The Expenditure Cycle

Category: Sales

Last Updated: 28 Feb 2023

Pages: 4 Views: 803

Table of contents

SUGGESTED ANSWERS TO DISCUSSION QUESTIONS

This should generate a great deal of discussion. The basic issue concerns the willingness of consumers to divulge the kind of information that would allow companies to personalize the sales interaction versus concerns that such information would be misused or sold to other parties. In addition, with the growing problem of identity theft, consumers are becoming increasingly concerned about the safety and security of their personal information.

Companies that wish to collect this data will most likely have to demonstrate the need for this information to the consumer and also the company’s ability to keep this information secure.

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Digitized products force little change on the four business activities of the revenue cycle. For all products, whether digitized or not, an order must be taken, the product shipped, an invoice delivered, and cash collected. The only thing that digitized products do is change the way these four activities are carried out. Digitized products actually facilitate the four activities by incorporating electronic sales orders, shipping, billing, and cash collections.

Employees need to be trained to use the POS properly. Such training should include understanding how the POS works, stressing that. In that errors on the employees part will directly affect the inventory master file numbers. If an item does not “scan”, then it must be rescanned or dealt with so that the integrity of the records is upheld.

Similarly, employees should be trained not to skip sales. If an item does not “scan”, the employee should be trained to accurately enter in the “bar code” of the item. Entering a generic or erroneous code not only creates an inventory error, but it also frustrates the customer who may take their business elsewhere. In addition, employees should be trained to report and/or fix errors in bar codes as they are encountered and in a timely manner.

The report already provides dollar amounts outstanding by number of days past due by customer and by invoice. However, the percentage of total accounts receivable categorized by days past due would help to alert management of categories that are increasing. This could also be reported by customer and by invoice. This way if a particular invoice was not being paid, the company could more quickly identify the invoice, contact the customer, and potentially resolve any problems or disputes about the particular invoice.

In addition, reporting by customer can help to identify chronic “slow paying” customers so that corrective action could be taken such as offering discounts for quick payment, changes in term, and notifying the credit manager to restrict credit for this particular customer. Furthermore, the company may have a certain threshold for each category of past due accounts either in percentages or absolute dollars. A metric could be calculated and presented that highlights the categories exceeding that threshold.

10. This is a good question to get students to explore and compare the role of technology in dynamic price setting policies. You may want to preface the discussion by relating the following scenario: You have graduated from collage and started your own consulting firm. A client has an urgent need that requires you to travel to his location. Since this is a last minute trip, you pay full price for an airline ticket. Since this client is on a fixed contract, you cannot charge the cost of the ticket back to the client.

While riding on the airplane you find yourself sitting next to a college student who is majoring in accounting. During the course of the conversation with this accounting student, you find that he purchased his airline ticket from a discount reseller and paid less than half of what you paid for the same flight. How do you feel about this arrangement? Do think this type of pricing arrangement could transfer to other products? Would the companies that sell these other products be put at a competitive disadvantage when customers find that they are paying different prices for the same goods or services?

The instructor can facilitate discussion of invoiceless pricing in a B2C environment by asking students how they would feel about not receiving a phone or cable bill. What are the problems the phone or cable company and phone or cable consumers encounter without a paper bill? What about billing problems and disputes. What about payment deadlines or consumers that want to pay in person or pay in cash?

Any form of electronic or digital cash has the same audit risks as physical cash: susceptibility to theft and loss of an audit trail.

In addition, digital “cash” also has risks associated with the durability of the store of value – to what extent can the cash be recovered if the storage media becomes defective? Another issue concerns the potential loss of privacy, because the digital currency can be “marked” in a manner that enables tracing its path through the economy.

Why not indeed? Copies of the sales order can be used by inventory personnel as a picking ticket to select inventory items ship to the customer. In similar fashion, the sales order converted into a picking ticket can also be used as a packing slip.

Just make sure a copy is sent with the package and not the original so that in case there is a problem the original form can be reviewed for any errors or discrepancy. If sales orders are created electronically, the information contained on the electronic sales order can be used to create paper (or electronic) picking tickets, packing slips, or invoices.