Page 212 - Accounting Information Systems

CHAPT E R 4 The Revenue Cycle 183

to update the general ledger accounts in real time, if doing so poses no significant operational delays.
Finally, the batch program prepares and mails customer bills and transfers the closed sales records to the
closed sales order file (sales journal).

ADVANTAGES OF REAL-TIME PROCESSING
Reengineering the sales order processes to include real-time technology can significantly reduce operat-
ing costs while increasing revenues. The following advantages make this approach an attractive option
for many organizations:
1. Real-time processing greatly shortens the cash cycle of the firm. Lags inherent in batch systems can
cause delays of several days between taking an order and billing the customer. A real-time system
with remote terminals reduces or eliminates these lags. An order received in the morning may be
shipped by early afternoon, thus permitting same-day billing of the customer.
2. Real-time processing can give the firm a competitive advantage in the marketplace. By maintaining
current inventory information, sales staff can determine immediately whether the inventories are on
hand. This enhances the firm’s ability to maximize customer satisfaction, which translates into
increased sales. In contrast, batch systems do not provide salespeople with current information. As a
result, a portion of the order must sometimes be back-ordered, causing uncertainty for the customer.
3. Manual procedures tend to produce clerical errors, such as incorrect account numbers, invalid inven-
tory numbers, and price–quantity extension miscalculations. These errors may go undetected in batch
systems until the source documents reach data processing, by which time the damage may have al-
ready been done. For example, the firm may find that it has shipped goods to the wrong address,
shipped the wrong goods, or promised goods to a customer at the wrong price. Real-time editing per-
mits the identification of many kinds of errors as they occur and greatly improves the efficiency and
the effectiveness of operations.
4. Finally, real-time processing reduces the amount of paper documents in a system. Hard-copy docu-
ments are expensive to produce and clutter the system. The permanent storage of these documents
can become a financial and operational burden. Documents in digital form are efficient, effective,
and adequate for audit trail purposes.

AUTOMATED CASH RECEIPTS PROCEDURES
Cash receipts procedures are natural batch systems. Unlike sales transactions, which tend to occur contin-
uously throughout the day, cash receipts are discrete events. Checks and remittance advices arrive from
the postal service in batches. Likewise, the deposit of cash receipts in the bank usually happens as a single
event at the end of the business day. The cash receipts system in Figure 4-19 uses technology that auto-
mates manual procedures. The following discussion outlines the main points of this system.

Mail Room
The mail room clerk separates the checks and remittance advices and prepares a remittance list. These
checks and a copy of the remittance list are sent to the cash receipts department. The remittance advices
and a copy of the remittance list are sent to the AR department.

Cash Receipts Department
The cash receipts clerk reconciles the checks and the remittance list and prepares the deposit slips. Via
terminal, the clerk creates a journal voucher record of total cash received. The clerk files the remittance
list and one copy of the deposit slip. At the end of the day, the clerk deposits the cash in the bank.

Accounts Receivable Department
The AR clerk receives and reconciles the remittance advices and remittance list. Via terminal, the clerk
creates the cash receipts transaction file based on the individual remittance advices. The clerk then files
the remittance advices and the remittance list.