ODT 200 LA 1.3- Revenue and Receipt Cycle
Credit management
New customers
Activities
1. Customer completes credit application form, that is filed properly by clerk
2. Credit controller- background check, confirms credit status with bureau
3. Controller sets credit limit according to creditworthiness- updates master file
4. Data capture clerk adds new debtor to master file through a master file amendment form (segregation from
controller- has read-only access)
5. Financial manager reviews master files, agrees master file to application form- log of amendments printed
Existing customers
Activities
1. Controller follows up on credit checks to confirm continuing credit worthiness- balances checked before authorising
order
2. Credit controller authorises request for increase of credit limit
3. Controller reviews age analysis, to identify debtors at risk of not paying
4. Controller reviews requests for credit changes by similar process as for new customers
5. Controller enables computer system to print out logs and exception reports of long- outstanding debtors
6. Controller recommends debtors with possible bad debts to management, creates allowance for credit losses
7. Financial accountant approves allowance created
8. Controller hands over bad debts to attorneys/ agencies
Receiving and authorisation of orders from customers:
First time order received/ approval of customer
Activities
1. Customer fills in a pre-printed sequentially numbered customer order form, or if order is telephonically/
electronically etc. the entity will have to document the order by their own means
2. If verbal/ telephonic- clerk reads back details of order to customer
3. Order clerk confirms that customer has an account number and is on the authorised customer list (searches debtors
master file, performs validity check)
4. Clerk identifies customer through customer number and ID number/and other pertinent details
5. Clerk refers customer to credit controller if customer is not on the authorised list
6. The order clerk must submit all sales to the credit controller for approval (Segregation of duties, cannot initiate and
authorise order)
7. Sales order clerk creates a pre-printed, sequentially numbered Internal Sales Order with order details- one for
invoicing, and one for pending picking slip
8. Clerk reconciles ISOs with customer order confirmation; e.g. emails
9. Supervisor agrees prices ion ISO with approved price list/master file- (selects prices on drop down list)
* Clerk does not have write access to price list master file
10. Clerk sends ISOs to credit controller, who only approves them if the customer is within his credit limit (performs
limit check in debtors balance)
11. Sales order clerk requests warehouse to perform an inventory availability check from the inventory master file
(validity check on system)
I. If inventory is not available, clerk communicates the fact with the customer that it can be placed on back order
II. Clerk creates a backorder note, and sends copy thereof to purchasing department
III. Sales department regularly follows up on backorders with purchasing department
12. Sales order clerk creates a pre-printed picking slip that is cross-referenced to the ISO (sales prices usually not
displayed on picking slip)- two to warehouse, and one filed in pending ISO file
13. A second staff member or supervisor checks accuracy of descriptions and quantities on picking slip and agrees it to
the ISO, before sending it to the warehouse
14. Long outstanding ISOs without picking slips are followed up by sales staff with warehouse (exception reports)
15. Clerk obtains reasons for the cancelling of any ISOs or broken sequences
, 16. Clerk files completed picking slips and ISOs for later agreement with invoices
Picking of goods from warehouse
Picking of goods from warehouse
Activities
1. Warehouse supervisor agrees goods picked with duplicate, carbon copied picking slip received from sales
department to ensure the accuracy and completeness thereof, and signs the slip as evidence for the check
* Warehouse staff cannot create or change picking slips, have read-only access
2. Supervisor checks file of sequentially numbered picking slips to ensure all of them are acted on
3. Warehouse staff sends a copy of the picking slip to the sales order department when goods have successfully been
picked to match with ISO in pending file (or changes status to “Picked” on computer system)
4. Sales order clerk agrees completed picking slips with ISOs to ensure that all pickings were made, and all ISOs were
responded to
5. Successful picking slips are filed together with the ISO, and the other copy is filed in the warehouse
Despatch and delivery of goods to customers
Transferring of picked goods to despatch bay
Activities
1. The despatch bay must be a separate area with good access controls, such as keys that are only allocated to the
despatch clerk- inventories must be stored safely before despatch
2. The despatch clerk inspects the goods transferred to the bay, and matches the quantity and description to the
picking slip
i. (uses mobile scanning device to scan items as they are brought into despatch bay, loaded into system that
produces exception reports for any missing items, which is reviewed by the supervisor)
3. Despatch clerk rejects items that are not on the picking slip, and follows up on missing items
4. Despatch clerk signs picking slip as proof of having taken custody of the items, after agreeing actual inventory to PS
Delivery vehicle, goods exciting the premises
Activities
1. Despatch clerk creates sequential delivery notes (one filed in warehouse, one for customer, and copy of signed one
from customer to invoicing) for goods being despatched (uses scanning device for all goods leaving premises
2. Driver provides positive identification before taking custody of the items’
3. Driver checks and compares goods loaded with the delivery note to ensure completeness and accuracy
4. Driver signs delivery note to show acceptance of custody of items
5. Security guard (who are independent from the packing and loading process) at gate performs gate controls- signs
delivery list
i. Checks number of boxes/items in truck, and compare with delivery note
ii. Performs spot checks on content where possible
Goods delivered to customer
Activities
1. Customer must sign a copy of the delivery note to acknowledge acceptance and receipt of goods
i. IFRS 15- revenue only recorded after transfer of ownership
2. Signed delivery note must be transferred to accounting department in order for them to create an invoice
Invoicing of sales
Initiation of Invoice
Activities
1. Invoice clerk creates a pending file for all ISOs awaiting delivery notes
2. Invoicing clerk receives signed copy of delivery note, and files and matches it with the ISOs in the pending file in
sequential order
3. Invoicing clerk creates a sequentially numbered invoice- copy filed with the delivery note and ISO; copy for
bookkeeping; copy for customer
Credit management
New customers
Activities
1. Customer completes credit application form, that is filed properly by clerk
2. Credit controller- background check, confirms credit status with bureau
3. Controller sets credit limit according to creditworthiness- updates master file
4. Data capture clerk adds new debtor to master file through a master file amendment form (segregation from
controller- has read-only access)
5. Financial manager reviews master files, agrees master file to application form- log of amendments printed
Existing customers
Activities
1. Controller follows up on credit checks to confirm continuing credit worthiness- balances checked before authorising
order
2. Credit controller authorises request for increase of credit limit
3. Controller reviews age analysis, to identify debtors at risk of not paying
4. Controller reviews requests for credit changes by similar process as for new customers
5. Controller enables computer system to print out logs and exception reports of long- outstanding debtors
6. Controller recommends debtors with possible bad debts to management, creates allowance for credit losses
7. Financial accountant approves allowance created
8. Controller hands over bad debts to attorneys/ agencies
Receiving and authorisation of orders from customers:
First time order received/ approval of customer
Activities
1. Customer fills in a pre-printed sequentially numbered customer order form, or if order is telephonically/
electronically etc. the entity will have to document the order by their own means
2. If verbal/ telephonic- clerk reads back details of order to customer
3. Order clerk confirms that customer has an account number and is on the authorised customer list (searches debtors
master file, performs validity check)
4. Clerk identifies customer through customer number and ID number/and other pertinent details
5. Clerk refers customer to credit controller if customer is not on the authorised list
6. The order clerk must submit all sales to the credit controller for approval (Segregation of duties, cannot initiate and
authorise order)
7. Sales order clerk creates a pre-printed, sequentially numbered Internal Sales Order with order details- one for
invoicing, and one for pending picking slip
8. Clerk reconciles ISOs with customer order confirmation; e.g. emails
9. Supervisor agrees prices ion ISO with approved price list/master file- (selects prices on drop down list)
* Clerk does not have write access to price list master file
10. Clerk sends ISOs to credit controller, who only approves them if the customer is within his credit limit (performs
limit check in debtors balance)
11. Sales order clerk requests warehouse to perform an inventory availability check from the inventory master file
(validity check on system)
I. If inventory is not available, clerk communicates the fact with the customer that it can be placed on back order
II. Clerk creates a backorder note, and sends copy thereof to purchasing department
III. Sales department regularly follows up on backorders with purchasing department
12. Sales order clerk creates a pre-printed picking slip that is cross-referenced to the ISO (sales prices usually not
displayed on picking slip)- two to warehouse, and one filed in pending ISO file
13. A second staff member or supervisor checks accuracy of descriptions and quantities on picking slip and agrees it to
the ISO, before sending it to the warehouse
14. Long outstanding ISOs without picking slips are followed up by sales staff with warehouse (exception reports)
15. Clerk obtains reasons for the cancelling of any ISOs or broken sequences
, 16. Clerk files completed picking slips and ISOs for later agreement with invoices
Picking of goods from warehouse
Picking of goods from warehouse
Activities
1. Warehouse supervisor agrees goods picked with duplicate, carbon copied picking slip received from sales
department to ensure the accuracy and completeness thereof, and signs the slip as evidence for the check
* Warehouse staff cannot create or change picking slips, have read-only access
2. Supervisor checks file of sequentially numbered picking slips to ensure all of them are acted on
3. Warehouse staff sends a copy of the picking slip to the sales order department when goods have successfully been
picked to match with ISO in pending file (or changes status to “Picked” on computer system)
4. Sales order clerk agrees completed picking slips with ISOs to ensure that all pickings were made, and all ISOs were
responded to
5. Successful picking slips are filed together with the ISO, and the other copy is filed in the warehouse
Despatch and delivery of goods to customers
Transferring of picked goods to despatch bay
Activities
1. The despatch bay must be a separate area with good access controls, such as keys that are only allocated to the
despatch clerk- inventories must be stored safely before despatch
2. The despatch clerk inspects the goods transferred to the bay, and matches the quantity and description to the
picking slip
i. (uses mobile scanning device to scan items as they are brought into despatch bay, loaded into system that
produces exception reports for any missing items, which is reviewed by the supervisor)
3. Despatch clerk rejects items that are not on the picking slip, and follows up on missing items
4. Despatch clerk signs picking slip as proof of having taken custody of the items, after agreeing actual inventory to PS
Delivery vehicle, goods exciting the premises
Activities
1. Despatch clerk creates sequential delivery notes (one filed in warehouse, one for customer, and copy of signed one
from customer to invoicing) for goods being despatched (uses scanning device for all goods leaving premises
2. Driver provides positive identification before taking custody of the items’
3. Driver checks and compares goods loaded with the delivery note to ensure completeness and accuracy
4. Driver signs delivery note to show acceptance of custody of items
5. Security guard (who are independent from the packing and loading process) at gate performs gate controls- signs
delivery list
i. Checks number of boxes/items in truck, and compare with delivery note
ii. Performs spot checks on content where possible
Goods delivered to customer
Activities
1. Customer must sign a copy of the delivery note to acknowledge acceptance and receipt of goods
i. IFRS 15- revenue only recorded after transfer of ownership
2. Signed delivery note must be transferred to accounting department in order for them to create an invoice
Invoicing of sales
Initiation of Invoice
Activities
1. Invoice clerk creates a pending file for all ISOs awaiting delivery notes
2. Invoicing clerk receives signed copy of delivery note, and files and matches it with the ISOs in the pending file in
sequential order
3. Invoicing clerk creates a sequentially numbered invoice- copy filed with the delivery note and ISO; copy for
bookkeeping; copy for customer
