H&m Rea Term Project

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In the revenue process, H&M creates value by designing, producing and providing fashionable clothing at attractive prices to their customers in H&M stores.

The main objective of the sales/collection process is to sell clothing, to provide related services (the finished clothing from the conversion process) and to collect their payments, usually in the form of cash.

Chart 3 represents the REA model for the Sales/Collection process of H&M. In order to have a fully integrated system, the model is composed of three major entities, which are Resources, Events and Agents.

The Resources in the model are the inventories and the cash account. The inventories include dresses, tops, shirts, skirts and so on. The cash accounts are contained in various bank accounts.

The Events in the model are the sale and cash receipt, product returns and cash disbursement. The sale is an economical decrement event because the products must be used up in exchange for cash from customers. On the other hand, the cash receipt is an economic incremental event, because cash must be collected when the company has finished delivering the goods and related services.

Each sale will lead to a cash receipt, and the relationship between the two is called duality. The sales generate cash payments, which will be paid before customers getting products.

One sale could contain several products but should only be paid with one cash payment. Cash receipts can come from shareholders, creditors, lenders, and customers. Therefore, a cash receipt can exist in the database without being associated with a sale or with multiple sales. Cash receipts are received and processed by a cashier. Cash is immediately deposited into one of the bank accounts which H&M maintains promptly after receiving it. Therefore, each cash receipt can only exist in the cash account once and the cash account may be associated with more than one cash receipts.

The product return is an economical decrement reversal event because when customers return the products, H&M will get the products back, which is a reverse of economical decrement. On the other hand, the cash disbursement is an economic decrement event, because cash must be disbursed when customers return their products.

Each product return will lead to a cash disbursement, and the relationship between the two is called duality. Once the product return is approved by a cashier, it will generate cash disbursement, which will be paid right after the return is accept by the cash clerk. One return could contain several products but should only be paid with one cash payment. Cash disbursement can come to suppliers, shareholders, employees, and creditors. Therefore, a cash disbursement can exist in the database without being associated with a product return or with multiple product returns.

The agents in the REA model include two external agents (customers and shipping dealers) and two internal agents (sales persons and cashiers). There is no record that a customer is serviced by which cashier or sales person. Customers exist in the REA model through making purchase in the company.

Customers only pay cash once when they make a purchase. Cashiers and sales persons can exist in the REA model without any transaction happened. The cashiers are responsible for recording the received cash receipts, so the cashiers may be associated with multiple cash receipts.

If the sale happened online, the products in this sale will be shipped through a shipping dealer. Shipping dealers could only exist in the REA Model if they have delivered for H&M once.

Information about inventories, cash accounts and employees are entered into the database of H&M before any sale transactions occur.

The attributes for each Resource, Event and Agent are showed in Exhibit 1.

Chart 3[pic 23]

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Queries

The above database provides detail information about related resources, economic events and agents in revenue cycle of H&M. This database conveys useful information to both internal and external users, from which many different queries can be implemented. The list below includes some of the queries in this system:

QUERIES

PURPOSE

Which product costs less than $9?

Help management know the cost of each product better, and help to improve cost control

What is the delivery time from factories to stores for each product?

Help determine the proper time to make orders, which can avoid the situation that customers need to wait for a lone time to get their goods.

What is the average cost of the products?

Determine which products are most popular with customers. Based on this customer preference, managements’ efforts can better meet the market needs.

What is the average sale per day?

Help to make assessment of potential demand, and make it more possible that the products meet customers needs.

What is the sales return for each sale?

Help to investigate the reason for sales return and help the management to conduct quality control

Which date has the lowest sale?

This amounts can be compared with the historical data, and help evaluate the management performances.

Which product costs more than $11?

Help management to determine if they should give up this kinds of products or increase price of this good

Who is responsible for the sale on March 3rd?

Help to develop an audit trail, and once problems arise, it is easier for the management to find who should take the responsibility.

How many customers live in Toronto?

Help managements to estimate sales in different areas and to determine the storage level for different goods and thus minimizing the storage costs..