The Sales/Collection Business Process

1
The Sales/Collection Business Process

• Chapter 8

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Chapter Learning Objectives

1. Identify activities and documents common to
   sales/collection business processes for various
   enterprises
2. Recognize similarities and differences between
   different types of revenue-generating enterprises
3. Identify the components of the REA ontology in
   the sales/collection business process
4. Explain how the sales/collection business process
   fits into an enterprises value system
5. Explain how the sales/collection business process
   fits into an enterprises value chain
6. Create a REA business process level model for an
   enterprises sales/collection business process
7. Create queries to meet common information needs
   in the sales/collection process

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Sales/Collection Process in an Enterprise Value
System
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Sales/Collection Business Process in Enterprise
Value Chains
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REA Sales/Collection Business Process Level
Pattern
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Sales/Collection Process Events

• Instigation Events in the Revenue Cycle
• Marketing events internally instigated
• Customer inquiries externally instigated
• Resource - type

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Sales/Collection Process Events

• Mutual Commitment Events in the Revenue Cycle
• Involve the enterprise and an external business
  partner agreeing to exchange resources at a
  defined future time
• Internal agents - sales or customer service
  representatives and/or order entry clerks
• External agents - customers

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Sales/Collection Process Events

• Economic Decrement Events in the Revenue Cycle
• Represent the revenue generating activities
• Resources vary for different types of businesses
• Inventory, Labor ,Temporary use of asset
• Internal Agents -- salespeople, shipping clerks,
  delivery clerks, and service engagement personnel
• External Agents -- customers or clients

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Sales/Collection Process Events

• Economic Increment Events in the Revenue Cycle
• Almost always is a Cash Receipt event
• External agent transfers ownership of cash (or a
  cash equivalent) to the enterprise
• Resource is typically cash
• Internal agents -- cashiers, accounts receivable
  clerks, or other financing personnel
• External agents -- customers or clients

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Sales/Collection Process Events

• Economic Decrement Reversal Events
• Events in which previous economic decrement
  events are reversed or negated
• Although similar in mechanics, such events are
  inherently different from economic increment
  events
• Getting something back that you were happy you
  had given up (and for which you now have to give
  back the thing you were originally happy to get)
  is not the same as getting something you wanted
  to get in exchange for giving up something you
  were willing to give up
• Resources, Internal Agents, and External Agents
  are the same as those for economic decrement
  events

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Sale Return Event

• Title (ownership) for products that were
  previously transferred from seller to buyer is
  transferred back from buyer to seller
• Symbolized by sales return authorization,
  receiving report and credit memo documents or
  data entry screens that summarize information
  about the event

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Sales/Collection Process Relationships

• Fulfillment relationships
• Between Marketing, Sales Call, or Customer
  Inquiry and Sale Order events
• Between Sale Order and Sale (or Rental or Service
  engagement) events
• Duality relationships
• Between Sale (or Rental or Service engagement)
  and Cash Receipt (or Receipt of Bartered
  Goods/Services) events
• Reversal relationships
• Between Sale and Sale Return events
• Participation relationships
• Between each event and each internal and external
  agent

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Sales/Collection Process Relationships

• Proposition relationships
• Between Marketing, Sales Call, or Customer
  Inquiry event and Inventory (or Inventory Type or
  Service Type)
• Reservation relationships
• Between Sale Order, Rental Contract, or Service
  Contract and Inventory (or Inventory Type or
  Service Type)
• Also between Sale Order, Rental Contract, or
  Service Contract and Cash
• Stock flow relationships
• Between Sale (or Rental or Service Engagement)
  and Inventory (or Inventory Type or Service Type)
• Between Sale Return and Inventory (or Inventory
  Type)
• Between Cash and Cash Receipt

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Resource Query Types

• Detailed status information at one or more points
  in time for each resource instance
• Detailed status information at one or more points
  in time for only those resource instances meeting
  specified criteria
• Summarized status information at one or more
  points in time for all resource instances
• Summarized status information at one or more
  points in time for only those resource instances
  meeting specified criteria

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Event Query Types

• Detailed information about each event instance
• e.g., what happened, when and where did it
  happen, etc.
• Detailed information about each event instance
  that meets specified criteria
• e.g. events of a specified type that occurred
  during a specified time period or that occurred
  at a specified location
• Summarized information for all instances of an
  event type for a specified time period
• e.g. total of the event instances during a
  specified time period
• Summarized information for only those instances
  of an event type for a specified time period that
  meet specified criteria
• e.g. average dollar value of the event instances
  for a specified location during a specified time
  period

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Agent Query Types

• Detailed status information at one or more points
  in time for each agent instance
• Detailed status information at one or more points
  in time for only those agent instances meeting
  specified criteria
• Summarized status information at one or more
  points in time for all agent instances
• Summarized status information at one or more
  points in time for only those agent instances
  meeting specified criteria

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Duality Relationship Query Types

• Identification as to whether a specified exchange
  is completed
• Identification of completed exchanges for a
  specified time period
• Identification of incomplete exchanges for a
  specified time period
• Calculation of the amount of claims, e.g. prepaid
  expenses, payables, unearned revenues, or
  receivables, either in total or for a specified
  exchange event
• Calculation of the total or average length of the
  timing difference(s) between the events involved
  in one or more exchanges

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Accounts Receivable Query Steps

• Conceptually
• Dollar value of sales or service engagements for
  which cash receipt has not yet occurred in full,
  adjusted for any sale returns and sale discounts.
• Practically
• Total sales/service engagements through balance
  sheet date minus total cash receipts through
  balance sheet date that applied to sales/service
  engagements. Also subtract sales returns and
  discounts through balance sheet date.
• MUST include ONLY ending date constraint (balance
  sheet item reflects cumulative data from
  beginning of company through balance sheet date).
• Use sale/service engagement date to determine
  which revenues to include.
• Use cash receipt date and duality relationship to
  determine which cash receipts to include. Be sure
  to aggregate cash receipts that apply to same
  sale BEFORE subtracting from sale amount
• Likely need for outer join and Nz function in
  Access (for sales with no matching cash receipts
• Note Sales minus Cash receipts from Customers
  not acceptable (because you might get non-sale
  related CR from customers)

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Stockflow Relationship Query Types

• What resources or resource types were increased
  or decreased by an economic event?
• What quantity of a resource or resource type was
  increased or decreased by an economic event?
• What dollar value of a resource or resource type
  was increased or decreased by an economic event?
• When did an event increase or decrease a specific
  resource or resource type?
• Where did an event increase or decrease a
  specific resource or resource type?

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Fulfillment Relationship Query Types

• Identification of unfulfilled commitments or
  instigation events
• Identification of fulfilled commitments or
  instigation events
• Identification of commitment events that were not
  preceded by instigation events, or identification
  of economic events that were not preceded by
  commitment events
• Calculation of length of time between instigation
  and commitment events or between commitment and
  economic events
• Identification of causes of commitments and/or of
  economic events
• Identification of results of instigations and/or
  of commitment events

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Proposition Relationship Query Types

• What resources or resource types does the
  instigation event propose to increase or
  decrease?
• What quantity of a resource or resource type is
  the proposed increase or decrease for an
  instigation event?
• When did an instigation event propose to increase
  or decrease a specific resource or resource type?

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Reservation Relationship Query Types

• What resources or resource types is a commitment
  event agreeing to increase or decrease?
• What quantity of a resource or resource type is a
  commitment event agreeing to increase or
  decrease?
• What dollar value of a resource or resource type
  is a commitment event agreeing to increase or
  decrease?
• When did an event commit to increase or decrease
  a specific resource or resource type?
• Where did an event commit to increase or decrease
  a specific resource or resource type?

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Participation Relationship Query Types

• Which agent(s) participated in a specified event?
  
• How many events of a specified type has a
  specified agent participated?
• What is the total dollar value of events of a
  specified type in which a specified agent has
  participated for a specified time period?
• When did a specified event in which a specified
  agent participated occur?
• Where did a specified event in which a specified
  agent participated occur?

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Multiple-Relationship Revenue Cycle Queries

• Which sale orders have been partially filled?
• requires stockflow, reservation, and
  fulfillment-sale-order-sale relationships
• What is the total dollar value of accounts
  receivable for a specified customer at a point in
  time?
• requires duality, participation-customer-sale,
  and participation-customer-cash receipt
  relationships
• What inventory types have been presented to a
  specified customer in sales calls during a
  specified time period?
• requires proposition and participation-customer-sa
  les-call relationships

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More Multiple-Relationship Revenue Cycle Queries

• Which salesperson presented a specified inventory
  type to a specified customer?
• requires proposition, participation-customer-sales
  call, and participation-salesperson-sales-call
  relationships
• What is the total dollar amount of sales of a
  specified inventory type that have been made to
  customers in a specified region?
• requires stockflow and participation-customer-sale
  relationships
• In what region have sales calls involving a
  specified inventory type been the most
  successful?
• requires proposition, fulfillment-sales-call-sale-
  order, and reservation relationships

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Summary

• We discussed the sales/collection (revenue)
  process and how it fits in at the value system
  and value chain levels
• We discussed the extended REA pattern at the
  business process level
• We examined documents typically used to represent
  events and discussed related resources and agents
• We examined examples of relational database
  tables for the revenue cycle and discussed data
  input into those tables
• We systematically discussed types of queries for
  the sales/collection process to support
  decision-makers in various functional areas
• We provided selected examples of queries of
  various types

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Chapter 8

• End of Chapter