Accounts receivable management is part of the overall management system of current assets of the enterprise and consists in optimizing the total amount of accounts receivable and ensuring its timely collection.
The need for proper management of the level of receivables is determined not only by the desire to maximize the cash flows of the enterprise (receiving payments from debtors is one of the main sources of funds in the enterprise), but also by the desire to reduce its costs arising from the fact that any increase in receivables must be financed in some way: through the growth of external borrowings or at the expense of the enterprise's own funds.
Accounts receivable is a factor that determines the following:
The size and structure of current assets of the enterprise;
The duration of the financial cycle of the enterprise;
Size and structure of sales proceeds;
Turnover of current assets and assets in general;
Sources of funds of the enterprise;
Liquidity and solvency of the enterprise.
Accounts receivable management involves:
Organization of accounting and analysis of receivables for the previous and reporting periods;
Formation of the credit policy of the enterprise;
Formation of a collection procedure for receivables and planning of cash receipts from debtors based on collection coefficients;
Development of a system of control over the state of receivables;
Development of measures aimed at improving the efficiency of receivables management.
Accounts receivable management involves, first of all, control over the turnover of funds in the calculations. The acceleration of turnover is a positive trend in the economic activity of the enterprise.
Turnover acceleration can be achieved through the selection of potential buyers, the definition of payment terms, control over the maturity of receivables and the impact on debtors. The selection of buyers is carried out due to the analysis of compliance with their payment discipline in the past, the analysis of their current solvency, the analysis of their level of financial stability and the analysis of other financial indicators that characterize the financial condition of the buyer enterprise.
Determining the terms of payment for goods by buyers lies in the fact that the buyer sets the deadlines for paying for goods: paid earlier - received a discount on payment for goods, paid on time - lost the discount provided, paid late - pay a fine.
Control over the maturity of receivables includes ranging receivables by the timing of their occurrence. The most common classification provides for the following grouping of receivables in days: up to 30 days, from 30 to 60 days, from 60 to 90 days, from 90 to 120 days, more than 120 days.
Accounts receivable management implies a mandatory comparative analysis of the amount of receivables with the amount of accounts payable. It is very important for the financial position of the company that the receivables do not exceed the accounts payable.
Receivables management also consists in creating reserves for doubtful debts and analyzing actual losses associated with non-payment of receivables.
One of the main approaches to managing receivables is the formation of an enterprise's credit policy. The purpose of the credit policy is to obtain additional profit by stimulating the growth of sales. But the implementation of the credit policy is associated with certain costs of control over the payment of bills and servicing receivables. In addition, there are risks of bad debts when shipped products are not paid at all.
Factors affecting the conduct of credit policy:
1. The state of the economy in the country and abroad. During periods of general economic downturn, a more liberal credit policy is carried out in order to stimulate potential buyers. With an increase in demand and an improvement in the economic situation in the country, the enterprise can gradually pursue a more stringent credit policy.
2. Place of the enterprise in the market. If there are a significant number of enterprises offering identical products and services, the company needs to compete and pursue a more liberal credit policy so as not to frighten off current and future customers.
3. The nature of the products offered. As a rule, for durable goods, the loan term is longer.
4. Financial condition of buyers, customers. For clients whose financial condition is stable or who have proven themselves in the past on a good side (positive credit history), a loan can be provided on preferential terms.
Factors affecting the amount of receivables: the volume of sales of products on credit and the average period of time between the date of shipment of products and receipt of funds.
The main elements of credit policy:
1. The volume of sales on credit, the average terms of the loan, the prices for the products offered on credit depend on the behavior of the enterprise when conquering the market, the company's risk appetite, consumer demand for the company's products, the shelf life of the goods, the volume of purchases by customers, the level of competition, the amount of bank interest rates, credit risk, the prevailing lending conditions in the region.
The calculation of the amount of money required by the enterprise to form the appropriate amount of receivables, based on the volume of products sold on credit, is determined by the formula:
where DZ - accounts receivable of the enterprise;
P to - products sold on credit.
T to - the actual average term of a commercial loan, taking into account the possible time of its default;
It is important to determine the cost of one day of deferred payment:
, (2)
where SP od - the cost of one day of delay;
P to - products sold on credit;
D is the duration of the analyzed period.
2. Standards of credit reliability. They define the acceptable reliability that a client must demonstrate in order to be granted a loan. The creditworthiness of the borrower is characterized by:
Its reputation, which depends on the timeliness of settlements on previously received loans (the borrower's credit history), the responsibility and competence of the management;
The current financial condition of the enterprise itself and the ability to produce competitive products and services;
The stability of activities and the ability, if necessary, to mobilize funds from various sources.
When analyzing creditworthiness, the following quantitative indicators are used: liquidity ratios, financial stability ratios, turnover ratios, profitability ratios, investment attractiveness. Absolute indicators such as the net assets of the enterprise and the value of own working capital are also calculated.
Also, customers and buyers are divided into groups, depending on the size of the commercial loan provided to them: a loan provided in the maximum amount, in a limited amount, and no loan is provided.
3. Terms of deferred payment, including discounts for early payment. They are determined by the type of policy adopted by the enterprise and include the following:
Payment grace periods;
The amount of commercial credit provided to various clients;
The amount of discounts when paying for products by the buyer in the first days after unloading:
1. The amount of penalties and the mechanism for their collection.
2. The share of deferred payment, drawn up by a bill.
The terms and amounts of deferred payments are determined by the following conditions:
Features of the relationship of the enterprise with certain groups of buyers or individual buyers;
The credit policy of the enterprise and the current practice in the market of commercial loans;
The financial capabilities of the enterprise, suggesting the need to divert funds into receivables, which lengthens the operating and financial cycles, slows down the turnover of the company's working capital, and reduces profitability.
Sometimes providing a discount for early or fast payment for products has a positive effect on the speed of return of funds. However, it must be remembered that discounts in contracts are necessary in the following cases:
If they result in increased sales and higher overall profits;
If the company is experiencing a shortage of funds;
To calculate the appropriateness of a discount, the following formula is usually used:
, (3)
where I - total interest costs of using a commercial loan;
T to - the term of a commercial loan;
P is the period of the discount.
Consider an example:
For example, the following is indicated in the delivery contract on the terms of deferred payment: “4/10-30”, which means: if the buyer pays for the goods within ten days, then he is given a four percent discount on the cost of the goods. If the buyer does not use the discount, he must pay for the goods within thirty days. We substitute the initial data into formula (3) and get: 
or 25.56 percent. This means that the cost of the loan provided by the supplier firm from the tenth to the thirtieth day will be twenty-five percent. Therefore, if a client can purchase a loan from a bank cheaper and pay off the lender within ten days, it will be more profitable than using the lender's money for another twenty days.
As practice shows, it is not uncommon for bad faith debtors to fail to fulfill their obligations under contracts in terms of payment terms, which leads to the formation of overdue receivables from suppliers. For violation of the terms of contracts, the following measures of civil liability are applied: fines, penalties, interest. The amounts of sanctions recognized by the debtor for which court decisions have been received on their recovery are included by commercial organizations in non-operating income (paragraph eight of the Accounting Regulation "Income of the Organization" (PBU 9/99)). The amounts of fines, penalties, forfeits before they are received are reflected in the balance sheet as part of receivables.
There is such a thing as the formation of a collection procedure for receivables. Under the collection of receivables is understood the receipt of funds in the repayment of this debt. The collection coefficient, in turn, allows you to establish when and in what amount cash is expected to be received from sales of a given period. The collection coefficient expresses the percentage of expected cash receipts from sales in a certain time interval, starting from the moment the product is sold:
, (4)
where K inc - collection coefficient;
Change in the amount of receivables in the interval n;
OP t - sales of the month t;
n - the first month of shipment of goods.
The value of this indicator can be determined on the basis of an analysis of cash receipts (repayment of receivables) of past periods. When calculating this ratio, it is necessary to pay attention to the register of aging receivables, compiled on the basis of accounting data.
At present, such approaches to refinancing accounts receivable have been developed in Russia, such as: factoring, forfaiting, promissory notes and other securities used as a means of payment.
4. Control of settlements and debt collection policy. As part of the debt collection policy, procedures are developed that the company adheres to when collecting overdue debts.
In order to correctly assess all trends related to receivables, every financial manager must be able to analyze the scorecard associated with receivables. First of all, this is the value of the receivables turnover period (V / Dz). If this ratio has decreased compared to the previous period, it means that the company has reduced sales on credit. You should also carefully monitor the period of repayment of receivables. After all, the longer the period of repayment of receivables, the higher the risk of non-payment (this relationship will be discussed in more detail below).
In addition to the above indicators, you should calculate:
* the share of receivables in the total volume of working capital according to the following formula:
UV \u003d (DZ / CO) x 100, where
DZ - the average value of receivables for the period, rub.;
SO - the average value of working capital, rub.
The lower this indicator, the more mobile the structure of the company's property and the higher the financial stability;
* the amount of doubtful receivables in the total volume of receivables:
SW.sdz \u003d (SZ / DZ) x 100, where
SZ - the average value of doubtful receivables, rub.
This indicator characterizes the "quality" of receivables, and its growth indicates a decrease in the company's liquidity, an increase in risks.
One of the components of the financial analysis of accounts receivable is the assessment of its real state. When conducting such an assessment, not only the amount of receivables is considered, but also the date of its occurrence: the current (non-overdue receivables), overdue (doubtful) and bad receivables are allocated. Further, based on the analysis, a register of accounts receivable is compiled, in which all three groups of debtors are distinguished and any decisions are made for each group: an active reminder to the debtor of the need for immediate payment, write-off of bad debt, etc.
The frequency of analytical reports of this kind depends on the duration of the cash flow cycle (average grace period). If all deferrals are provided for a sufficiently large number of days, for example 60 or more, then it is advisable to draw up this report no more than once a quarter. Although here you need to remember that you can miss the time to make some operational decisions.
Accounts receivable management is a specific function of financial management, the main purpose of which is to increase the company's profits through the effective use of receivables as an economic tool. And above all, accounts receivable is a very variable and dynamic element of working capital, significantly depending on the policy adopted by the organization in relation to buyers of products. Since receivables represent the immobilization of own working capital, i.e. in principle, it is not beneficial to the organization, then the obvious conclusion is that it should be reduced as much as possible. Accounts receivable can be reduced to a minimum, however, this does not happen for many reasons, including competition. Of great importance are the selection of potential buyers and the determination of the terms of payment for the goods provided for in the contracts. The selection is carried out using informal criteria: observance of payment discipline in the past, predictive financial capabilities of the buyer to pay for the volume of goods requested by him, the level of current solvency, the level of financial stability, the economic and financial conditions of the seller enterprise (overstocking, the degree of need for cash, etc.). P.).
It is important to prevent further growth in the share of receivables in the total current assets of the enterprise - this may lead to a decrease in all financial indicators, a slowdown in the turnover of resources, downtime due not to internal problems, but to external ones, and a decrease in the ability to pay one's obligations to creditors.
Accounts receivable management includes several main tasks:
- 1. preliminary check of the debtor at the initial stage of cooperation
- 2. planning allowable limits for receivables
- 3. financing of receivables
- 4. accounting, control, evaluation of the effectiveness of receivables
- 5. collection of overdue receivables
- 6. claim work with undisciplined debtors
Thus, in order to effectively improve the receivables management policy, it is necessary to evaluate the effectiveness of each of these tasks.
The main objectives of receivables management are:
- limiting the acceptable level of receivables;
- selection of sales conditions that ensure a guaranteed cash flow;
- determination of discounts or surcharges for various groups of buyers in terms of their observance of payment discipline;
- acceleration of debt collection;
- reduction of budget debts;
- assessment of possible costs associated with receivables, that is, lost profits from not using funds frozen in receivables.
The ability of an asset such as receivables to be converted into cash becomes a key challenge for any sales department in every company. Tasks, in turn, are divided into several subtasks:
- determination and maintenance of the optimal volume of accounts receivable,
- debt turnover;
- monitoring the quality of receivables.
Naturally, these sub-tasks fall on the shoulders of marketers and require qualified receivables management. My experience in managing sales departments shows that efforts to recover receivables are confidently higher in terms of practicality among other tasks of the sales department and are one of the most effective measures to optimize the costs of an enterprise and increase sales efficiency. Repayment of debts within the time frame planned by the accounting policy is a real opportunity to replenish the much-needed working capital for any company.
Accounts receivable management consists of the same management functions that are not specific to any other type:
- planning,
- organization,
- motivation;
- control and analysis.
Accounts receivable planning is the process of preliminary financial calculations, assessments and management decisions. In order for receivables planning to be real, and therefore effective, it is necessary to formulate an organization's strategy, determine a sales policy, and choose rational receivables parameters. Planning the amount of receivables - was, is and will be one of the most important.
Organization of accounts receivable management, the current work with accounts receivable, should become an obligatory moment of the sales division and will require close attention of managers and managers. Determining approaches to receivables management, stages and methods is a problem that does not have an unambiguous solution, depends on the specifics of the enterprise and the personal qualities of the management. Since the management of receivables is a component of the enterprise management system, the process of managing it can be carried out in stages. In addition, receivables management occurs over time, and it is natural that it must be represented as a certain staged system.
To manage accounts receivable transparent is required. complete, timely and up-to-date information on debtors, payments and debts: data on invoices issued to debtors that have not been paid at the moment; time of delay in payment for each of the accounts; the amount of bad and doubtful receivables, estimated on the basis of the standards established by the company; credit history of the counterparty (average overdue period, average loan amount). As a rule, such information can be obtained in the study of the accounting system.
Under motivation implies a set of administrative, psychological moments that determine the behavior of the debtor, the manager of your company as a whole.
Actions for receivables control- preparation of action standards, comparison of actual results with standard ones. In the process of monitoring receivables, information is collected on the financial position of debtors, on which the state of receivables depends. The main difficulty at this stage is to determine the minimum amount and nomenclature of data that allow the control subject to have a clear idea of the state of the control object. This circumstance is connected with two points. The first point is due to the fact that the collection and processing of accounting information requires funds, which are always limited. The second point is due to the fact that information can be duplicated and late, and this does not contribute to making an informed decision. Analysis of receivables - study and selection of factors, the influence of which led to the emergence of deviations in the actual parameters of the state of receivables from planned indicators.
Classification of receivables
The traditional classification of receivables provides for their distribution according to the legal criterion for urgent or overdue. Term receivables are receivables that have not yet matured or are less than one month old and that are associated with normal settlement terms specified in the agreements. Overdue - this is a debt with violation of contractual terms. Further, it is important to analyze the concept of doubtful debt, which is understood as a current receivable, in relation to which there is uncertainty about its repayment by the debtor. It is clear that debts of this type continue to appear on the balance sheet of the creditor, as long as there is even a slight confidence in their repayment. They will be debited from the balance only when they become hopeless. Therefore, we will separately single out uncollectible receivables, which include current receivables, in respect of which there is confidence in its non-return by the debtor or for which the limitation period has expired.
Accounts receivable management
Accounts receivable management is a part of the general management of current assets and the marketing policy of the enterprise, aimed at expanding the volume of sales of products and consisting in optimizing the total amount of this debt, ensuring its timely collection. The basis of the qualified management of the receivables of the company is the adoption of financial decisions on the following fundamental issues:
Accounting for receivables for each reporting date;
Diagnostic analysis of the state and reasons due to which the company has a negative position with the liquidity of receivables;
Development of an adequate policy and introduction into the practice of the company of modern methods of managing receivables;
Monitoring the current state of receivables.
The receivables management policy is part of the overall current asset management and marketing policy of the enterprise, aimed at expanding the volume of sales of products and consisting in optimizing the total amount of this debt and ensuring its timely collection.
The problem of receivables is of particular relevance in the context of inflation, when there is a depreciation of money. In order to calculate the company's losses from late payment of accounts by debtors, it is necessary to subtract its amount from the overdue receivables, adjusted for the inflation index for this period.
ABC analysis of receivables
The classification of receivables can be based on the distribution of receivables depending on the target groups of debtors. At the same time, marketing approaches are used, which are based on the study of consumer behavior. Accounting for various reasons for non-payments and the real possibilities of citizens to pay the debts that have arisen is decided on the basis of accounting data on payments and debts.
One of these methods is the ABC analysis method. Due to the fact that this term came from abroad, there is often confusion between the "hey-b-c - method" (from the English Activity Based Costing), and "a-be-tse - analysis" from ABC-Analysis. Their nature is completely different. The ABC (Activity Based Costing) method is a method for determining and accounting for expenses by type of organization's activities, a method for determining and accounting for expenses step by step. ABC-analysis (ABC-Analysis) is associated with the name of the Italian economist and sociologist Vilfredo Pareto (in statistics, the well-known "Pareto diagram").
This method is based on the law discovered by the Italian economist V. Pareto, who says that a relatively small number of causes are responsible for most possible outcomes, at the moment this law is better known as the “20/80 rule”.
The sequence of the analysis: firstly, calculate the total debt of all clients on the list; secondly - to calculate 80% of this amount; thirdly, by summing up the debts according to the list, starting from its part with the largest debts, that part of consumers who owe 80% of the total amount should be singled out. Their number is much less than the number of debtors. The selected group of citizens is the first and main target audience, given its relative small number and the main share of the debt (80%). Work with this category of debtors should be based on a personal approach. These efforts are justified by the amount of debt that will be returned. In a similar way, two more groups are distinguished: the first will be the smallest, the third will be the most numerous.
This method makes it possible to form target audiences of debtors, for whom the methods of debt collection applied will differ, which will allow choosing the most effective methods of collection for this particular category. In addition, the advantage can be attributed to the choice of a group of debtors who accumulate the largest amount and which need to be paid attention in the first place. When applying the ABC-analysis method, certain difficulties arise, especially for utilities. They lie in the need to automate and computerize all relationships with debtors. At the same time, in communal enterprises, computerized accounting of payments should be kept not for houses or districts in general, as is always done, but for end consumers. The result of the analysis are lists of debtors with whom it is necessary to work.
The ABC analysis method is mainly used in the management of receivables that already exist. Credit limit management can be used to prevent unpredictable debt. It represents the maximum allowable amount of receivables both for the enterprise as a whole and for each counterparty, or is set for each of the commercial departments of the company, allocated according to the industry principle in proportion to the part of the proceeds for the previous period in the total sales of the enterprise and is approved by the order of the general director. According to the same scheme, the limits are distributed among managers who work with buyers. Each of the managers, in turn, must distribute the credit limit received by him among the clients. As a rule, for new customers who work with the company for no more than six months, the credit limit is set in an amount that does not exceed the average monthly sales volume. For counterparties who have been working with the company for more than six months, the credit limit is set by the manager and must be approved by the management.
Credit limits
Credit limit management can be used to prevent unpredictable debt. It represents the maximum allowable amount of receivables both for the enterprise as a whole and for each counterparty, or is set for each of the commercial departments of the company, allocated according to the industry principle in proportion to the part of the proceeds for the previous period in the total sales of the enterprise and is approved by the order of the general director.
