready, the next step is processing the order and getting the inventory ready to be delivered to the customers. The sales team might also carry out sales activities to make the final product reach to the customers. After delivery , an invoice is made and sent to the customers, upon payment of which the revenue cycle is complete.

The managers need to understand the revenue cycle, to look for errors in the the entire process of collecting revenue, if they are properly trained and do not properly understand the process , how would they understand the errors and rectify it. If the managers properly understand the revenue cycle it helps keep the business running. If the revenue cycle is not properly managed, then it is possible to overspend.