Revenue Cycle - Definition & Meaning
What is Revenue Cycle?
Revenue cycle is a recurring business activities and information processing operations involved in the process of delivering goods and services to customers and receiving payments for the sales.
The objective of the Revenue cycle is to provide right product at right price at right place where the customer needs at the right time. The revenue cycle ensures that sufficient amount of operating cash is maintained considering the credit and debits. Any problems in maintaining the operating cash will directly affect the functioning of the company. The activities involved in the typical revenue cycle are
1. Sales Order
Sales order entry involves four steps. They are receiving the customer order, analysing the credit of the customer and approving, inventory availability check and confirming the order.
2. Credit/Customer Service
Special software CRM is used by many organisations to provide a better customer service. The ultimate aim of the customer service is to retain the existing customers and acquiring new customers. Transaction processing systems are used to improve the customer relationships where POS devices get real time data about the inventories.
3. Shipping
Shipping involves two main activities pick and pack the order and ship the order. Lot of companies use advanced technologies like barcode and RFID to identify the consignments easily.
4. Billing/Account receivable
Billing has two separate activities. Invoicing and updating the accounts receivable
5. Cash receipts and Collections
Final step in which the cashier receives the money and deposits in bank. Remittance list is updated. Electronic fund transfers and Electronic data interchange are used to increase the efficiency
Hence, this concludes the definition of Revenue Cycle along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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