Chapter 9:

The Revenue
Cycle

Prepared by
Kent Wilson
University of South Australia

Revenue Cycle Overview and

Key Objectives
The revenue cycle consists of all events
that are involved in the exchange of
goods and services with customers,
including the collection of payment for
those goods and services
Excellent customer service must be
provided at all times

Source Documents
1. Customer order
2. Order acknowledgement
3. Credit application
4. Sales order
5. Goods packing slip

Source Documents

(Cont)

6. Bill of lading
7. Shipping notice
8. Sales invoice
9. Remittance advice
10.Customer service log

Strategic Implications of the

Revenue Cycle
The level of sales drives all other activity
levels within the organisation
In order to survive and prosper an
organisation must not only remain profitable,
it also must be able to achieve positive cash
flows
A well controlled revenue cycle can provide a
competitive advantage by providing superior
customer service

Technologies Underpinning
the Revenue Cycle

ERP (Enterprise Resource

Planning)
o Improves the integration of enterprise - wide
data

EDI (Electronic Data

Interchange)
o Enables the exchange of data between two
separate computer systems

Technologies Underpinning
the Revenue Cycle (Cont)
XML (eXtensible Markup
Language)
o Used for online sales sites to provide efficient
data exchange

CRM (Customer Relationship

Management)
o Improves understanding of customers and
their interaction with the organisation

Data & the Revenue

Cycle
Revenue cycle activities require
access to:
o Customer data
o Inventory data
o Accounts receivable data

Revenue Cycle Business

Decisions
Strategic Level:
o
o
o
o

Price setting
Operational Level:
o Responding to customer
Sales return & warranty
inquiries
Provision of credit
o Credit extension
Cash collection
o Inventory availability
o Delivery method
o Cash receipt allocations

Revenue Cycle
Documentation

Revenue Cycle
Context

Revenue Cycle Logical Data

Flows

Revenue Process
Activities
1.

Process Customer Order

2.

Ship Goods

3.

Bill the Customer

4.

Receive & Record Payment

Process the Sales

Order
Key activities:
o Check inventory levels
o Credit check
o Create sales order
Backorder for goods not available

Table 9.3, p416 summarises

these activities

Pick, Pack and Ship the

Goods
Key activities:
o Pick the goods
o Prepare for shipping
o Deliver the goods

Table 9.4, p421 summarises

these activities

Bill the Customer

Key activities:
o Check sales completion
o Create invoice

Table 9.5, p426 summarises

these activities

Receive and Record

Payment
Key activities:
o Receive payment
o Record payment

Table 9.6, p428 summarises

these activities

Measuring Revenue Cycle

Performance

Overview of Chapter 9
The objectives and strategic
implications of the revenue cycle
were established
Technologies that underpin the
revenue cycle activities were
identified
Both strategic and operational

Overview of Chapter 9

(Cont)

The primary activities in the revenue

cycle were identified and discussed
Risks and ways of mitigating these
risks were considered
The importance of establishing KPIs
was emphasised

Key Terms
o
o
o
o

Back order
CRM
EDI
ERP

o
o
o
o

Exception report
XML
Post - billing system
Pre - billing system