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Define a business process

A business process is a set of procedures and policies designed to create value for a stakeholder


Porter's value chain

Primary activities: Inbound logistics, operations, outbound logistics, marketing & sales, service

Support activities: Procurement, information technology, human resource management, infrastructure


The purpose of the sales/collection process

To provide goods and services to clients and to collect payment


The steps of the sales/collection process

1. Take a customer's order
2. Approve the customer's credit
3. Fill order based on approved credit
4. Ship product (if necessary)
5. Bill the customer
6. Collect payment
7. Process uncollectible receivables as necessary


Step 1: Take a customer's order

Produces a sales order document (paper/electronic), electronic data interchange, type and quantity


Step 2: Approve the customer's credit

Mostly business to business, produces accounts receivable/ credit history report, constantly monitor AR to establish credit limit


Step 3: Fill order based on approved credit

May need to back order, RFDC, RFID, produces a picking ticket and packing slip


Step 4: Ship product (if necessary)

Shipping department compares physical count with order, inventory master file is updated, produces a packing slip and bill of lading


Step 5: Bill the customer

Company can offer discount for fast payment, creates a sales invoice (paper/electronic), electronic can save printing, postage and risk of human error


Step 6: Collect payment

A remittance list identifies names and amounts of customer remittances and send to AR, remittance advice advises company that they are remitting payment, involves a lockbox and EFT, credit cards etc.


Step 7: Process uncollectible receivables as necessary

Open invoice (customer pays per invoice) or balance forward (a monthly statement), the accounts receivable ageing schedule is typically used here.


Connecting the generic structure of AIS and S/C process

Inputs - sales order
Processes - Journal entries
Outputs - AR ageing schedule
Storage - Accounts receivable, inventory and customer master files, transaction files, junction files
Internal Controls - Pre numbered sales order, authorisation control


What are the source documents for the S/C process

Customer order; summarises items and prices
Picking list; Guide selection of items from warehouse
Packing list/slip; Specifies shipment contents
Bill of lading; Specifies the t+c's of freight
Customer cheque; Remit payment
Remittance advice; provides evidence of payment for AIS
Deposit slip; Transfer cash receipts to bank
Customer invoice; to bill client


What assets need to be protected?

Cash, inventory and data


Internal controls for the sales/collection process

- segregation of duties
- adequate documentation
- insurance
- proper inventory storage,
- employee training,
- daily cash deposits,
- document matching,
- information technology