selling the product. When they sell the product, if they collect in full at the point of the sale
and record the purchase, the revenue cycle for them is complete. If they sell the product and
don't collect in full, then it goes on to the next stage of the revenue cycle process, which is
the collections process. Revenue cycle management is usually done by
(or accounting) department of a company.
Revenue Cycle Management for Service Based Businesses
If a company sells services, which could include charging for products at the
same time, the next stage is providing the service. If they collect for services and supplies
used at the time of billing, then the revenue cycle is complete. If they don't collect in full,
then it goes into the same revenue cycle process as if they were only selling services.
Revenue Cycle Management: The Collections Process
When companies enter the collections process, it becomes the most tenuous
part of the entire revenue cycle progression. Companies will track how their revenue cycle
processes are going by setting time determinants on where their outstanding receivables, or
uncollected monies, are.
Every company hopes to be paid in full within the first 30 days, but that doesn't happen all
the time, depending on many factors outside of their control. This leads to breaking up the
revenue cycle reporting into stages showing where the money is. Usually it goes something
like 30 days, followed by 60, 90, 120, 180 and 360. There can be other numbers within
these, so it's not cut and dried. Based on specific calculations using revenue and receivables
figures, a company can determine the accounts receivable days, which tells them on average
how long it's taking them to collect on their money.
Revenue Cycle Management: Getting Paid
The revenue cycle stage is finally completed either when an account is paid in
full, or an account is written off the books and either sent to a
, or charged
off entirely. Each company and industry gets to set the rules on how to handle outstanding
accounts receivables. It's important for companies to track their revenue cycle process for
two reasons. One, it's how they can determine how profitable they are based on how much
revenue they're generating, and two, they can track how well their cash if flowing and alter
the processes for getting that cash in more quickly if necessary.