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Discuss the role of information systems in enhancing business process with close reference to revenue cycle. (20 Marks) A revenue cycle is the process businesses use to describe the financial progression of their accounts receivables from the very beginning, when they first acquire product, if they're product based, until they get paid, if they get paid in full. The revenue cycle is defined as a recurring set of business activities and related information processing operations associated with providing goods and services to customers and collecting cash in payment for those sales (Romney and Steinbart, 2002). The primary external exchange of information in revenue cycle is with customers. The revenue cycles primary objective is to provide the right product in the right place at the right time for the right price. There are 3 basic functions of the AIS in the revenue cycle: (1) Capturing and processing data about business activities, (2) Storing and organizing that data to support decision making, (3) Providing controls: ensure reliability of data & safeguard resources. One of the objectives of accounting information system in the revenue cycle is to support the performance of the organisations business activities by efficiently processing transaction data. Meanwhile, Walker and Johnson (2001) defines the revenue stream in detail, which includes sales order receipt and processing, credit verification, pricing, invoicing, revenue recording, return processing, and cash collection. The second function of accounting information system in revenue cycle is to provide adequate control of the business. The controls ensure that all transactions are properly authorised, valid and recorded accurately. The controls include the safeguard of assets (cash, inventory, and data) from loss or theft and are to ensure that business activities are performed efficiently and effectively (Noor Azizi, et al., 1998 and Romney and Steinbart, 2002). The third function of the accounting information system in revenue cycle is to provide useful information for decision making. Sales and cash collection involve the decisions and processes necessary for the transfer of the ownership of goods and services to customer, for example, to respond to customer enquiries and determine inventory availability. Walker and Johnson (2001) stated that revenue
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stream information systems provide the foundation for processing of clerical functions, such as billing and journal entries; linking sales, order processing, order status, customer service and cash receipts; customer relations support; control of uncollectible accounts; and reporting to management and regulatory agencies. Basically there are four basic business activities performed in the revenue cycle: Sales order entry: The primary objectives of the sales order entry process are to accurately and efficiently process customer orders, ensure that the company gets paid for all credit sales and that all sales are legitimate, and to minimize the loss of revenue arising from poor inventory management. This is achieved through many different ways like phone, Optical scanners can convert hardcopy to electronic data or customers enter data. Choice boards allow customers to customize products to their needs (e.g., Dell). Use EDI (EDINT) for orders or to allow vendors to manage inventory (vendor managed inventory (VMI). Software can be used to optimize selling prices! Most business-to-business sales are made on credit. Credit sales should be approved before they are processed. Each customer will have a credit limit. Credit limit is the maximum allowable account balance for each customer based on the customers past credit history and ability to pay. Customer services is so important that many companies use special software packages, called Customer Relationship Management (CRM) systems, to support this vital process. The goal of customer relationship management is to retain customers. This is important because a general marketing rule of thumb is that it costs at least five times as much to attract and make a sale to a new customer as it does to make a repeat sale to an existing customer. Transaction processing technology can also be used to improve customer relationships. For example, many commercial POS systems can link not only with the inventory file but also with the customer master file. This not only automatically updates accounts receivable balances but provides an opportunity to print customized coupons and personal messages on each sales receipt, such as Thank you. Web sites provide a cost-effective alternative to traditional toll-free telephone customer support, automating that process with a list of frequently asked questions (FAQs).

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Shipping: The primary objective of the shipping function is to fill customer orders efficiently and accurately, and to safeguard inventory. Shipping consists of the following two steps: (1) Picking and packing the order and (2) Shipping the order The picking ticket printed by sales order entry triggers the pick and pack process. Some of the investments companies have an automated warehouse system which includes: computers, barcode scanners, conveyer belts and communications technology. Some warehouses have no peopleuse robots. Radio-Frequency Identification (RFID) is replacing bar codes. The RFID tag eliminates the need to align items with scanners; instead, the tags can be read as the inventory moves throughout the warehouse. The shipping department compares the physical count of inventory with the quantities indicated on the picking ticket and with the quantities indicated on the copy of the sales order that was sent directly to shipping from sales order entry. The packing slip lists the quantity and description of each item included in the shipment. The bill of lading is a legal contract that defines responsibility for the goods in transit. If the customer is to pay the shipping charges, the copy of the bill of lading may serve as a freight bill, to indicate the amount the customer should pay to the carrier. One major decision that needs to be made when filling and shipping customer orders concerns the choice of delivery method. Another important decision concerns the location of distribution centers. RFID systems can provide real-time information on shipping status and thus provide additional value to customers. Billing: The primary objectives of the billing and accounts receivable functions are to ensure that customers are billed for all sales that invoices are accurate and that customer accounts are accurately maintained. Involves two separate but related tasks: Invoicing: The document created in the billing process is the sales invoice, which notifies customers of the amount to be paid and where to send payment. Updating accounts receivable: The accounts receivable function uses the information on the invoice to debit the customers accounts for credit purchases and credit the customers accounts when payment is received.
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Cash collections: The primary objective of the cash collections function is to safeguard customer remittances. Its the final step in the revenue cycle is cash collections. The cashier handles customer remittances and deposits them in the bank. A remittance list provides the names and amounts of all customer remittances, and sends it to accounts receivable. Imaging technology can be used to improve the efficiency of processing customer payments. Electronic data interchange (EDI) is the use of computerized communication to exchange business data electronically in order to process transactions. Electronic Fund Transfer (EFT) only involves the transfer of funds. Although every bank can do EFT through the ACH system, not every bank possesses the EDI capabilities necessary to process the related remittance data. Many companies have to separate the EFT and EDI components of processing customer payments. Financial electronic data interchange (FEDI) integrated the exchange of electronic funds transfer (EFT) with the exchange of the remittance data; electronic data interchange (EDI). Effective management of revenue cycle activities requires timely access to accurate information Operational data are needed to monitor performance and to perform recurring tasks. In addition, current and historical information is needed to enable management to make strategic decisions. The accounting information system must also supply the information needed to evaluate performance of critical processes.