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REVENUE CYCLE of Manufacturing Business

INTRODUCTION:
Venturing into a business entails a sort of risk to meddle with. Furthermore, the entrepreneur

assumes the responsibility and the risk for a business operation with the expectation of making a profit. The entrepreneur generally decides on the product, acquires the facilities, and brings together the labor force, capital, and production materials. If the business succeeds, the entrepreneur reaps the reward of profits; if it fails, he or she takes the loss. Companies must have revenues in order to survive and be in the circulation. The difference between their revenues and their expenses (money spent on production processes, interest payments on loans, and so on) determines their profit or loss. A company whose expenses are consistently more than its revenues will not be allowed by its creditors (who have financed the gap between revenues and costs) to continue in its present form.

Thus, to further understand how a business carries out its operation in its respective field, this paper aimed to discuss the revenue, expenditure and conversion cycle of a manufacturing firm particularly the AVANT, Nueva Ecija Branch located at Bagong Sikat, Munoz franchised by Engr. Badua. Revenue cycle will be first discussed thereto.

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REVENUE CYCLE of Manufacturing Business

AVANT is a new concept in water refilling station business in the Philippines providing efficient production and distribution of safe and quality drinking water to the community. The water refilling station business has been proven to be a very profitable venture because it only requires minimal investment but has the potential to generate high net profit and fast investment return due to the infinite market demand for clean, safe and healthy drinking water by the public. With this impact at hand, an opportunity was seized as the first AVANT branch in Nueva Ecija hails to be located at Bagong Sikat, Munoz. AVANT main products include Alkaline Water, Mineral Water and Purified Water, which are processed using a 9000 GPD Advanced Water Treatment Equipment. AVANT WATER produces and delivers safe and healthy drinking water by ensuring that the raw water undergoes proper treatment through a water treatment system that is designed based on sound engineering principles and operated a competent staff within a hygienic environment. AVANT Water is processed through a series of pre-filtration stages, water softening and conditioning before it goes through the Reverse Osmosis (RO) system, the finest water filtration method, wherein up to 99% of contaminants such as rust, hardness, salts and other impurities are removed. Prior to refilling, the processed water is subjected to a series of post-filtration

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REVENUE CYCLE of Manufacturing Business

stages and then subjected to ultraviolet light sterilization to ensure that the final product is free from any viruses and bacteria. To ensure that the AVANT Water is safe and healthy as well as meets the stringent limits set under the Philippine National Standards for Drinking Water by the Department of Health (DOH) of the Philippines, a monthly Microbiological Analysis is conducted every month and a Physical and Chemical Analysis is done every six months by a DOH-accredited water laboratory. Water plays a significant role in life, health, and vitality so drink AVANT Water Your Water for a Healthy Life! AVANT Water is the brand of the drinking water popularized by EZITECH Water Management Systems, a water engineering firm that is engaged in the research, design, assembly, installation and commissioning of water treatment for commercial, residential and industrial applications. AVANT, which means in the lead in French, is committed to be the trailblazer in the efficient, hygienic and excellent production and distribution of safe and healthy drinking water.

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REVENUE CYCLE of Manufacturing Business

REVENUE CYCLE
The revenue cycle is the set of activities in a business which brings about the exchange of goods or services with customers for cash. This cycle has two phase process: the physical phases in which goods or services are transferred to the buyer; and the financial phase in which the cash is received from the buyer. The first phase is handled by the sales order processing subsystem, the latter by the cash receipts subsystem. In between these two subsystems may arise the sales return procedures.

I.

Sales Order Procedures

a. Receive Order: The sales process begins with the receipt of a customer order indicating the type and quantity of merchandise desired. In Avant, they accept sales through telephone calls and over-the counter orders. Their contact numbers are: Globe (0927-6580-910); Smart (0919-8306-444) and PLDT (6440-8060-486). They have catered contact numbers in major networks for ease access from their customers. For orders, they use two records: one is the individual records of their customers(to count the gallons lent to them). It is to take note that Avant customers are allowed to use the gallon-containers for as long as they will handle it with care. It is indicated in the record whether they have just borrowed round (those used for water dispensers) or thin (with a faucet at the bottom) containers. Upon damaged due to their negligence or due to intentional destruction of such, the customer will pay as a consequence of 150 pesos as the price of the container. Be it as it may, if the damage is due to probable natural occuring instances as the

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REVENUE CYCLE of Manufacturing Business

probable thinning of the plastic container because of frequent use, Avant will give the customers with new container to use for free. Furthermore, these records of the customers are arranged according to barangays or purok where they came from. One color is designated for every barangay, thus providing an easy way to search for their customers records.

On the otherhand, the other record is to account for the total number of gallons of purified, mineral or alkaline water sold in a day. This allows the manager to know the lowest, average, and highest sales of their product. Their customers are
Individual consumers (households, students(mostly) PHILMEC (contract)terms: monthly billing and around 2 weeks processing Municipal/barangay offices; bureau of fire Some CLSU establishment Dealers

According to them, it is on Saturdays where they get the most customers. Their Minimum of sales is 60-70 gallons per day but they happen to serve even 150-200 customers during the past days. Thus their average sale achieved to be 170 gallons/ day. Purified water was best sold followed by mineral then alkaline. How they are different are as follows: Mineral Water = Less investment but the disadvantage is shorter shelf life. Purified Water = Equipment is more expensive that Mineral process with the use of Reversed Osmosis system, the water will last up to 6 months. Alkaline Water = Current fad because of positive write-ups about health benefits for people, but like mineral water, the shelf life is short. But then, Alkaline Water was not already well introduced to the people of Nueva Ecija thats why if compared to purified water and mineral water sales, it is relatively lower.

For their customers, as in PHILMEC, they do have contracts. The term of payment is that there would be a monthly billing but the processing is uncertain, most probably about two weeks or more.

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REVENUE CYCLE of Manufacturing Business

b. Check Credit For household customers: In the this water refilling business, it is usual that if a customer orders for a credit, he would then pay his debt during the next delivery and the cycle goes as is. They do not set credit limits and just operating on mere fiduciary matters. They will wait until the person would be able to pay if ever he has outstanding balances (but it is totally unusual according to the franchiser of Avant)

For schools, municipal halls, PHILMEC: Avant has proven their credit worthiness. They do not set a formal credit limit. They just operate purely in fiduciary relationship which appeals that they can order as much as they needed.

c. Delivery AVANT Water delivers water directly to your doorstep! Their delivery services ensure that you receive the same quality of drinking water that you get at the AVANT Water Refilling Station but with the added convenience of delivery. Customers who are calling for an order are expected to know that they could not receive their orders out rightly. The delivery also depends on the distance of the customer from the station. When the customers are just their neighboring houses, they will deliver the product upon call. The delivery also depends on the number of buyers accumulated on a certain period. The delivery vehicle would pursue on delivering when a lot of customers has laid their call. So call orders are accumulated before actual delivery takes place. Avant practices just-in-time inventory. It stocks only what it needs for the next day. Thus, most often, they tend to refill gallons upon order.

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REVENUE CYCLE of Manufacturing Business

It is required that they stock gallons of water inside the station away from sunlight. It is for the fact that plastic containers used in the Philippines if compared to other countries like America are prone to chemical reactions when exposed to sunlight.

d. Bill customers The delivery of purified water to the office marks the completion of the economic event and the point at which the customer should be billed. Billing is applicable to their customers as in PHILMEC where the term of payment is within one month. e. Update Accounts Receivable They also have list of their receivables from their customers. They update this record upon occurrence of a receivable from their credit-worthy customers.

II.

Sales Return Procedure

Their sales return procedure is simple. Sales return just happen when the container contains damage. If the damage is beyond the control of the buyer, as in the actual thinning of the plastic container due to frequent use, AVANT will replace the container for free. But then, when the damage is due to intentional acts or negligence, the borrower of the container face the consequence of paying 150 pesos.