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The revenue cycle is “the recurring set of business activities and
data processing operations associated with providing goods and
services to customers and collecting cash in payment of those sales,”
(Romney et al., p.428, 2021). The importance of the revenue cycle in
the accounting information systems (AIS) is that it allows businesses to
predict cash flow and track transactions at all phases. This means, while
not every transaction proceeds according to schedule, this rough
timeline indicates when payments will be made and how much a
business can expect to take in as revenue by a given date. The three
primary functions of AIS in the revenue cycle are (1) to capture and
process data about business activities, (2) store and organize that data
to support decision making, and (3) to provide controls, which ensures
reliability of data and safeguard resources. The main purpose of the
revenue cycle also known as the income cycle “is to provide the right
product in the right place and time at the right price,” (Azhar Susanto,
2019). To accomplish this objective there are four basic business
activities to perform in the revenue cycle and they are “sales order
entry, shipping, billing, and cash collection,” (Romney, et al., p.428,
2021).
The article “Strategies for successful revenue cycle outsourcing,”
by Lisowski and Sanderson (2013), discusses the decision of some
health care systems and hospitals to outsource their revenue cycle
management process. The article provided advantages of outsourcing
to include revenue gains and cost savings. Some entity will decide to
outsource their revenue cycle, while others may develop an internal
system. When the decision is made to outsource the revenue cycle, the
factors to take into consideration when choosing a partner must
include information technology (IT) system compatibility, and payment
arrangements.
The relevance of the article to the AIS is that the authors believe
it is customary for the health care system to outsource a portion of
their revenue cycle, but some institutions are outsourcing the entire
process. When an institution outsource their revenue management
cycle they may lose control of this process, but the pros outweighs the
cons. Outsourcing allows the practice to significantly save on the cost
of managing staff in-house, which is “one of your most significant
expenses when running a practice,” ( Dunlop, 2022). This article also
stated, “the primary advantages derive from cost savings, revenue
gains, access to specialized skills, mitigation of risk, capacity
management, and reduced capital requirements,” (Lisowski &
Sanderson, 2013). Companies utilizing AIS in their accounting cycle will
ensure the highest level of accuracy with their financial transactions
and record-keeping. Which allows specific employees to access the
information they need while limiting sensitive information to others
and protecting the overall security of the company’s financial data.
Happy new year and all the best,
Charmaine
References:
Azhar Susanto, M. (2019). Revenue Cycle in Accounting Information
Systems. International Journal of Scientific & Technology Research,
8(06). https://www.ijstr.org/final-print/june2019/Revenue-
Cycle-In-Accounting-Information-Systems.pdf
Dunlop, M. (2022, August 2). Why Should You Outsource Revenue Cycle
Management in Healthcare? Healthtechzone.com. Retrieved
December 28, 2022, from
https://www.healthtechzone.com/topics/healthcare/articles/202
2/08/02/453067-why-should-outsource-revenue-cycle-
management-healthcare.htm
Lisowski, D. A., & Sanderson, B. (2013). strategies for successful
revenue cycle outsourcing. Hfm (Healthcare Financial
Management), 67(9), 82-86–5.
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Romney, M. B., Steinbart, P. J., Summers, S. L., & Wood, D. A. (2021).
Accounting Information Systems (15th ed.). Pearson Education, Inc.
