Accounting Information Systems - Essay Example

Accounting Information Systems As the business grows and the number of new s increases, billing and collecting from customers can prove to be a daunting task. This is so especially if its manual. However, automating billing and collection systems can save time and improve the efficiency of the whole process. Since the business involves billing the customers the same amount at regular intervals, an automated recurring billing system is the way to go. Furthermore, companies that offer a wide variety of products or services at different prices would be better of employing such a system. Some of the popular billing options include: i. Automatic credit card charges ii. Email billing iii. Bills mailed through a contract with a third-party service iv. Automatic withdrawal from customer bank accounts A billing software is a software that assists companies in billing their customers. This can be through online orders and invoices. The software also helps integrate payment gateways and terminals for processing online payments and credit cards. Such systems have several features that are common to an automated billing software. In most cases, the software allows the creation of customer profiles which contain the data needed to accurately prepare the invoice. This data includes; customer name, billing contact, billing address, and the email address if the invoice is sent electronically. Billing System Process 1. Use a billing service or software. Pay for the service/software or set up an account to use it if needed. There are various billing softwares for example, CitrusDB. 2. Input customer information into your system. This includes entering data into the system. This includes items such as name, credit card information, billing and mailing addresses and payment schedules. 3. Set up recurring billing for customers if applicable. Billing should be scheduled to occur automatically in regular intervals, such as once a month. 4. Send customers bill payment reminders if possible. Sending constant reminders to ones customers is one way through which a business an keep in touch with its customers. This ensures that payment is received on time and in a regular fashion. 5. Prepare billing invoices. How do customers acquire these invoices? They may be printed and mailed or emailed to customers. Invoices should be checked for errors before sending them to customers. It would also be prudent to provide copies of any receipts for the materials to attach to the customers bill. 6. Record the receipt of payments. Keep track of when the customers pay and what the payment amount was. Chart Showing the Automated Billing System Challenges of an Automated Billing System Costs. It would be very expensive to implement such a system and also its maintenance costs are high. In some cases, training costs are included especially where the employees are not conversant with the system. Cumbersome. Such systems are very detailed and can prove to be quite cumbersome and also the constant reminding of the customers about their due payments can be deemed to be nagging. Imperfect systems. Although it is a common myth that technology is perfect, such systems are not entirely perfect and are prone to crashes which leave the business in limbo and at times almost paralysed. Collection Sytems Every business man knows that a sale isn’t a sale until the cash is in the account. Therefore getting this money when one needs it can pose a real challenge. Most companies wait until the invoice is due before taking any action. The real solution would be in adopting pro activeness. How do we collect payment from our customers? That is what this section seeks to address. Automating the payment collection process can be very useful as it enhances the efficency of the orgnisation. The automation acn be done through employing softawares and other technologies. Such softwares are useful in saving, maintaining and calculating balance of payment collected from customers. They also allow customers to pay in installments as they are able to keep track. In such cases, installment records for instance the Receipt No, Date, Paid Fees will be saved in the database and afterwards the balance will be generated. Collection System Process Establish Payment Methods How will people pay you? The payment system method employed depends primarily on the type of business and type of customers. Are they individuals or comapnies? There are some established ways to take in money from customers of all types: Cash payments, primarily from individuals in a retail business Credit and debit card payments from individuals and businesses Credit or payment plans, from both individuals and business customers Online payment methods such as PayPal, from individuals and companies. Checks, from individuals in a retail environment and business customers Other external payment sources, such as insurance companies, in certain types of companies. 1. Set Up Payment Processing "Rules of Thumb" After determining the types of payments to take, set out some rules for your employees regarding the acceptance and handling of these payment types. For example, what are your rules for accepting checks? When do you allow customers to pay over time? Do you do credit checks on new customers? 2. Send out Bills It is important to ensure that bills are sent to customers who owe money to the business. Such bills could be sent at least once a month, or more often in case the money is urgently needed. 3. Run an Accounts Receivable Aging Report Depending on the type of business, one may encounter customers who purchase on credit, or who pay over time. In such cases, running an accounts receivable aging report will show when to send out bills and when to initiate stronger collection methods. 4. Initiate Collections Proceedings for Non-payers For customers who do not pay within a reasonable amount of time (this is after prior communication with the customer,) initiate collections proceedings. Setting up and managing a collection system can help a businessman collect money due and this ensures cash flow in the company. Chart Showing the Automated Collection System Challenges faced in Collection Systems Difficulty in actualising. In theory, this system sounds like a perfect specimen, however upon actualising it various difficulties are experienced. For instance employing stronger collection methods; such tactics could lead to customer loss. Expensive. This is a very common problem and a major reason as to why businesses opt not to implement it. The cost of collection at times proves to be higher than the payments sought. At the end of the day collection results in major losses in the organisation. Time consuming. These systems do not discourage credit purchases however such purchases can be detrimental especially to infant businesses as they require the cash flow in order to cater for its day to day operations. Appendix 1 Appendix 2 Appendix 3 References Bagranoff N. A., Simkin, M. G. and Strand C.S. (2007) Core Concepts of Accounting Information Systems (10th Edition). Wiley & sons. Romney M. and Steinbart P. (2006) Accounting Information Systems (10th Edition). Pearsonian Education, New jersey. Tatum, M. (2012) What Is Automated Billing? Conjecture Corporation. Read More