Ergon plc was a Cambridge based UK listed company. During the late 1990s the company produced digital positioning equipment for the global transportation sector, especially the merchant navy. The company’s products were sold throughout Europe, North America, Australia and Canada, and were widely regarded as the best in the market. Indeed during the period 1993 to 2003 the company’s digital positioning equipment consistently won high praise for both its design and capabilities.
In January 2004, however, Ergon plc went into liquidation, with reported debts of £230m. In March 2005, after extensive investigation, the company receivers, Hopwind LLP, published its findings on the failure of Ergon plc. The report suggested that the principal cause of Ergon plc’s failure had been inadequate internal control within the company’s revenue cycle operations, in particular the management of debtor payments.
Required
Describe the primary function of a revenue cycle for a company such as Ergon plc and explain how a lack of internal control could lead to the eventual collapse of the company.