The objectives of the billing process are to ensure the customers are billed for all sales, invoices are accurate, and the customers are billed for all sales. Accurate billing is crucial and requires information identifying the items and quantities shipped, prices, and special sales terms. But, sometimes threats might happen; the transaction might result from either a mistake or a fraud. The company might face failure to bill customers. The failure will cause loss of assets and revenues and inaccurate sales, inventory and accounts receivable data. For example, the employees who ship the product to might not bill the customers as they customers are their friends. Besides, no reconciliation of inventory amounts shipped with billings might cause failure to bill customers. This could result in undetected underbilling. In addition, the bookkeeper might do not periodically verify that all sales orders and shipping advices have been invoiced.
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So, the company must observe the problems faced and reduce the risk of errors and fraud. The company may separate the shipping and billing function to prevent that the failure to bill customers. The internal control can manage the billing and shipping records should be integrated on the computer system to provide for reconciliation of inventory amounts shipped and billed. The company internal control must periodically verify that all sales orders and shipping advices have been invoiced. This is because accurate and timely billing is crucial. The Billing Department may require information from the Shipping Department on items and quantities shipped and from Sales on prices and other sales terms. The basic document created is the sales invoice. Invoices may be sent or received in paper form and in invoice-less systems, ensure every shipment is recorded, since the shipment triggers recording of the account receivable. The wellââ‚¬”managed internal control should also merge the billing process with sales and marketing by using data about a customerââ‚¬â„¢s past purchases to send information about related products and services with the monthly statement. All sales tickets should be prenumbered and accounted for. This would quickly spot missing tickets.
On top of that, I suggest that the On-line data entry by sales staff. The system should include credit checks on customers as well as check inventory availability Email notification of each department (shipping, billing, etc.) whenever another department performs an action (e.g., billing is notified whenever shipping enters data indicating that an order has been released)
Furthermore, there might be the billing error occurred during the sales transaction. The billing might be underbilling or overbilling. This may cause loss of asset and customer dissatisfaction. The employee might prepare the invoices without notification about what was shipped and when. This will cause the billing mistakes when shipping goods. The employees maybe deal with the wrong price list of the products or goods to cause overbilling customers.
The solution for the billing error can be controlled by prepare invoice only after receive copy of shipping advice indicating quantities shipped and date. The internal control can use the prices of computer-based such as have the computer retrieve prices from the inventory master file. This can prevent the wrong price with the goods shipping or even wrong price wrong goods. Moreover, the company can use date entry edit control to eliminate the billing error. Have the system to check the inventory availability as order data are entered with the prices of it. The company also can use online terminal to enter sales order date into the system as orders are received to avoid the quantity error with billing error. Internal control can also do have a system to save all the inventory or product list with pricing list so that the company can use barcode scanners to scan the products order. It can prevent the data key in error.
Furthermore, for the billing error I suggest that use passwords to limit access to authorized users, and to restrict the duties each employee may perform and which files they may access in case to prevent the inventory data and prices changed by the employees. Next we can also check quantities on packing slip against quantities on sales order to make sure again the right goods shipping and the billing cost.
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In addition, posting errors in updating accounts receivable is one of the threats of the billing in revenue cycle. Accounts can be written off to cover theft of cash due to uncollectible accounts are not determined on the basis of established criteria. Any of fees earned, cash receipts, and uncollectible accounts expense could be either understated or overstated because of undetected differences between the subsidiary ledger and the general ledger. Also, fees earned and cash receipts or accounts receivable could be understated because of failure to record billings, cash receipts, and write-offs accurately. Trial balances of the accounts receivable subsidiary ledger are not prepared independently of, or verified and reconciled to, the accounts receivable control account in the general ledger. It causes customer dissatisfaction and loss of sales and may indicate theft of cash
To solve of this threat problems, the internal control can establish and use criteria for writing off accounts receivable. Write off should be authorized by someone who does not have access to cash and periodic reconciliation of the subsidiary accounts receivable ledger to the general ledger control account for accounts receivable. Besides, the invoice shall be prepared as soon as the order is approved and the inventory, accounts receivable and general ledger files are updated at that time to prevent the delay between order and shipment so that the bill can post into account receivable just in time to avoid any error happened. Between, in case to avoid the error in maintaining the customer accounts, the company internal control may edit checks such as validity checks on customer and invoice numbers so amounts are applied to the correct account. The company can also make the field check on it to ensure payment amounts are numeric. To make sure there are no error occurred during the updating of account receivable, the internal control shall make the reconciliation of subsidiary accounts receivable ledger with general ledger and sending the monthly statements to every customer to provide independent review.
To reduce this threat, I suggest that the company can compare the number of accounts updated with the number of check received. A variety of inputs edit checks (limit checks, range checks, reasonableness tests, etc.) to ensure completeness of data entry and accuracy. Besides, establishment of electronic lockboxes with banks so that customer payments go directly to companyââ‚¬â„¢s account. Use email notification of each department whenever another department performs an action. The system that provide should include the credit checks on customers as well as check inventory availability to avoid the posting error in updating account receivable and maintaining customer accounts.
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