A systematic approach to managing accounts receivable. A systematic approach to managing the accounts receivable of an enterprise Approaches to managing the accounts receivable of an enterprise
Accounts receivable management is part of the overall system for managing the company's current assets 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.
Accounts receivable 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 existing 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 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 receivables as factoring, forfeiting, promissory notes and other securities used as a means of payment have been developed in Russia.
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.
The main elements of the process of managing receivables in the enterprise.
Accounts receivable- represents the amount of debts due to the organization from legal entities or individuals as a result of economic relations between them, or, in other words, the diversion of funds from the turnover of the organization and their use by other organizations or individuals. DZ - it is a loan issued by suppliers and contractors when a purchasing entity receives goods and services from counterparties without requiring immediate payment. Therefore, the policy of managing receivables is called a credit policy in relation to buyers of products. The receivables management policy is part of the general current asset management policy and the company's marketing policy aimed at expanding the volume of sales of products and related to optimizing the size of receivables and ensuring its timely collection.
The receivables management policy includes:
1) Analysis of accounts receivable in the previous period in order to assess the level and composition of the company's accounts receivable, as well as the effectiveness of investing financial resources in it. It analyzes the maturity of receivables, the periods of its collection, the size of the diversion of current assets into receivables, the composition of the receivables by its age groups, and identifies hopeless and doubtful receivables.
2) Certain principles and approaches of credit policy in relation to buyers of products are being formed. Two main questions are solved: 1. in what forms the sale of products is carried out, 2. what type of credit policy should be chosen.
There are three main types of credit policy in relation to buyers:
1. Conservative. It is aimed at minimizing credit risk, which is a priority, therefore, it significantly reduces the circle of buyers on credit. First of all, due to groups of buyers with increased risk; by minimizing the terms of granting a loan and its size, tightening the conditions for granting a loan and increasing its cost, due to a more stringent procedure for collecting receivables.
2. Moderate the type focuses on the average level of credit risk and, accordingly, softer conditions for providing a commercial loan.
3. Aggressive(soft) type provides for the maximization of additional profit by expanding the volume of sales of products on credit, regardless of the high level of credit risk.
1) The formation of a system of credit conditions includes:
a) the term of the loan,
b) the limit of the loan provided,
c) the cost of providing a loan, i.e. a system of price discounts when making payments for purchased products,
d) a system of penalties for delay in fulfilling obligations.
2) Formation of standards for evaluating buyers and differentiating the conditions for granting a loan. These standards are based on the creditworthiness of the enterprise.
3) Building effective systems for monitoring the movement of timely collection of receivables. One of the effective forms is the ABC system, where the largest and most doubtful types of receivables are allocated to category A; category B - medium-sized loans; category C - all other types that do not have a serious impact on the results of the enterprise.
Types of remote sensing:
Short-term (payments for which are expected within 12 months after the reporting date),
Long-term (payments for which are expected more than 12 months after the reporting date),
Overdue (the statute of limitations has expired).
Management methods DZ:
Monitoring the status of accounts for overdue and deferred DZ;
Conducting a ranking of debtors in order to identify debtors that account for a large share of total and overdue debts;
Analysis of debt by type of product in order to identify goods that are not profitable in terms of collection. - assessment of the real value of the remote control taking into account the possibility of its sale (factoring);
Strengthening work with debtors, incl. using out-of-court debt collection procedures;
Control over the status and balance of changes in receivables and payables;
Diversification of buyers;
Discount system (credit policy optimization);
Development of measures to motivate the staff of sales departments (remuneration in the head of the effectiveness of measures to receive payments).
Unlike inventories and work in progress, which cannot be drastically changed, receivables are a highly variable and dynamic element of working capital, significantly dependent on the organization's policy towards product buyers. Since receivables represent the immobilization of own working capital, that is, in principle, it is not beneficial for the organization, then the conclusion about its maximum possible reduction is obvious. Accounts receivable can be reduced to a minimum, however, this does not happen for many reasons, including competition.
From the point of view of reimbursement of the cost of the supplied products, the sale can be carried out in one of three ways:
Prepayment (the goods are paid in full or in part before being transferred by the seller);
Payment for cash (the goods are paid in full at the time of the transfer of the goods, that is, there is a kind of exchange of goods for money);
Payment on credit (the goods are paid for after a certain time after their transfer to the buyer).
When developing a lending policy for buyers of its products, an organization must decide on the following key issues:
The term for granting a loan (most often in an organization there are several standard agreements that provide for a deadline for paying for products);
Credit standards (criteria by which the supplier determines the financial solvency of the buyer and the resulting possible payment options);
The system for creating reserves for doubtful debts (it is assumed that, no matter how the system of work with debtors is debugged, there is always a risk of non-receipt of payment, at least due to force majeure; therefore, based on the principle of caution, it is necessary to create a provision for losses due to with the insolvency of the buyer);
Payment collection system (this includes procedures for interacting with buyers in case of violation of payment terms, a set of indicators indicating the significance of payment violations, a system for punishing unscrupulous counterparties, etc.);
Discount system.
No matter how effective the buyer selection system is, in the course of interaction with them all sorts of overlays are not ruled out, so the organization is forced to create some system of control over the fulfillment of payment discipline by buyers.
The formation of an organization's receivables management policy (or its credit policy in relation to product buyers) is carried out according to the following main stages.
Stage one. Analysis of accounts receivable of the organization in the previous period.
The main objective of this analysis is to assess the level and composition of the organization's receivables, as well as the effectiveness of the financial resources invested in it. Analysis of accounts receivable for settlements with customers is carried out in the context of commodity (commercial) and consumer credit.
Stage two. Formation of principles of credit policy in relation to buyers of products.
In modern commercial and financial practice, the sale of products on credit (with a deferred payment for it) has become widespread both in our country and in countries with developed market economies. The formation of the principles of credit policy reflects the conditions of this practice and is aimed at improving the efficiency of the operating and financial activities of the organization.
In the process of forming the principles of credit policy in relation to buyers of products, two main issues are resolved:
In what forms to sell products on credit;
What type of credit policy should be chosen by the organization.
In the process of choosing the type of credit policy, the following main factors should be taken into account:
Modern commercial and financial practice of trading operations;
The general state of the economy, which determines the financial capabilities of buyers, their level of solvency;
The current conjuncture of the commodity market, the state of demand for the organization's products;
The potential ability of the enterprise to increase the volume of production while expanding the possibilities of its implementation by providing a loan;
Legal conditions for ensuring the collection of receivables;
Financial capabilities of the enterprise in terms of diverting funds into receivables;
The financial mentality of the owners and managers of the organization, their attitude to the level of acceptable risk in the process of economic activity.
When determining the type of credit policy, it should be borne in mind that its hard (conservative) version negatively affects the growth of the organization's operating activities and the formation of sustainable commercial relations, while its soft (aggressive) version can cause excessive diversion of financial resources, reduce the level solvency of the organization, subsequently cause significant debt collection costs, and ultimately reduce the profitability of current assets and capital employed.
Stage three. Determination of the possible amount of working capital directed to receivables under a commodity (commercial) loan.
When calculating this amount, the following must be taken into account:
Planned sales volumes of products on credit;
The average period for granting a deferred payment for certain forms of credit;
The average period of delay in payments, based on the prevailing business practice (it is determined by the results of the analysis of receivables in the previous period);
The ratio of the cost and price of products sold on credit.
Stage four. Formation of a system of credit conditions.
These conditions include the following elements:
1) The term of the loan (credit period) characterizes the maximum period for which the buyer is granted a deferred payment for the sold products. An increase in the term of the loan stimulates the volume of sales of products (ceteris paribus), but at the same time leads to an increase in the amount of funds invested in receivables and an increase in the duration of the financial and entire operating cycle of the organization. Therefore, when setting the size of the credit period, it is necessary to assess its impact on the results of economic activity in the complex.
2) The amount of the granted credit (credit limit) characterizes the maximum limit of the amount of the buyer's debt on the provided commodity (commercial) or consumer credit. It is established taking into account the type of credit policy being implemented (the level of acceptable risk), the planned volume of sales of products on the terms of deferred payments, the average volume of transactions for the sale of finished products (for consumer credit - the average cost of goods sold on credit), the financial condition of the organization - the creditor and other factors. The credit limit is differentiated according to the forms of credit provided and the types of products sold.
3) The cost of providing a loan is characterized by a system of price discounts when making immediate payments for purchased products. In combination with the term of the loan, such a price discount characterizes the rate of interest for the loan, calculated for comparison on an annualized basis. The system of penalties for delay in fulfilling obligations by buyers, formed in the process of developing credit conditions, should provide for appropriate penalties, fines and penalties. The amount of these penalties must fully compensate for all financial losses of the creditor organization (loss of income, inflationary losses, compensation for the risk of reducing the level of solvency, and others).
4) The system of penalties for delay in fulfilling obligations by buyers, formed in the process of developing credit conditions, should provide for appropriate penalties, fines and penalties. The amount of these penalties must fully compensate for all financial losses of the creditor organization (loss of income, inflationary losses, compensation for the risk of reducing the level of solvency, and others).
Stage five. Formation of standards for assessing buyers and differentiation of conditions for granting a loan
The basis for establishing such standards for evaluating buyers is their creditworthiness. The creditworthiness of the buyer characterizes the system of conditions that determine his ability to attract credit in various forms and in full, within the stipulated time frame, to fulfill all financial obligations associated with it.
The formation of a system of customer evaluation standards includes the following main elements:
Determination of a system of characteristics that assess the creditworthiness of individual groups of buyers;
Formation and examination of the information base for assessing the creditworthiness of buyers;
The choice of methods for assessing individual characteristics of the creditworthiness of buyers;
Grouping buyers of products according to the level of creditworthiness;
Differentiation of credit conditions in accordance with the level of creditworthiness of buyers.
The grouping of buyers of products according to the level of creditworthiness is based on the results of its assessment and usually provides for the allocation of the following categories:
Buyers to whom credit can be granted to the maximum extent, i.e. at the level of the established credit limit (a group of "first-class borrowers");
Buyers to whom credit can be granted in a limited amount, determined by the level of acceptable risk of default;
Buyers to whom credit is not provided (with an unacceptable level of risk of default, determined by the type of credit policy chosen).
Differentiation of credit conditions in accordance with the level of creditworthiness of buyers, along with the size of the credit limit, can be carried out according to such parameters as:
term of the loan;
The need for credit insurance at the expense of buyers;
Forms of penalties, etc.
Stage six. Formation of the collection procedure for receivables
As part of this procedure, the terms and forms of preliminary and subsequent reminders to buyers of the date of payments, the possibilities and conditions for prolonging the debt on the granted loan, the conditions for initiating bankruptcy proceedings for insolvent debtors should be provided.
Stage seven. Ensuring the use of modern forms of refinancing receivables in the organization
The development of market relations and the infrastructure of the financial market make it possible to use a number of new forms of receivables management in the practice of financial management - its refinancing, i.e. accelerated transfer to other forms of current assets of the organization: cash and highly liquid short-term securities.
The main forms of refinancing of receivables currently used are:
Factoring;
Accounting for bills of exchange issued by buyers of products;
Forfaiting.
Control of the movement and timely collection of receivables is organized as part of the construction of a general system of financial control in the organization as an independent block of it.
One of the types of such systems is the ABC-system in relation to the organization's receivables portfolio. Group "A" includes the largest and most doubtful types of receivables (the so-called problem loans); in group "B" - medium-sized loans; in group "C" - other types of receivables that do not have a serious impact on the financial performance of the organization.
In addition to the considered stages of the formation of the receivables management policy, it should also be noted that it is necessary to constantly monitor the level of accounts payable, i.e. analyze the level of funds attracted from suppliers
1.2 Approaches to managing the receivables of the enterprise
Receivables management directly affects the company's profitability and determines the discount and credit policy for low-performing buyers, ways to accelerate the collection of debts and reduce bad debts, as well as the choice of sale terms that ensure a guaranteed flow of funds.
Receivables management techniques include: accounting for orders, issuing invoices and establishing the nature of receivables. Among the points to be considered, there are some that require special attention, such as the need to find ways to reduce the average time interval between the completion of the sale of goods and the issuance of an invoice to the buyer. The possible costs associated with receivables, i.e., lost profits from not using funds, instead of investing them, should be assessed.
Accounts receivable management is associated with two types of time reserves - for issuing an invoice and sending by mail. The time to issue an invoice is the number of days from sending the goods to the buyer until the invoice is sent. Obviously, the company should send invoices at the same time as the goods. Postal delivery time - between the preparation of the invoice and its receipt by the buyer. Postal processing times can be reduced by decentralizing invoicing and postage (using express mail for large invoices with due delivery or discounts on advance payments).
The key to receivables management is the timing of the credit (provided to customers) that affects sales and cash receipts. For example, providing longer credit terms is likely to increase sales. The terms of the loan are directly related to the costs and income associated with receivables. If the terms of the loan are tight, the company will have less cash invested in receivables and losses from bad debts, but this can lead to lower sales, lower profits and a negative reaction from buyers. On the other hand, if the terms of the loan are not specific, the company may achieve higher sales and more revenue, but it also risks an increase in bad debts and high costs associated with slow payment by low-performing buyers. The timing of receivables should be liberalized, as this allows you to get rid of excess inventory or obsolete products, or if you are in an industry whose goods are for seasonal sales (for example, bathing suits). If the goods are perishable, then use short-term receivables and, if possible, practice payment on delivery.
When assessing the solvency of a potential buyer, the honesty of the buyer, financial stability and property security should be taken into account. Buyer creditworthiness can be assessed quantitatively by regression analysis, which considers the change in the dependent variable that occurs when the independent (informative) variable changes. This method is especially useful when you need to evaluate a large number of small buyers. Potential bad debt losses should be carefully assessed if your company sells to many customers and does not change its credit policy for a long time.
The extension of the loan entails additional costs: administrative costs of the activities of the loan department, computer services, as well as commissions paid to special agencies that determine the creditworthiness of borrowers or the quality of securities.
Information obtained from retail credit bureaus and professional credit reference services is quite useful. There are many ways to maximize the return on receivables and minimize possible losses: billing, reselling the right to collect debts, and assessing the financial situation of clients.
Invoicing. In cyclical billing, they are billed to customers at different time periods. Under this system, customers with last names beginning with "A" might be the first to be billed on the first day of the month, those with last names beginning with "B" would be billed on the second day, and so on. Invoices to buyers must be sent within twenty-four hours of the time and issue.
To expedite collection of payments, invoices can be sent to customers while their order is still being processed in the warehouse. You can also bill for services at intervals if the work is completed within a certain period, or you can charge fees upfront, which is preferable to making payments after the work is completed. In any case, you need to draw up accounts for large sums immediately.
When business develops passively, seasonal billing dates may apply: we suggest extending the payment deadline to stimulate demand among buyers unable to make payments earlier than the end of the zone.
Buyer evaluation process. Before granting a loan, it is necessary to carefully analyze the financial statements of the buyer and obtain rating information from financial advisory firms. High-risk receivables should be avoided, such as in the case of buyers in a financially unstable industry or region. The business also needs to be wary of clients that have been in business for less than one year (about 50 percent of businesses fail within the first two years). Typically, consumer receivables carry a greater risk of default than corporate receivables. You should modify credit limits and expedite the demand for payments based on changes in the financial situation of the buyer. This can be done by withholding products or suspending services until payments are made and by requiring collateral to support questionable accounts (the value of the collateral must equal or exceed the account balance). If necessary, use the assistance of a collection agency to collect funds from recalcitrant buyers.
It is necessary to categorize receivables by due dates (arrange them by time elapsed from the date of invoicing) to identify buyers who are late in payment, and impose interest on late payments. Once current, aged receivables have been compared with prior years' receivables, industry regulations, and competitor performance, a bad debt loss statement can be prepared showing accumulated losses by customer, terms of sale, and amount, and organized by business unit. , production line, and type of customer (for example, industries). Bad debt losses are usually higher for smaller companies.
Insurance protection. You can resort to credit insurance, this measure against unforeseen losses of bad debt. When deciding whether to purchase such protection, one must evaluate the expected average bad debt losses, the company's financial ability to withstand these losses, and the cost of insurance.
Factoring. It is possible to resell the rights to collect receivables if this results in net savings. However, in a factoring transaction, confidential information may be disclosed.
When granting a commercial loan, it is necessary to assess the competitiveness of the enterprise, the current economic conditions. During a recession, credit policy should be loosened to stimulate business. For example, a company might not re-invoice customers who receive a cash discount even after the discount has expired. But it is possible to tighten credit policy in conditions of shortage of goods, since during such periods the company, as a seller, has the opportunity to dictate terms.
In general, accounts receivable management includes:
1) analysis of debtors;
2) analysis of the real value of existing receivables;
3) control over the ratio of receivables and payables;
4) development of a policy of advance payments and provision of commercial loans;
5) assessment and implementation of factoring.
The analysis of debtors involves, first of all, an analysis of their solvency in order to develop individual conditions for the provision of commercial loans and conditions for factoring agreements. The level and dynamics of liquidity ratios can lead the manager to conclude that it is advisable to sell products only with prepayment, or vice versa - about the possibility of reducing interest on commercial loans, etc.
The analysis of accounts receivable and the assessment of its real value consists in analyzing the debt by the timing of its occurrence, identifying bad debts and forming a reserve for doubtful debts for this amount.
1.3 Turnover analysisaccounts receivable
Of particular interest is the analysis of the dynamics of receivables by the timing of their occurrence and/or by the turnover period. A detailed analysis allows you to make a forecast of the receipt of funds, identify debtors in respect of which additional efforts are needed to recover debts, and evaluate the effectiveness of receivables management.
The ratio of receivables and payables is a characteristic of the financial stability of the company and the effectiveness of financial management. In the practice of financial activities of Russian firms, a situation often arises that makes it unprofitable to reduce accounts receivable without changing accounts payable (liabilities). A decrease in receivables reduces the coverage (liquidity) ratio, the company acquires signs of insolvency and becomes vulnerable to government agencies and creditors. Recall that a company's balance sheet is considered insolvent if:
current assets at the end of the period/short-term debt at the end of the period 2
volume of sources volume of non-current own income - assets at the end of the period / volume of working capital at the end of the period 0.1
Accounts receivable - an element of working capital, its reduction reduces the coverage ratio. Therefore, financial managers solve not only the task of reducing accounts receivable, but also balancing it with accounts payable.
When analyzing the relationship between receivables and payables, it is necessary to analyze the terms of a commercial loan provided to the company by suppliers of raw materials and materials.
Terms of payment for shipped products - one of the factors affecting the volume of sales. Terms of payment means:
a) providing individual buyers with a commercial loan (deferred payment);
b) the term of the loan;
c) discount for timely payment. The three conditions listed can be expressed in a common pattern: For example, a firm provides a 3 percent discount if a bill is paid within 10 days, maximum term (no discount)
CORPORATE MANAGEMENT OF FINANCIAL AND ECONOMIC ACTIVITIES
Systematic approach to receivables management
N. F. Mormul, S. A. Enikeeva
National Research University "MIET"
The main approaches to the definition of the terms "accounts receivable" and "accounts receivable management" are considered, a systematic approach to the management of receivables as an integral part of the management of current assets of an enterprise through the implementation of the main management functions (planning, control and evaluation, regulation and motivation), the relationship of which presented as a feedback system. In addition, the content of each control function is briefly outlined.
Key words: accounts receivable; receivables management; credit policy; systems approach.
In modern economic conditions, most enterprises are experiencing a shortage of financial resources, which actualizes issues related to their formation, optimal placement and effective use.
The current state of mutual settlements of enterprises is characterized by a high share of receivables in the structure of their current assets. This may cause a decrease in financial stability and solvency, an increase in the cost of debt collection and, as a result, a decrease in the profitability of the capital used. In this regard, the improvement of accounts receivable management becomes one of the main tasks of financial management.
In domestic and foreign literature, different definitions of the essence of receivables are accepted. Some authors think that it
© Mormul N. F., Enikeeva S. A.
represents a debt to the organization of various legal entities and individuals arising in the course of economic activity. Others mean by it the obligations to this enterprise arising from other organizations and (or) individuals in connection with the provision of products, performance of work and provision of services. The definition of an obligation is given in Article 307 of the Civil Code of the Russian Federation: “By virtue of an obligation, one person (debtor) is obliged to perform a certain action in favor of another person (creditor), such as: transfer property, perform work, pay money, etc., or abstain from a certain action, and the creditor has the right to demand from the debtor the performance of his obligation.
In accounting, receivables, as a rule, are understood as property rights, which are one of the objects of civil rights. Article 128 of the Civil Code of the Russian Federation
states: “Objects of civil rights include things, including cash and documentary securities, other property, including non-cash funds, book-entry securities, property rights; results of work and provision of services; protected results of intellectual activity and equivalent means of individualization (intellectual property); intangible goods". Consequently, the right to receive receivables is property, it itself is part of the assets of the enterprise, which means that as an asset it must meet the following conditions: bring economic benefits in the future; be at the disposal of an economic entity, which could freely use it at its own discretion or sell it; be the result of past transactions.
A number of authors consider receivables from the standpoint of marketing: as a tool to stimulate demand. Under the influence of market competition, enterprises seek to attract as many buyers as possible by providing them with a deferral (installment plan) of payment for purchased goods, which benefits in the form of increased sales. At the same time, receivables are expected and planned within the framework of the credit policy of the enterprise. However, the evaluation of the effectiveness of the use of receivables as a marketing lever that increases the demand for products (works, services) and sales remains one of the unresolved methodological problems.
Within the framework of another approach, receivables are treated as a commodity credit provided by the enterprise to its debtors. The amount of accounts receivable shows
the amount of funds diverted from the turnover of the enterprise and in circulation with the debtor. Article 823 of the Civil Code of the Russian Federation states: “Contracts, the execution of which is associated with the transfer of money or other things determined by generic characteristics to the ownership of the other party, may provide for the provision of a loan, including in the form of an advance payment, prepayment, deferment and installment payment for goods, works or services (commercial credit), unless otherwise provided by law.
Accounts receivable, in accordance with IAS 32 "Financial Instruments: Presentation", is a financial asset that represents financial claims that give their owner the right to receive payment, i.e. the contractual right to demand cash or another financial asset from another company .
There is also a well-known interpretation of receivables as a form of investment: enterprises, providing a deferral (installment plan) of payment for sold products (works, services), lend to their counterparties, hoping to receive additional revenue, and thereby form a risky environment for non-performing commodity loans with long settlement periods.
A number of domestic and foreign economists attribute receivables to the tools for managing the working capital of an enterprise. From these positions, it represents an investment of funds and the expansion of sales on credit in order to increase the volume of sales. This approach rather describes the properties of receivables, rather than reveals its essence.
The variety of approaches to the definition of receivables indicates its impact on various aspects of the enterprise.
In the scientific literature there is no unambiguous interpretation of the concept of "receivables management". Modern authors agree in understanding the purpose of this process: optimization of the level of receivables is recognized as such. However, its growth is not always a problem for the enterprise. If it expands its activities, increases the volume of sales, then the number of buyers increases and, accordingly, receivables may increase. In this case, the presence and growth of only overdue receivables will be undesirable, as this increases the financial risks of the enterprise associated with non-payment of the principal debt, as well as with the diversion and freezing of working capital. Representatives of the American school of economics Y. Brigham and L. Gapensky believe that the optimization of the amount of receivables should ensure the achievement of a balance between the desire of the enterprise to maximize its net cash receipts for a certain period and minimize the costs associated with maintaining the amount of receivables at a certain level. They also offer mechanisms to influence its value through credit policy.
Despite a common understanding of the goal of receivables management, in the scientific literature there is no unity of views on how to achieve it.
So, E. S. Stoyanova considers receivables management as part of the working capital management system and offers two approaches to this process:
1) comparison of the additional profit associated with a particular scheme of spontaneous financing, with the costs and losses arising from a change in the policy of product sales;
2) comparison and optimization of the terms of receivables and payables.
According to P. Khitrov, the main stages of receivables management include planning its size, managing credit limits for buyers, controlling receivables and motivating employees.
The most complete list of management activities is presented by G. M. Kolpakova: it includes a financial analysis of the activities of the supplier enterprise, the development of a credit policy for the enterprise, the decision to grant a loan, insurance of receivables, control of product shipment, control over the financial condition of debtors and collection measures accounts receivable.
Professor V. V. Kovalev focuses on such a component of the receivables management process as the development of an enterprise's credit policy.
Analysis of the above approaches to the management of receivables indicates the lack of consistency in their implementation. In our opinion, receivables management, like any process of managing any object, involves the implementation of basic management functions (planning, control and evaluation, regulation and motivation). The implementation of each of them requires the implementation of calculation and analytical procedures, i.e., the analysis function, one might say, permeates the entire management process.
The receivables management process can be implemented as a feedback system. This approach is based on the principles of automatic control theory, when it is necessary to set (formulate)
the required state of the system, then ensure control over its observance (monitoring), analyze and evaluate the emerging deviations from the specified state and, if necessary, implement regulatory actions in order to promptly eliminate the deviations that occur or correct the required state level.
In this case, the main task of the planning function will be to determine the required state of the system, i.e., the calculation of the expected amount of receivables (ARac):
DZras, "= LG ^ ™" - S / C ■ +: 360,
where -LT is the planned volume of re-
product leasing on credit; C / C - the ratio of the cost and price of a unit of production;
about - the average period of provision
credit to buyers, in days; -
average period of delay in payments on the granted loan, in days.
If the financial capabilities of the enterprise do not allow investing the estimated amount of funds in receivables, it is necessary to adjust the terms of credit or the planned volume of sales of products on credit, therefore, the calculation of the expected amount of receivables (DZrasch) should be preceded by a set of works called the formation of the credit policy of the enterprise. It includes:
Development of debtor creditworthiness standards;
Establishment of terms for granting loans;
Determining the conditions and amounts of discounts and penalties (markups) charged;
Creation of a payment collection system;
Creation of a system of reserves for doubtful debts.
The credit policy can be conservative, moderate or aggressive, depending on the operating conditions of the enterprise, and requires periodic adjustments.
When determining the type of credit policy, it should be borne in mind that the conservative type has a negative effect on the growth of sales and the formation of stable commercial relations, while the aggressive type can cause excessive diversion of financial resources from the enterprise's turnover, increase debt collection costs and, as a result, reduce profitability his assets.
The implementation of the control function requires monitoring and analysis of the state of receivables based on maintaining a payment calendar and comparing it with the schedule of expected cash receipts from debtors in order to prevent the formation of problem debts.
Comparison of the data of the schedule and the payment calendar makes it possible to assess the state of the parameters of receivables and choose methods of influencing them, i.e., to implement the regulation function.
In most cases, the implementation of the motivation function is associated with the stimulation of employees of the commercial divisions of the creditor enterprise and is based on the possibility of redistributing credit limits. The departments that provided the enterprise with the largest amount of margins with the minimum delay in payment, and thereby increased sales, receive a reward in the form of a fixed percentage of this volume. At the same time, if the credit limits allocated to departments are exceeded, managers are subject to a fine in the amount of the product of the amount of exceeding the credit limit by the percentage of the enterprise's profitability. However, this can be influenced
only on the motivation of employees of creditor enterprises, while in the implementation of the motivational function it is necessary to take into account the motivation of debtors to fulfill contractual requirements for timely payment for delivered products.
Thus, the proposed approach is systematic, since all management functions are interconnected, which provides a holistic view of the issues of receivables management.
Literature
1. Civil Code of the Russian Federation (Civil Code of the Russian Federation) // Codes and laws of the Russian Federation: legal navigation system [Electronic resource]. URL: http://www.zakonrf.info/gk/ (date of access: 04/02/2015).
2. International Financial Reporting Standard (IAS) 32 “Financial Instruments:
presentation of information” // IFRS FM [Electronic resource]. URL: http://msfofm.ru/ifrs?id=333 (date of access: 04/02/2015).
3. Brigham Yu, Gapensky L. Financial management: in 2 volumes. St. Petersburg: School of Economics; M.: Higher School of Economics, 1997. T. 1. 497 p.; T. 2. 669 p. (Open book - open mind - open society).
4. Financial management: theory and practice / Ed. E. S. Stoyanova. 6th ed. M.: Prospect, 2006. 656 p.
5. Khitrov P. Accounts receivable management // Financial director. 2005. No. 12. S. 22-30.
6. Kolpakova G. M. Accounts receivable management. M.: MIET, 2000. 72 p.
7. Kovalev VV Managing the company's assets. M.: Prospekt, 2007. 388 p.
Mormul Nina Fedorovna - Candidate of Economic Sciences, Associate Professor, Professor of the Department of Economics and Management (E&M), MIET. Email: [email protected]
Enikeeva Stella Anatolyevna - Candidate of Economic Sciences, Associate Professor of the Department of E&M MIET. Email: [email protected]
