SALES CYCLE

 Potential errors or irregularities

1. Goods despatched without being invoiced. Services rendered without being invoiced, goods in transit or a consignment about not recognised in the books.
2. Goods being sent to bad credit risk customers
3. Overdue account without follow up.
4. Invoicing errors; sales invoiced but not recorded in the books.
5. The receipt of cash/cheques not being recorded including teeming and lading.
6. Cash sales not recorded.
7. Improper crediting of debtors account.

 Implications of the above errors

1. Understated sales, wrong management accounts, loss of assets of company and accounts without true and fair view.
2. Bad debts and loss of assets.
3. Increased incidents of bad debts.
4. Misstatement of sales and debtors, loss of money increased disputes with customers due to errors in invoicing.
5. Misappropriation of cash, exposure to theft and loss of interest due to delayed banking.
6. Misappropriation of readily realisable assets.
7. Unreliable records, increased incidents of bad debts, dispute and customers loss of organisation.

Preventive measures

1. Sales orders should be pre-numbered so as to initiate audit trail and minimise disputes with customers Discounts are approved by the officer responsible. Pass order to credit department to assess the credit worthiness of the customer. The sales order is approved after goods are confirmed to be present in the store. Then despatch - raise documentation to evidence it. Despatch notes should be pre-numbered.
2. Matching of all delivery and despatch notes by an independent clerk.
3. Establish credit control department to examine orders. Review long outstanding debts and investigate why payment was not made.
4. Use pre-numbered sales invoices and issue invoices in sequence.Establish proper sales journals and debtors ledger. Checking invoices raised by clerks for arithmetic accuracy pricing, discounts allowed coding and cross referencing to the customer’s
5. Opening mail is only by Managing Directors secretary in the presence of the messenger. Prepare a pre-list for all cheques received by mail.

• • Pre-numbered receipts.
  • For all money raised a receipt must be issued.
  • Receipts entered should be prompt.
  • Regular bank reconciliation.
  • Compare pre listed cheques and pay-in-slips from the bank by an independent clerk.

6 .re-numbered cash sales receipts.

• • Restricting number of people who can handle cash.
  • Filed of returns daily.
  • Quantity reconciliation.
  • Supervision of cash handlers.
  • Encourage use of cheques or credit card payment.
  • Surprise cash count.
  • Reconciliation and support records.

        7 . Coding of customers