The five accounting cycles in an organization are: The revenue cycle, expenditure cycle, financing cycle, fixed assets cycle, and the conversion cycle. The revenue cycle is the set of activities in a business bringing about the exchange of goods or services with customers or consumers for cash, such as sales orders, accounts receivables, cash receipts (Hall, 2004), and cost of goods sold. The expenditure cycle is an external exchange of information between vendors and the company. The expenditure cycle takes information from the revenue cycle, production cycle, and other cycles (Romney & Steinbart, 2006).
The expenditure cycle includes inventory, accounts payable, payroll, and cash payments. The conversion cycle is very important to businesses. The conversion cycle tells how quickly a business can convert products into cash through sales. The financing cycle determines how long of time needed for the company to raise financial resources to the time of the repayment of dividends, stocks, and other debts (Financing Cycle, n. d. ). Fixed assets maintain records of the original cost of an asset, the depreciation amount of the asset, and the disposal amount of said asset.
Riordan Manufacturing Company sells plastic bottles, fans, heart valves, medical stents, and custom plastic parts. The Riordan Company uses the revenue cycle by increasing sales force promotions, offering price discounts and customer group services to existing customers and to new customers, Riordan Manufacturing Company plans to implement public relations activities, trade shows, brand development, and also giving sales force promotions (Riordan, 2006). Riordan Manufacturing has started recently to consolidate information and update systems.
In doing so, they are eliminating some of the problems/issues that they have had with internal controls. Historically, the sales department has allowed each salesperson to maintain their own set of customer records, and has allowed each to use whatever method he or she choose to do so. This has caused a weakness in internal control, as this practice does not allow operational efficiency and it has made checking accuracy harder. Riordan is currently looking at an integrated customer management system, which will go along with their newly formed team selling approach.
By using an integrated system, management will be better able to check the accuracy of each salesperson’s data. Riordan Manufacturing has mandatory training in place for each of its new employees, which must be completed by each employee within 90 days of being hired. This includes a New Employee Orientation for each new hire and Six Sigma training for production, shipping, and quality employees. When supervisors are either promoted or hired they are required to take additional training within 12 months. By requiring training, Riordan is establishing a good Control Environment, which is necessary for good internal control.
Riordan’s mission statement says they are “assuring that our employees are well informed and properly supported, we will provide a climate focused on the long term viability of our company. ” This part of the mission statement shows that Riordan is working on providing information and communication with its employees, which allows the internal control process to move along more smoothly. Although Riordan has some weaknesses with its internal control, they seem to be looking for ways in which to improve the situation.
They are doing so by integrating the sales records; requiring training not only for new employees but also for new supervisors; and by open communication. The revenue cycle is an essential part of an accounting cycle in any enterprise. Accounting information systems are essential, especially when keeping accountability of sales orders, accounts receivables, and cash receipts. Intuit is a large company that provides services to organizations in which the revenue cycle is not only easy to track for the company itself but also for the organizations clients.
Chicago press released an update on how medical bills can be viewed online by clients and clients can also make payments into their own account. This is a good accounting information system as it avoids employees of the company to process manually information as intuit registers it and does the job. Chicago and Mountain View says “Designed to work together, the physician’s office views, tracks and posts the payments online through their Intuit Patient Payments interface, while their patients view and pay bills with Quicken Health Bill Pay.
Because billing clerks now see the same view of the bill that the patient sees, it is easy to answer patient questions. ”(, 2009, p. 1). Such services can be applied or integrated to the revenue cycle as it accelerates processing of revenues and is reliable. The same information viewed by the company is available to the clients and transactions are made with the blink of an eye. The best part of integrating such accounting information system into a company’s revenue cycle is that information can be viewed around the whole world, as it is an online supported company.
Intuit and organizations of such information accounting systems are good and can work for either small enterprises or big worldwide organizations. The revenue aspect of business operations is the activities and related information processing operations related with providing goods or services to customers and collection cash or payments for those sales. These activities may include sales orders, shipping, billing, and payment collections (Marshall B. Romney & Paul John Steinbart, 2009).
Riordan Manufacturing, Inc. has 15 to 20 major customers and 12 minor customers. Each member of sales currently maintains a different set of customer records using different tools, which is not practical for an enterprise to maintain an integrated or accurate set of records to plan for the future (Riordan Manufacturing, Inc. (Apollo Group, Inc. ), 2004). Riordan is considering a new integrated system that will better assist the sales team and increase customer satisfaction.
An enterprise resource planning system is to be considered, which integrates the financial system with all other aspects of the organization including human resources, manufacturing, and sales at a central data base (Bagranoff, Simkin, & Norman, 2008). To optimize costs, Riordan can keep current systems for manufacturing, human resources, etc, and adopt a program that integrates revenue solutions into what the organization currently has. Softrax by AFS Financial Solutions offers an enterprise integration software program that uses data from an organization’s original financial systems to provide the revenue management it offers.
Softrax transfers and synchronizes data between existing enterprise systems. It also offers an open, non-proprietary system that permits easy customization and the ability to exploit external web services to complement existing systems (AFS Financial Solutions, 2001-2009). Sales orders and billings are processed into this system, warehouse and productions are further optimized, and the current basic financial data available; all systems currently used in the revenue aspect of the rganization are integrated so that all information matches and management can better plan for future needs. Riordan Manufacturing is made up of three operating entities each with its own Finance and Accounting Systems. These are in Georgia, Michigan, and California, along with a joint venture in the People’s Republic of China (Riordan Manufacturing, Inc. Apollo Group, Inc), 2004). Finance and Accounting information data is provided in different ways from each of these places to the corporate office in San Jose.
The San Jose office will combine all the information for the system. Some is provided by data files, some data is provided via hardcopy reports and must be re-entered, and some data is provided via data files but must be converted (redirected) to the proper account codes (Riordan Manufacturing, Inc. Apollo Group, Inc), 2004). The company closes those figures to the General Ledger followed by the Income Statement. Another 15-20 days after the end of the month of a demanding work load the Balance Sheet will be completed. References AFS Financial Solutions. 2001-2009). Softrax Solutions. Retrieved from http://www. softrax. com/solutions/enterprise-integration/ (2009). Press Releases Allscripts, Intuit Team to Speed Patient Bill Payment for Physicians Nationwide Partnership helps reduce the problems, questions and paper . Intuit. Retrieved from http://about. intuit. com/about_intuit/press_room/press_release/articles/2009/BillPaymentForPhysiciansNationwide. html Bagranoff, N. A. , Simkin, M. G. , & Norman, C. S. (2008). Core Concepts of Accounting Information Systems (10th ed. . New York, NY: John Wiley & Sons, Inc. Financing Cycle. (n. d. ). Corporate Finance by Vernimmen. com. Retrieved December 19, 2009, from, www. vernimmen. com/html/glossary Hall, J. (2004). South-Western Publishing Company. Accounting Information Systems, 4th Ed. Retrieved December 18, 2009 from, www. swlearning. com/acctg/hall Marshall B. Romney & Paul John Steinbart. (2009, December). Accounting Information Systems 9th Edition [PowerPoint slides].