Financial Management

RECEIVABLES MANAGEMENT

Group No. - 007
•Amber Kumar – 004 •Hemlata kein – 028 •Kheeleshwar Prasad – 034 •Jayant Bhatnagar - 055

Working Capital Cycle “Any fool can lend money. but it takes a lot of skill to get it .

RECEIVABLES/DEBTORS Receivables or Debtors are one of the most important parts of the currents assets which are created if the company sells the finished goods to the customers on credit basis and does not receive the "Cash" for the same immediately. RECEIVABLES / DEBTORS 3 .

MANAGEMENT OBJECTIVES OF RECEIVABLE MANAGEMENT • Is to increase the sales to such an extent that the risk of bad debts is reasonable and within control • Creating. presenting and collecting accounting receivables • Establish and communicate the credit policies • Evaluation of customers and setting credit limits • Ensure prompt and accurate billing • Maintaining up-to-date records • Initiate collection procedures on overdue accounts RECEIVABLES 4 .

RECEIVABLES MANAGEMENT PROCESS Receivable Management Process .

RECEIVABLES MANAGEMENT OPTIMUM LEVEL OF INVESTMENT IN TRADE RECEIVABLES OPTIMUM LEVEL OF INVESTMENT IN TRADE RECEIVABLES Profitability Costs & Profitability Optimum Level Liquidity Stringent Liberal .

Types of Credit Analysis are as follows :      Trade Reference Bank Reference Credit Bureau Report Financial Statement Past Experience Salesman's Interviews and Reports . The Credit should be extended only to those customers by the company whose credit worthiness is established.RECEIVABLES MANAGEMENT AREA (1) CREDIT ANALYSIS The Company has to decide the customer to whom it should sell its products on credit.

CIBIL .

RECEIVABLES MANAGEMENT AREA (2) CREDIT TERMS The credit terms indicates the terms on which the company should extend the credit to the customers. This involves the consideration of following aspects : Credit Period  Credit Limit  Discount Policy .

This can be done by sending the reminder letters or making calls or by paying the personal visits. following proposition should be remembered : Cost – Benefit Analysis  Indian Limitation Act . While deciding credit collection policy.RECEIVABLES MANAGEMENT AREA (3) CREDIT COLLECTION The Credit collection indicates the steps taken by the company to collect the dues from the customers. the company may follow the standard practices of reminding the customer just before the due date. For this purpose.

are equally the sources available for financing the receivables. This is due to the fact that receivables is a part of working capital.RECEIVABLES MANAGEMENT AREA (4) FINANCING THE RECEIVABLES Whatever sources that are available to the company for financing the working capital requirement. Some important sources are : Pledging  Factoring .

RECEIVABLES MANAGEMENT AREA (5) MONITORING OF RECEIVABLES It may be necessary to ensure that the outstanding receivables are within the framework of the credit policy decided by the company. for this the company may use the following techniques :• Computation of receivables • Ageing schedule average age of . For this the company may be required to apply regular system to monitor the receivables properly.

Courtesy: Diagrams and photos taken from some public material available on sites .

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