Receivables Management

Receivables arise out of credit transactions . Reasons for giving credit are as follows :1) Getting competitive advantage. 2) Attracting potential customers. 3) Protection from competitors. 4) Increase in sales volume.

Goals of Credit Management

- To obtain maximum amount of sales. - To control the cost of credit - To maintain investment in debtors at minimum level.

Cost Involved in Credit

Production and Selling cost. Admin Expenses. Cash Discount Bad Debts Opportunity Cost.

Decision Involved
There are 5 main decisions involved in credit policy. 1) Credit Standards. 2) Credit Analysis. 3) Credit Terms. 4) Recovery procedure.

Credit Procedure
1) Credit Information - Through financial statements. - Banks - Credit Agencies and bureau. 2) Credit Investigation - understanding type of customer i.e new or old. - Type of business business line. 3 ) Credit Analysis 4) Deciding the credit limit and credit line . 5) Collection procedure. - Factoring.