Zach's Entertainment World (ZEW) is a multistore retail business that sells electronic gaming products such as DVDs, CDs, mp3 players, game consoles and TVs. In addition to these retail sales, ZEW also sells music, games, and DVDs via its website. The company's operation has been driven by its cost leadership strategy since its establishment, and there is no plan to change that. The CEO of ZEW, Zach Willis, has some understanding of the strategic importance of the revenue cycle in the business' success, but would like to know more, including the likely risks associated with this process and how ZEW could measure performance of its Receipts process.

ZEW's Receipts Process Narrative:

In addition to prepaid online sales and retail cash sales, ZEW offers a credit facility to selected larger customers. These customers receive invoices when they purchase goods and are sent a statement at the end of the month. Payments made by these customers are received by ZEW's cashier.

Each morning the accounts receivable officer receives a report of customer receipts from the cashier. This Customer Receipts Report lists the customer number and name, the amount received from each customer and the total of customer receipts. The account receivable officer logs on to the computer and opens a new cash receipts batch. They then enter the first customer number from the Customer Receipts Report. The computer displays details of all open (unpaid) invoices for that customer. The accounts receivable officer selects the invoice/s that have been paid by clicking on one or more check boxes. The computer calculates a total for the customer based on the invoices checked and when the checked invoices total matches the total received by the cashier from that customer, the accounts receivable officer authorises the receipt allocation.

The computer records the cash receipt total and changes the status of the selected invoices from 'open' to 'closed' (paid). The accounts receivable officer repeats this for every customer receipt on the report. Once all the customer receipts have been entered, the accounts receivable officer updates the computer to record the cash receipts batch as complete. The computer automatically prints out a report containing details of the cash batch. The accounts receivable officer attaches the Cash Receipts Batch Report to the Customer Receipts Report and files them away.

Required

1. Explain why the revenue cycle is a strategically important aspect of ZEW's business operations process.
2. Suggest SIX suitable key performance indicators (KPIs) for evaluating ZEW's revenue cycle
3. Select THREE KPIs from those you suggested in (b) and explain why they are suitable to helping ZEW measure how well its revenue cycle is meeting its objectives.
4. Identify AND discuss THREE risks that ZEW is likely to encounter in its receipts process.