外文翻译-应收账款(共18页).doc

精选优质文档-倾情为你奉上 Eleonora Kontu, M. S.The town of Kastav, KastavBudget and Finance Department ManagerE-mail: eleonora.kontusri.t-com.hrMANAGEMENT OF ACCOUNTS RECEIVABLE IN A COMPANY UDK / UDC: 657.422:658.155 JEL klasifikacija / JEL classification: G32, D29, M41 Prethodno priopenje / Preliminary communicationPrimljeno / Received: 8. listopada 2012. / October 8, 2012 Prihvaeno za tisak / Accepted for publishing: 10. lipnja 2013. / June 10, 2013AbstractAccounts receivable management directly impacts the profitability of a company. Firstly, the purpose of the empirical part of the study is to analyze accounts receivable and to demonstrate a correlation between the accounts receivable level and profitability expressed in terms of Retun on Assets (ROA) of sample companies. Secondly, the aim of theoretical research is to explore cost and benefits of changes in credit policy, determine the independent variables which have an impact on net savings and establish a relationship among them in order to develop a new mathematical model for calculating net savings following a revision of credit policy. On the basis of research result, a mathematical model for calculating net savings and following a revision of credit policy, has been developed and with this model a company can consider different credit policies as well as changes in credit policy in order to improve its income and profitability and establish a credit policy that results in the greatest net profitability. Keywords: accounts receivable, profitability, net savings, credit policy21 EKON. MISAO PRAKSA DBK. GOD XXII. (2013.) BR. 1. (21-38) Kontu, E.: MANAGEMENT OF ACCOUNTS. 1.INTRODUCTIONAccounts receivable is the money owed to a company as a result of having sold its products to customers on credit. The primary determinants of the company's investment in accounts receivable are the industry, the level of total sales along with the company's credit and the collection policies. Accounts receivable management includes establishing a credit and collections policy. Credit policy consists of four variables: credit period, discounts given for early payment, credit standards and collection policy. The three primary issues in accounts receivable management are to whom credit should be extended, the terms of the credit and the procedure that should be used to collect the money. The major decision regarding accounts receivable is the determination of the amount and terms of credit to extend to customers. The total amount of accounts receivable outstanding at any given time is determined by two factors: the volume of credit sales and the average length of time between sales and collections. The credit terms offered have a direct bearing on the associated costs and revenue to be generated from receivables. If credit terms are tight, there will be less of an investment in accounts receivable and fewer bad debt losses, but there will also be lower sales and reduced profits. We hypothesize that by applying scientifically-based accounts receivable management and by establishing a credit policy that results in the highest net earnings, companies can earn a satisfactory profit as well as a return on investment. The purpose of this study is to determine ways of finding an optimal accounts receivable level along with making optimum use of different credit policies in order to achieve a maximum return at an acceptable level of risk. In striving to fill in the gaps relating to net savings from changes in credit policy, the study makes its own contribution to research and thereby to managers by giving them general recommendation. With the aim of completing these gaps, the study will investigate accounts receivables, their management and explore costs and benefits from changes in credit policy as well as net profitability. When a company is considering changes in its credit policy in order to improve its income, incremental profitability must be compared with the cost of discount and the opportunity cost associated with higher investment in accounts receivable. The outcome represents a new mathematical model for calculating net savings from changes in credit policy and with this model a company can consider different credit policies as well as changes in credit policy in order to improve its income and profitability. 22 EKON. MISAO PRAKSA DBK. GOD XXII. (2013.) BR. 1. (21-38) Kontu, E.: MANAGEMENT OF ACCOUNTS. 2.LITERATURE REVIEW2.1.Accounts receivable managementAccounts receivable represents a sizable percentage of most firms' assets. Investments in accounts receivable, particularly for manufacturing companies, represent a significant part of short-term financial management. Firms typically sell goods and services on both cash and a credit basis. Firms would rather sell for cash than on credit, but competitive pressures force most firms to offer credit. The extension of trade credit leads to the establishment of accounts receivable. Receivables represent credit sales that have not been collected. As the customers pay these accounts, the firm receives the cash associated with the original sale. If the customer does not pay an account, a bad debt loss is incurred1. When a credit sale is made, the following events occur: inventories are reduced by the cost of goods sold, accounts receivable are increased by the sales price, and the difference is profit, which is added to retained earnings. If the sale is for cash, then the cash from the sale has actually been received by the firm, but if the sale is on credit, the firm will not receive the cash from the sale unless and until the account is collected. Carrying receivable has both direct and indirect costs, but it also has an important benefit-increased sales. According to Chambers and Lacey there are three primary issues in the 2management of accounts receivable: to whom to extend credit, what the terms of the credit should be, and what procedure should be used to collect the money. Extending credit should be based upon a comparison of costs and benefits. The analysis must build in uncertainty because we are uncertain of future payment, and we will handle this by computing the expected costs and expected benefits through payment probabilities. The potential cost of extending credit is that the customer will not pay. Although there is a temptation to compute this cost as the full price of the product, it is almost always more appropriate to use the actual cost of the product. The potential benefit of extending credit is not just the hope for profit on the one transaction; rather, it is the potential value of the customer for a long-term relationship. The decision of how much credit to offer must be made when the customer initially requests credit and when the customer requests additional credit. The fundamental principle that guides financial decisions can be used: marginal benefit versus marginal cost. The marginal cost is the additional potential lost costs of the product. The costs of past uncollected sales are sunk costs and should not be included as a marginal costs. The marginal benefits are the potential sales and 12Pinches, G.: Financial Management, Harper Collins College Publishers, New York, 1994., p. 701-702.Chambers, D. R., Lacey, N. L.: Modern Corporate Finance, Hayden McNeil Publishing, Michigan,2011, p. 518.23 EKON. MISAO PRAKSA DBK. GOD XXII. (2013.) BR. 1. (21-38) Kontu, E.: MANAGEMENT OF ACCOUNTS. interest revenues including the potential to recover past sales that remain 3uncollected . Once the decision to grant credit has been made, the firm must establish the terms of the credit. Credit terms are often separated into two parts: the credit period and the credit discount. Collection of accounts receivable is an important process for a corporation and requires a well-designed and well-implemented policy. One technique is the factoring of accounts receivables. In a typical factoring arrangement, one firm will sell their accounts receivable outright to another firm for an agreed-upon price. There ia usually no recourse in such transactions, such that the buyer (also known as the factor) takes the loss if the purchaser of the goods does not ultimately pay for them. Another technique to expedite the receipt of accounts receivable is to utilize lock boxes. Lock boxes are payment collection locations spread geographically so as to reduce the amount of time required for checks mailed to the firm to be deposited and cleared. The lock boxes are typically post office box addresses from which deposits go directly to a bank on the day of receipt. The reduction of mailing time and check clearing time for the banks can produce significant savings when large sums of money are involved. Payments of accounts receivable should be closely monitored to detect potential problems such as would be indicated by slow payments. Following up on slow-paying customers is an important function of the credit department. Procedures should be carefully developed and consistently implemented4. The major decision regarding accounts receivable is the determination of the amount and terms of credit to extend to customers. The total amount of accounts receivable is determined by two factors: the volume of credit sales and the average length of time between sales and collections. The credit terms offered have a direct bearing on the associated costs and revenue to be generated from receivables. In evaluating a potential customers ability to pay, consideration should be given to the firms integrity, financial soundness, collateral to be pledged, and current economic conditions. A customers credit soundness may be evaluated through quantitative techniques such as regression analysis. Bad debt losses can be estimated reliably when a company sells to many customers and when its credit policies have not changed for a long period of time. In managing accounts receivable, the following procedures are recommended: establish a credit policy establish a policy concerning billing establish a policy concerning collection. 34Ibidem, p. 520.Ibidem, p. 521-522 .24 EKON. MISAO PRAKSA DBK. GOD XXII. (2013.) BR. 1. (21-38) Kontu, E.: MANAGEMENT OF ACCOUNTS. The establishment of a credit policy can include the following activities: A detailed review of a potential customers soundness should be made prior to extending credit. Procedures such as a careful review of the customers financial statements and credit rating, as well as a review of financial service reports are common. As customer financial health changes, credit limit should be revised. Marketing factors must be noted since an excessively restricted credit policy will lead to lost sales. The policy is financially appropriate when the return on the additional sales plus the lowering in inventory costs is greater than the incremental 5cost associated with the additional investment in accounts receivable . The following procedures are recommended in establishing a policy concerning billing: Customer statements should be sent within 1 day subsequent to the close of the period. Large sales should be billed immediately. Customers should be invoiced for goods when the order is processed rather than when it is shipped. Billing for services should be done on an interim basis or immediately prior to the actual services. The billing process will be more uniform if cycle billing is employed. The use of seasonal datings should be considered. In establishing a policy concerning collection the following procedures should be used: Accounts receivable should be aged in order to identify delinquent and high-risk customers. The aging should be compared to industry norms. Collection efforts should be undertaken at the very first sign of customer 6financial unsoundness . 2.2.Managing the credit policyThe success or failure of a business depends primarily on the demand for its products. 5Shim, J. K., Siegel, J. G.: Financial Management, Third edition, Mc Graw Hill, New York, 2007,p.107-108.6Ibidem, p. 108 .25 EKON. MISAO PRAKSA DBK. GOD XXII. (2013.) BR. 1. (21-38) Kontu, E.: MANAGEMENT OF ACCOUNTS. The major determinants of demand are sales prices, product quality, advertising, and the companys credit policy. The financial manager is responsible for administering the companys credit policy. Receivables management begins with the credit policy. Credit policy consists of four major components: credit standards, credit terms, the credit limit and collection procedures. Credit standards refer to the required financial strength of acceptable credit customers. Based on financial analysis and non financial data, the credit analyst determines whether each credit applicant exceeds the credit standard and thus qualifies for credit. Lower credit standards boost sales, but also increase bad debts. The minimum standards a customer must meet to be extended credit are: character, capital, capacity, conditions and collateral. The credit period, stipulating how long from the invoice the customer has to pay, and the cash discount together comprise the sellers credit terms. A companys credit terms are usually very similar to that of other companies in its industry7. Discounts given for early payment include the discount percentage and how rapidly payment must be made to qualify for the discount. If credit is extended, the dollar amount that cumulative credit purchases can reach for a given customer constitutes that customers credit limit. The customer periodically pays for credit purchases, freeing up that amount of the credit limit for further orders. The two primary determinants of the amount of a customers cr