Sales collection business process

The Sales/Collection The Sales/Collection Business ProcessBusiness Process

Chapter Learning ObjectivesChapter Learning Objectives1.1. Identify activities and documents common to Identify activities and documents common to

sales/collection business processes for various enterprisessales/collection business processes for various enterprises2.2. Recognize similarities and differences between different Recognize similarities and differences between different

types of revenue-generating enterprisestypes of revenue-generating enterprises3.3. Identify the components of the REA ontology in the Identify the components of the REA ontology in the

sales/collection business processsales/collection business process4.4. Explain how the sales/collection business process fits into Explain how the sales/collection business process fits into

an enterprise’s value systeman enterprise’s value system5.5. Explain how the sales/collection business process fits into Explain how the sales/collection business process fits into

an enterprise’s value chainan enterprise’s value chain6.6. Create a REA business process level model for an Create a REA business process level model for an

enterprise’s sales/collection business processenterprise’s sales/collection business process7.7. Create queries to meet common information needs in the Create queries to meet common information needs in the

sales/collection processsales/collection process

Sales/Collection Process in an Sales/Collection Process in an Enterprise Value SystemEnterprise Value System

Sales/Collection Business Process Sales/Collection Business Process in Enterprise Value Chainsin Enterprise Value Chains

REA Sales/Collection REA Sales/Collection Business Process Level Business Process Level

PatternPattern

Sales/Collection Process EventsSales/Collection Process Events

Instigation Events in the Revenue CycleInstigation Events in the Revenue Cycle Marketing events – internally instigatedMarketing events – internally instigated Customer inquiries – externally instigatedCustomer inquiries – externally instigated Resource - typeResource - type

Sales/Collection Process EventsSales/Collection Process Events Mutual Commitment Events in the Revenue Mutual Commitment Events in the Revenue

CycleCycle Involve the enterprise and an external business Involve the enterprise and an external business

partner agreeing to exchange resources at a partner agreeing to exchange resources at a defined future timedefined future time

Internal agents - sales or customer service Internal agents - sales or customer service representatives and/or order entry clerks representatives and/or order entry clerks

External agents - customersExternal agents - customers

Sales/Collection Process EventsSales/Collection Process Events Economic Decrement Events in the Revenue Economic Decrement Events in the Revenue

CycleCycle Represent the revenue generating activities Represent the revenue generating activities Resources vary for different types of businessesResources vary for different types of businesses

Inventory, Labor ,Temporary use of assetInventory, Labor ,Temporary use of asset Internal Agents -- salespeople, shipping clerks, Internal Agents -- salespeople, shipping clerks,

delivery clerks, and service engagement delivery clerks, and service engagement personnelpersonnel

External Agents -- customers or clientsExternal Agents -- customers or clients

Sales/Collection Process EventsSales/Collection Process Events Economic Increment Events in the Revenue Economic Increment Events in the Revenue

CycleCycle Almost always is a Cash Receipt eventAlmost always is a Cash Receipt event

External agent transfers ownership of cash (or a cash External agent transfers ownership of cash (or a cash equivalent) to the enterpriseequivalent) to the enterprise

Resource is typically cashResource is typically cash Internal agents -- cashiers, accounts receivable clerks, or Internal agents -- cashiers, accounts receivable clerks, or

other financing personnelother financing personnel External agents -- customers or clientsExternal agents -- customers or clients

Sales/Collection Process EventsSales/Collection Process Events

Economic Decrement Reversal EventsEconomic Decrement Reversal Events Events in which previous economic decrement Events in which previous economic decrement

events are reversed or negatedevents are reversed or negated Although similar in mechanics, such events are Although similar in mechanics, such events are

inherently different from economic increment events inherently different from economic increment events Getting something back that you were happy you had given Getting something back that you were happy you had given

up (and for which you now have to give back the thing you up (and for which you now have to give back the thing you were originally happy to get) is not the same as getting were originally happy to get) is not the same as getting something you wanted to get in exchange for giving up something you wanted to get in exchange for giving up something you were willing to give upsomething you were willing to give up

Resources, Internal Agents, and External Agents are Resources, Internal Agents, and External Agents are the same as those for economic decrement eventsthe same as those for economic decrement events

Sale Return EventSale Return Event Title (ownership) for products that were previously Title (ownership) for products that were previously

transferred from seller to buyer is transferred back transferred from seller to buyer is transferred back from buyer to seller from buyer to seller

Symbolized by sales return authorization, receiving Symbolized by sales return authorization, receiving report and credit memo documents or data entry report and credit memo documents or data entry screens that summarize information about the screens that summarize information about the eventevent

Sales/Collection Process Sales/Collection Process RelationshipsRelationships

Fulfillment relationshipsFulfillment relationships Between MarketingBetween Marketing, , Sales CallSales Call, , or Customer Inquiryor Customer Inquiry

and Sale Orderand Sale Order eventsevents Between Sale OrderBetween Sale Order and Saleand Sale (or Rental or Service (or Rental or Service

engagement) eventsengagement) events Duality relationshipsDuality relationships

Between Sale (or Rental or Service engagement) and Between Sale (or Rental or Service engagement) and Cash Receipt (or Receipt of Bartered Goods/Services) Cash Receipt (or Receipt of Bartered Goods/Services) eventsevents

Reversal relationshipsReversal relationships Between Sale and Sale Return eventsBetween Sale and Sale Return events

Participation relationshipsParticipation relationships Between each event and each internal and external Between each event and each internal and external

agentagent

Sales/Collection Process RelationshipsSales/Collection Process Relationships

Proposition relationshipsProposition relationships Between Marketing, Sales Call, or Customer Inquiry event Between Marketing, Sales Call, or Customer Inquiry event

and Inventory (or Inventory Type or Service Type)and Inventory (or Inventory Type or Service Type) Reservation relationshipsReservation relationships

Between Sale Order, Rental Contract, or Service Contract Between Sale Order, Rental Contract, or Service Contract and Inventory (or Inventory Type or Service Type)and Inventory (or Inventory Type or Service Type)

Also between Sale Order, Rental Contract, or Service Also between Sale Order, Rental Contract, or Service Contract and CashContract and Cash

Stock flow relationshipsStock flow relationships Between Sale (or Rental or Service Engagement) and Between Sale (or Rental or Service Engagement) and

Inventory (or Inventory Type or Service Type)Inventory (or Inventory Type or Service Type) Between Sale Return and Inventory (or Inventory Type)Between Sale Return and Inventory (or Inventory Type) Between Cash and Cash ReceiptBetween Cash and Cash Receipt

Resource Query TypesResource Query Types

Detailed status information at one or more Detailed status information at one or more points in time for each resource instancepoints in time for each resource instance

Detailed status information at one or more Detailed status information at one or more points in time for only those resource points in time for only those resource instances meeting specified criteriainstances meeting specified criteria

Summarized status information at one or Summarized status information at one or more points in time for all resource instancesmore points in time for all resource instances

Summarized status information at one or Summarized status information at one or more points in time for only those resource more points in time for only those resource instances meeting specified criteriainstances meeting specified criteria

Event Query TypesEvent Query Types Detailed information about each event instanceDetailed information about each event instance

e.g., what happened, when and where did it happen, etc.e.g., what happened, when and where did it happen, etc. Detailed information about each event instance that Detailed information about each event instance that

meets specified criteria meets specified criteria e.g. events of a specified type that occurred during a specified e.g. events of a specified type that occurred during a specified

time period or that occurred at a specified locationtime period or that occurred at a specified location Summarized information for all instances of an event type Summarized information for all instances of an event type

for a specified time period for a specified time period e.g. total of the event instances during a specified time periode.g. total of the event instances during a specified time period

Summarized information for only those instances of an Summarized information for only those instances of an event type for a specified time period that meet specified event type for a specified time period that meet specified criteria criteria e.g. average dollar value of the event instances for a specified e.g. average dollar value of the event instances for a specified

location during a specified time periodlocation during a specified time period

Agent Query TypesAgent Query Types

Detailed status information at one or more Detailed status information at one or more points in time for each agent instancepoints in time for each agent instance

Detailed status information at one or more Detailed status information at one or more points in time for only those agent instances points in time for only those agent instances meeting specified criteriameeting specified criteria

Summarized status information at one or more Summarized status information at one or more points in time for all agent instancespoints in time for all agent instances

Summarized status information at one or more Summarized status information at one or more points in time for only those agent instances points in time for only those agent instances meeting specified criteriameeting specified criteria

Duality Relationship Query TypesDuality Relationship Query Types

Identification as to whether a specified exchange is Identification as to whether a specified exchange is completedcompleted

Identification of completed exchanges for a specified Identification of completed exchanges for a specified time periodtime period

Identification of incomplete exchanges for a specified Identification of incomplete exchanges for a specified time periodtime period

Calculation of the amount of claims, e.g. prepaid Calculation of the amount of claims, e.g. prepaid expenses, payables, unearned revenues, or receivables, expenses, payables, unearned revenues, or receivables, either in total or for a specified exchange eventeither in total or for a specified exchange event

Calculation of the total or average length of the timing Calculation of the total or average length of the timing difference(s) between the events involved in one or difference(s) between the events involved in one or more exchanges more exchanges

Accounts Receivable Query Accounts Receivable Query StepsSteps

ConceptuallyConceptually Dollar value of sales or service engagements for which cash Dollar value of sales or service engagements for which cash

receipt has not yet occurred in full, adjusted for any sale returns receipt has not yet occurred in full, adjusted for any sale returns and sale discounts.and sale discounts.

Practically Practically Total sales/service engagements through balance sheet date Total sales/service engagements through balance sheet date

minus total cash receipts through balance sheet date that applied minus total cash receipts through balance sheet date that applied to sales/service engagements. Also subtract sales returns and to sales/service engagements. Also subtract sales returns and discounts through balance sheet date.discounts through balance sheet date.

MUST include ONLY ending date constraint (balance sheet item MUST include ONLY ending date constraint (balance sheet item reflects cumulative data from beginning of company through reflects cumulative data from beginning of company through balance sheet date).balance sheet date).

Use sale/service engagement date to determine which revenues to Use sale/service engagement date to determine which revenues to include.include.

Use cash receipt date and duality relationship to determine which Use cash receipt date and duality relationship to determine which cash receipts to include. Be sure to aggregate cash receipts that cash receipts to include. Be sure to aggregate cash receipts that apply to same sale BEFORE subtracting from sale amountapply to same sale BEFORE subtracting from sale amount

Likely need for outer join and Nz function in Access (for sales with Likely need for outer join and Nz function in Access (for sales with no matching cash receiptsno matching cash receipts

Note: Sales minus Cash receipts from Customers not acceptable Note: Sales minus Cash receipts from Customers not acceptable (because you might get non-sale related CR from customers)(because you might get non-sale related CR from customers)

Stockflow Relationship Query TypesStockflow Relationship Query Types

What resources or resource types were increased What resources or resource types were increased or decreased by an economic event?or decreased by an economic event?

What quantity of a resource or resource type was What quantity of a resource or resource type was increased or decreased by an economic event?increased or decreased by an economic event?

What dollar value of a resource or resource type What dollar value of a resource or resource type was increased or decreased by an economic was increased or decreased by an economic event?event?

When did an event increase or decrease a When did an event increase or decrease a specific resource or resource type?specific resource or resource type?

Where did an event increase or decrease a Where did an event increase or decrease a specific resource or resource type?specific resource or resource type?

Fulfillment Relationship Query Fulfillment Relationship Query TypesTypes Identification of unfulfilled commitments or Identification of unfulfilled commitments or

instigation eventsinstigation events Identification of fulfilled commitments or Identification of fulfilled commitments or

instigation eventsinstigation events Identification of commitment events that were Identification of commitment events that were

not preceded by instigation events, or not preceded by instigation events, or identification of economic events that were not identification of economic events that were not preceded by commitment eventspreceded by commitment events

Calculation of length of time between instigation Calculation of length of time between instigation and commitment events or between and commitment events or between commitment and economic eventscommitment and economic events

Identification of causes of commitments and/or Identification of causes of commitments and/or of economic eventsof economic events

Identification of results of instigations and/or of Identification of results of instigations and/or of commitment events commitment events

Proposition Relationship Query TypesProposition Relationship Query Types

What resources or resource types What resources or resource types does the instigation event propose to does the instigation event propose to increase or decrease? increase or decrease?

What quantity of a resource or What quantity of a resource or resource type is the proposed resource type is the proposed increase or decrease for an instigation increase or decrease for an instigation event?event?

When did an instigation event When did an instigation event propose to increase or decrease a propose to increase or decrease a specific resource or resource type? specific resource or resource type?

Reservation Relationship Query Reservation Relationship Query TypesTypes

What resources or resource types is a commitment What resources or resource types is a commitment event agreeing to increase or decrease?event agreeing to increase or decrease?

What quantity of a resource or resource type is a What quantity of a resource or resource type is a commitment event agreeing to increase or decrease? commitment event agreeing to increase or decrease?

What dollar value of a resource or resource type is a What dollar value of a resource or resource type is a commitment event agreeing to increase or decrease? commitment event agreeing to increase or decrease?

When did an event commit to increase or decrease a When did an event commit to increase or decrease a specific resource or resource type?specific resource or resource type?

Where did an event commit to increase or decrease a Where did an event commit to increase or decrease a specific resource or resource type? specific resource or resource type?

Participation Relationship Query Participation Relationship Query TypesTypes

Which agent(s) participated in a specified event? Which agent(s) participated in a specified event? How many events of a specified type has a How many events of a specified type has a

specified agent participated? specified agent participated? What is the total dollar value of events of a What is the total dollar value of events of a

specified type in which a specified agent has specified type in which a specified agent has participated for a specified time period? participated for a specified time period?

When did a specified event in which a specified When did a specified event in which a specified agent participated occur?agent participated occur?

Where did a specified event in which a specified Where did a specified event in which a specified agent participated occur? agent participated occur?

Multiple-Relationship Multiple-Relationship Revenue Cycle QueriesRevenue Cycle Queries

Which sale orders have been partially filled?Which sale orders have been partially filled? requires stockflow, reservation, and fulfillment-sale-requires stockflow, reservation, and fulfillment-sale-

order-sale relationships order-sale relationships What is the total dollar value of accounts receivable What is the total dollar value of accounts receivable

for a specified customer at a point in time? for a specified customer at a point in time? requires duality, participation-customer-sale, and requires duality, participation-customer-sale, and

participation-customer-cash receipt relationshipsparticipation-customer-cash receipt relationships What inventory types have been presented to a What inventory types have been presented to a

specified customer in sales calls during a specified specified customer in sales calls during a specified time period? time period? requires proposition and participation-customer-sales-call requires proposition and participation-customer-sales-call

relationshipsrelationships

Which salesperson presented a specified Which salesperson presented a specified inventory type to a specified customer?inventory type to a specified customer? requires proposition, participation-customer-sales call, and requires proposition, participation-customer-sales call, and

participation-salesperson-sales-call relationshipsparticipation-salesperson-sales-call relationships What is the total dollar amount of sales of a What is the total dollar amount of sales of a

specified inventory type that have been made specified inventory type that have been made to customers in a specified region? to customers in a specified region? requires stockflow and participation-customer-sale requires stockflow and participation-customer-sale

relationshipsrelationships In what region have sales calls involving a In what region have sales calls involving a

specified inventory type been the most specified inventory type been the most successful? successful? requires proposition, fulfillment-sales-call-sale-order, and requires proposition, fulfillment-sales-call-sale-order, and

reservation relationshipsreservation relationships

More Multiple-Relationship More Multiple-Relationship Revenue Cycle QueriesRevenue Cycle Queries

SummarySummary We discussed the sales/collection (revenue) process and We discussed the sales/collection (revenue) process and

how it fits in at the value system and value chain levelshow it fits in at the value system and value chain levels We discussed the extended REA pattern at the business We discussed the extended REA pattern at the business

process levelprocess level We examined documents typically used to represent We examined documents typically used to represent

events and discussed related resources and agentsevents and discussed related resources and agents We examined examples of relational database tables for We examined examples of relational database tables for

the revenue cycle and discussed data input into those the revenue cycle and discussed data input into those tablestables

We systematically discussed types of queries for the We systematically discussed types of queries for the sales/collection process to support decision-makers in sales/collection process to support decision-makers in various functional areasvarious functional areas

We provided selected examples of queries of various typesWe provided selected examples of queries of various types