Receivables is the amountobligations of other organizations to the company. Most often, such relationships arise in cases where the company takes on the sale of products, and produces payment with the supplier upon the sale. This transaction is reflected in the balance sheet in the second part of the asset.
Accounts receivable are transferred tosale or sold goods for which money has not yet been returned. Indicators of debt turnover can tell about the financial position of the enterprise, about its stability. The higher the revenue from sales, the more profitable the organization works.
The concept and types of receivables includedebt for services, goods and work in cases where the supplier took an advance payment, or if there was a transfer of ownership before the end of the payment period. There is also the concept of "overdue receivables". This is when the debt was formed as a result of a breach of contract.
In terms of obligations, receivables are divided into short-term and long-term.
Any company should be able to manage this value. After all, its effective use allows you to increase the profit of the organization.
According to statistics, one fifth of the assets of the standardproduction organization accounts receivable. This suggests that the management of this tool is an important part of the firm’s financial policy. The task of debt management is to accelerate the receipt of money from the clientele, to reduce debts for which payments are doubtful or may not be received, to conduct effective sales activities and product promotion in the market.
The amount of debt is influenced by the following factors:
Sales volume and component of sales in volume. The higher the sale, the greater, as a rule, the debt.
Terms of payment with customers and suppliers.Under more favorable conditions provided to customers, receivables become higher. This occurs as a result of lower requirements for determining the reliability of the debtor, increasing the term of payment.
Debt collection policy. With greater activity of the enterprise for the recovery of debts, the balance of receivables decreases and its quality increases.
This value is also influenced by the payment discipline of customers.
Receivables Management Systemcan be divided into two blocks: on the policy of the company, which allows the use of debt to increase sales (providing a deferred payment under other equal conditions will be more beneficial for the consumer). The second will be a set of measures aimed at reducing the risk of arrears or bad debts.
Receivables: definition and tools for reducing
The most effective mechanism tomaximize cash flow and reduce the risk of debt, the organization organizes a system of fines and discounts. The accrual of penalties for violations of the term of payment shall be provided for by the contract. Depending on the timing of payment of goods can provide discounts. For example, with 100% prepayment, a 4% discount may be applied, upon shipment - 1%, with a deferred payment, no discount is provided.
Mandatory part of the management becomesemployee motivation in reducing receivables. For example, the reward of a sales manager is carried out not only for the fulfillment of the plan for the sale of products, but also for the fulfillment of obligations by customers who have received goods with a deferred payment.
