Management of accounts receivable of the enterprise should be made at each firm
Management of accounts receivable of the enterpriseIt is impossible without a well thought-out credit policy - an established set of rules that regulate the possibility of granting a commercial loan, and the procedure for the recovery of receivables. Approval of the order on the credit policy of the enterprise is adopted annually, in order to be able to clarify the goals and objectives, the standards, approaches and conditions adopted.
If you want the management of the receivables of an enterprise to be effective, its purpose should be the following:
- increasing the efficiency of investing in current and long-term accounts receivable;
- increase sales, or rather profits from it;
- increase the return on investment.
In addition to the formalization of objectives, management of accounts receivablethe debt of the enterprise implies the definition of tasks, in the solution of which the target values will be achieved (for example, successful entry into new sales markets). Each of the formulated tasks should have both the ability to measure the amount of funds, and the actual deadlines for its implementation.
Typically, the following methods are used to manage accounts receivable:
That is how the receivables managementindebtedness of the enterprise, has a direct impact on its profitability, determines what the credit policy will be, the provision of discounts in relation to inefficient buyers, the way the debt recovery process and the reduction of bad debts will be accelerated. The terms of sale, which ensure guaranteed receipts of working capital, also depend on this. To doubtful or bad debts, as a rule, they include unpaid bills. This means that for each unit of cash for goods shipped with a deferred payment and not paid on time, a certain percentage is not returned.
In order to be able to produce a qualitative analysis and management of accounts receivable, it is required to conduct:
- accounting of orders;
- accounting of issued accounts;
- timely establish the characteristics of the arisen receivables;
- Calculate the amount of loss of profits in connection with the investment of funds (consent to defer payment for the goods shipped or the service provided).
Management in this case is associated with the following varieties of time reserves:
- an invoice issuance;
- shipping with mail.
The time required for an invoice isthe number of days passing from the moment of sending the product to the buyer before the date of sending the invoice. The time of sending by mail consists in the number of days after which the invoice will be received by the buyer.
But the key is the installationdefined loan terms, which have a significant impact on the final and projected sales volumes, and, consequently, the receipt of funds. For example, if the distribution company provides a longer term loan, this will lead to an increase in sales. But it should be borne in mind that the loan term has a direct impact on the cost side. That is, we have a twofold situation. On the one hand, while tightening the terms of receivables, the enterprise will lose sales volumes, but at the same time the losses associated with non-return of funds will decrease significantly. On the other hand, milder conditions will increase sales, but the company will lose money already in two directions - the emergence of bad debts and lost profits. In this case, it is also necessary to take into account the seasonality of sales.