Internal Control Checklist/Questionaires/Assessment On Revenue Cycle

General

• Policies and procedures for credit and collections management should be clearly documented and communicated.
  

Credit Assessment
· The credit worthiness of all new credit customers should be evaluated and documented for approvals in the credit assessment forms.
· Credit limits of customers must be approved in accordance with the DOA.
· The credit assessments should include at least two of the following:
– Analysis of customers’ latest available financial statements or credit rating agency’s reviews
– Understanding customers’ management and business
– Personal guarantee
– Site visit
· Credit ratings of one to six should be specified for each customer based on the credit assessments.  Customer credit terms and limits should be granted based on the credit ratings.
· Overrides to the credit rules should be approved in accordance with the authority levels.
· Credit assessments for all major customers should be updated annually.

• No delivery order should be generated by the system if the relevant customers had trade debts exceeding either their credit terms or credit limits. Overrides require pre-approval from both the Divisional Director and Finance Manager before the orders can be processed.
  

Sales, Invoicing and Recording
· Price and volume discounts should be approved in accordance with the authority levels.
· Sales orders should be evaluated to ensure compliance with approved credit limits.
· Outstanding sales orders should be monitored daily for their progress and status.
· All Delivery Orders should be matched with Invoices and Customer’s Purchase Orders.
· All Credit Notes should be supported and approved in accordance with the authority levels.
· There should be sequential control over all Invoices, Credit Notes, Delivery Orders and Goods Returned Notes.
Collections and Bad debts

• Monthly debtors ageing reports showing old debts beyond credit period should be generated for monthly credit review.
  

• Follow up actions for long outstanding debts should be established and documented during credit review meetings.  Follow-up actions should include sending of reminder/warning letters and, ultimately legal letters as a last resort.
  

• All debtors write-off should be approved by both the Group MD or Group FD in accordance with the DOA.
  

• Customer statements should be mailed monthly to customers. Disputes must be investigated and resolved within two weeks and monitored by Functional Manager independent of sales function.
  

Credit Notes Issue

• Credit notes should be approved by Functional Managers independent of sales function.
  

• Credit notes are sequentially controlled.
  

Reconciliation

• Debtors ageing report should be reconciled to the GL monthly and reviewed by Finance Manager.
  

Segregation of Duties

• There should be segregation of duties between the following functions:
  

– Credit control
– Credit notes
– Collections
– Accounts receivable
Delegation of Authority (DOA)

• The documented DOA should cover the authority to:
  

– New credit customers
– Credit limits and terms, and overrides to the credit rule
– Sales orders
– Bad debt provision and write-off
– Credit note issues