Percentage of overdue accounts receivable formula. Accounts receivable management system. Decoding the debt ratio

In market conditions, the work of companies is associated with large volumes of settlements with various counterparties.

Overdue receivables are the debtor’s failure to timely fulfill the terms of the contract for the provided assets.

Its presence adversely affects the financial stability and efficiency of any business entity.

The main reason for the appearance of debts is that at the stage of signing contracts, most companies do not assess possible risks, do not consider the reputation of counterparties and real opportunities.

In general, every company has accounts receivable. It's difficult to do without it. But it all depends on the acceptable debt rate, when it is covered by receipts from other clients - there are no problems.

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Accounts payable and receivable: the main thing

Accounts payable (“this is what we owe”) – the company’s debts to business entities: suppliers, contractors, personnel, insurers, government. budget, tenants, etc. Its presence on the enterprise’s balance sheet increases working capital and helps to avoid production downtime if there are no available funds to pay for supplies.

Before analyzing the status of accounts receivable, their share is calculated and special attention is paid to this. The indicator is calculated using the formulas:
Share of receivables in the assets of the enterprise = (Responsible assets / assets) x 100
in the value of current assets = (DZ / current assets) x 100
coefficient DZ = DZ/revenue (informs how much product that has not yet been paid for per ruble of sales)
repayment period of debt = (liability x duration of the period)/revenue from sales (using this indicator, the period during which the debt will be repaid is assessed)

When analyzing receivables, special attention should be paid to the above indicator. The trend towards an increase in the share of overdue debt indicates a decrease in the liquidity of the enterprise.
Debt management: part of financial management of an enterprise
As part of the accounting, as well as marketing, policy of the enterprise, debt management is aimed at expanding the sale of products, providing services, and optimizing the total amount of debt. For debt management to be effective you need to:
determine debts at each reporting date
study and analyze factors that negatively affect debt
constantly monitor the status of debt

The problem of having accounts receivable becomes more pressing during an inflationary period, when money begins to depreciate. In such conditions, the enterprise loses more than half of its profit.
The control functions are:
planning – assessing management decisions, preliminary financial calculations, formulating an effective strategy, choosing reasonable values for “receivables”
organization of management - carrying out ongoing work on accounts receivable by enterprise managers; transparency, timeliness and relevance of obtaining information about debtors, payment amounts, invoices issued and unpaid on time, etc. are more significant.
motivation is a set of administrative and psychological aspects that determine the behavior of enterprise managers
analysis and control - study of factors influencing the deviation of actual indicators of the debt status from the planned ones

So, properly organized management will improve the enterprise, will allow you to choose the right methods of influencing debtors, will make it possible to control the debt and develop the right measures to reduce it.
Repayment of accounts receivable: an indicator of effective customer relations

Debt repayment is carried out in the manner prescribed by the terms of the contract.
When assessing the financial stability of an enterprise, they use the indicator “term of repayment of receivables”.
This is the time period during which the company hopes to receive money for its products, and at the same time it is an indicator of an effective relationship with the client.
To successfully manage debt maturities, you need an effective debt management strategy.
Its main elements are: a group of buyers and identifying among them those with whom the company is ready to work without prepayment, sanctions for late repayment of obligations, and with debtors in the event of a delay.
The debt repayment period is determined as follows:
Repayment time of the loan = (360*Average annual amount of the loan) / Sales proceeds
Average annual volume of debt = Amount of debt at the end of the day / Number of working days

Repayment of accounts receivable - payments from legal entities or individuals as a result of relationships with the enterprise. The main thing to remember is that a large amount of receivables is formed at those enterprises where control over its repayment is absent or ineffective.
Absence of accounts receivable: the first priority of any enterprise
The primary task of any enterprise is to take the necessary measures to prevent the appearance of debt. To do this, it is important to have complete information about the counterparty, its reputation, and financial condition.
If there is an urgent need, before signing a contract, you can contact the relevant specialists to obtain it. In addition, in order to prevent the occurrence of debt, it is more effective to work on full/partial prepayment.

Some companies, fighting for clients, often use the sale of products or on credit. But this path leads to delayed payments and debt.
Enterprises, hoping to return funds and increase profits, often, for various reasons, are unable to collect debts from counterparties. Receivables “hang” for an indefinite period, significantly reducing the profitability of the enterprise. Therefore, preventing the occurrence of overdue debt is the best guarantee of its absence.
Moreover, company managers should be guided by the following:
Before you start working with potential clients, check their reputation and collect all current information
find out what customers were guided by when they assigned the order of payments and try to be “at the beginning of the list”
organize “preventative conversations” with clients more often
stipulate in detail the terms of payments, working conditions, keep records of amounts, terms, agreements and refer to them if necessary
if possible, receive advance payment from clients and track their other payments
request all contact information

The inability to repay the debt may be a temporary phenomenon, or, conversely, the initial focus of an unscrupulous buyer on deception. Therefore, correctly collected information about clients and its timely analysis will help in preventing the occurrence of debts and the subsequent “struggle” for capital.
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Financial and economic publications pay a lot of attention to the problems of accounts receivable management. This is not surprising, since this current asset reflects both actual sales and frozen funds in the calculations. Often, articles and studies provide experience in interacting with clients in the event of delays, and discuss measures aimed at containing or reducing them. If we use medical terminology, they offer treatment options for the “disease” (an increase in overdue debt or its share in the total amount of debt). But “disease” is easier to prevent than to treat...

The warning lies in choosing the most optimal criteria for assessing the effectiveness of accounts receivable management and linking the motivation system of commercial services to them.

The implementation of effective accounts receivable management is carried out through the commercial department and those people who work directly with clients (sales representatives, sales managers). The task of financial services is to embed into the subconscious of commercial structures an algorithm of actions for debt management. This is only possible if the performance indicator of debt management is linked to the motivation system for managers and sales representatives. Therefore, it is necessary to determine evaluation criterion efficiency of accounts receivable management, to the standards of which will be tied business motivation system.

As practice shows, enterprises in various industries use their own criteria for assessing the effectiveness of accounts receivable management. The choice of criteria is influenced by the levels of product distribution and the competition that has developed in the market. In our case, consider basic criteria used in trade distribution companies, whose main task is to bring products to retail outlets (key and traditional retail).

Criteria for assessing the effectiveness of accounts receivable management, the most commonly used in Russian distribution:

percentage of overdue receivables in the total amount of debt;
average period of overdue receivables in days;
percentage of fulfillment of the cash flow plan;
percentage of overdue receivables to turnover.

Let's analyze these criteria and determine the advantages and disadvantages of each. Note that the condition is the use of the criterion and its mandatory influence on the motivation system of the sales department (manager).

1.Percentage of overdue debt in total accounts receivable(%PDZ). This criterion shows the share of overdue debt in total accounts receivable:

%PDZ=PDZ/PDZ × 100%,

where PDZ is the amount of overdue receivables;

DZ - the total amount of accounts receivable.

EXAMPLE

Table 1 presents data from a trading distribution company on the dynamics of accounts receivable and their overdue using the criterion “percentage of overdue accounts in the total amount of accounts receivable.”

Table 1. Dynamics of receivables and their delinquency using the “receivables” management criterion %PDZ
Period (end of week)	Manager Ivanov		Manager Semenov		Manager Petrov
Period (end of week)	DZ, rub.	PDZ, rub.	DZ, rub.	PDZ, rub.	DZ, rub.	PDZ, rub.
1st week
2nd week
3rd week
4th week
5th week
Standard

The main advantages of using this criterion for assessing the effectiveness of accounts receivable management:

the ability to link the sales department to overdue standards. At the enterprise in question, the standards included overdue up to 20%, the bonus for it was paid to businessmen in full. With this criterion, the sales department will try to maintain the delay within the limits of no more than the established standard. It should be said that the standard of delay for companies may be different.Hedepends on the level of competition in the industry, the availability of analogue products, etc.;
growth and (or) redistribution of sales by the end of the month.Case is that the sales department, in order to “dilute” the arrears in the total receivables, whenever possible, redistributes sales by the reporting date (conets of the month).

If we analyzeTable data 1,then it can be traced for all managers: the total “receivables” at the end of the 5th week (at the end of the month) differs significantly from other dates. This is especially clear in manager Semenov. While maintaining a stable arrears in the amount of 800,000-900,000 rubles. he deliberately overloads clients in the 5th week, increasing the total debt and “eroding” the arrears in it. But this increase is not enough to fall into the 20% standard: while maintaining the absolute amount of 900,000 rubles. lacks RUB 1,500,000. (900,000 rub. / 20% - 3,000,000 rub.) additional sales.

In this situation, manager Semenov, who knows that he will not receive a bonus for managing accounts receivable, does not focus on collecting overdue accounts. Managers Ivanov and Petrov also slightly increase sales at the end of the reporting date, but also reduce the arrears at the end of the month. This allows them to meet the delinquency standard and receive a bonus for managing receivables.

To the disadvantages This criterion includes the fact that it does not contribute to accelerating the collection of funds (at least at the end of the reporting date - month). There are always clients who delay payments (like manager Semenov, whose PD in absolute figures is almost stable at the end of each week), and those clients who are willing to pay earlier or even after the fact for an additional discount. But the sales representative, in most cases, will lead the solvent debtor to pay exactly on time, and not earlier, thereby improving the % of the payment on the reporting date, so that the delay of the willful defaulter is “blurred” into the current debt of reliable debtors.

2. Average period of overdue receivables in days(T PDZ). This criterion is determined by the average weighted arithmetic formula and shows the average number of days of delay for all invoices of each specific sales representative (manager):

T PD = Σ(PD × T PDZ) / ΣDZ.

Table 2 shows detailed data for manager Ivanov, whose average period of delay is 2.0 days. That is, funds for shipped goods are returned on average 2 days after the payment is due (average delay plus 2 days of average delay):

T PDZ = Σ((50,000 rub. × 21 days) + (150,000 rub. × 14 days) + (125,000 rub. × 7 days) + (125,000 rub. × 1 day) + (150,000 rub. × 0 days) + … + (375,000 rub. × 0 days)) / 2,100,000 rub. = 2.0 days.

This indicator has the same economic advantages and disadvantages as %PDZ:

“washing out” of expired invoices (TTN No. 1-4) at the expense of current ones (TTN No. 5-10);
redistribution of sales by the reporting date (TTN No. 7-10).

Table 2. Calculation of the period of delay in days
Manager Ivanov: at the end of the 5th week
No. TTN in chronological order	DZ, rub.	PDZ, rub.	TPDZ, days










Total on average	2 100 000

Usually, this criterion is not used to link it to the incentive system for commercial services, since it does not meet one of the main principles of the remuneration system - the principle of clarity and simplicity of calculation when calculating wages. It can complement the %PDZ and together provide a more complete picture of the effectiveness of debt management.

3. Percentage of fulfillment of cash flow plan(%VP ds). This criterion is tied to the set cash flow plans and the actual collection of funds:

%VP ds = F ds / P ds × 100%,

where F ds is the actual funds received;

P ds - planned receipt of funds.

For the purposes of effective accounts receivable management It is advisable to include in the cash flow plan:

receipt of current receivables in the reporting period ( DZ t);
receipt of overdue receivables in the reporting period ( PDZ);
cash inflow based on the sales plan for the reporting month and the average deferred payment under contracts with customers ( That);
cash inflow based on the sales plan for the reporting month for prepaid customers ( T p).

Thus, cash flow plan (P ds) can be calculated as follows:

P ds = DZ t + PDZ + T o + T p.

Table 3 shows the calculation of the cash flow plan according to the data in table. 1. So, according to manager Ivanov, the general cash flow plan is RUB 4,300,000., of which:

current accounts receivable at the end of the third week - RUB 1,750,000;
overdue accounts receivable at the end of the month - RUB 350,000;
cash flow plan according to the sales plan for the next month (plan - 3,000,000 rubles, average delay - 20 days) - 2,000,000 rubles. (RUB 3,000,000 / 30 days × 20 days);
plan for clients who work on an advance payment basis and do not fall into accounts receivable in any way - 200,000 rubles.

Table 3. Determination of the cash flow plan and calculation of the percentage of plan completion
Manager	Actual receipt of money (F ds), thousand rubles.	Actual sales (T o), thousand rubles.	Cash inflow plan (P ds), thousand rubles.					%VP ds
Manager	Actual receipt of money (F ds), thousand rubles.	Actual sales (T o), thousand rubles.	collection plan for current receivables	PDZ collection plan (amount at the end of the month)	cash flow plan according to the sales plan (based on an average delay of 20 days and a sales plan of 3 million rubles)	cash flow plan for prepaid clients	plan, everything	%VP ds

In fact, the collection of funds for manager Ivanov amounted to RUB 3,500,000., or 81,4 % from the set plan. Failure to fulfill the cash flow plan is explained by:

failure to fulfill the sales plan (no necessary sales - no required amount of receivables, and therefore no cash flow from it);
presence of overdue accounts receivable at the end of the month.

With correctly set sales plans, the manager will never reach the %VP ds = 100% indicator, since for this he needs to collect all the arrears to zero and fulfill the sales plan 100%. Fulfilling these two conditions in a market where everyone has the same product and several competitors is generally impossible.

To the benefits This system of effective management of “receivables” can include the acceleration of collection of receivables at the expense of solvent debtors, as well as the receipt of money for shipment in advance or upon payment. That is, managers in this case (unlike the two previous criteria) will be interested in making a plan for the receipt of funds at the expense of solvent debtors and closing the plan for the receipt of arrears for clients for whom it was not possible to collect it in the reporting period. At the same time, additional efforts will be made to work with “difficult” clients so that they repay their debts on time.

To the disadvantages This system can be attributed to the fact that the system for issuing plans (especially sales) must be as accurate and fair as possible. So, if the sales plan is overestimated, the cash flow plan will also be overestimated. And these are two criteria that will affect the reduction in the size of the sales manager’s bonus. That is, if the sales plan is not met, the cash flow plan will also not be fulfilled automatically. In fact, it may turn out that due to failure to fulfill the sales plan, the manager will be punished twice: for sales and for the receipt of money, which he could not fulfill, since there were no corresponding sales.

3.Percentage of overdue accounts receivable to turnover(%PDZ T). This indicator is calculated as the ratio of overdue accounts receivable (OPR) to the turnover (sales) of the current month (T):

%PDZ T = MPZ / T × 100%.

Table 4 shows the calculation of the percentage of overdue receivables to turnover.

Table 4. Calculation of the percentage of overdue receivables to turnover
Manager	Actual sales (T o), rub.	PDZ, rub.	%PDZ T

At the analyzed enterprise, the normative indicator was no more than 15 % (0.15 rubles overdue per 1 ruble of current sales). At the same time, due to low seasonality, the standard was adjusted by the seasonality coefficient.

To the benefits This criterion includes the desire of sales managers to close overdue and current receivables as soon as possible (so that the “receivable” does not become an overdue debt after some period), which cannot be said according to the first two criteria. In addition, to “dilute” the delay, the commercial department will strive to increase sales.

This criterion has become widespread relatively recently, but is already actively used by many distribution companies.

To summarize the information provided, we present the main calculations in table. 5.

Table 5. Summary of the advantages and disadvantages of criteria used in practice for assessing the effectiveness of receivables management
Criterion	Advantages	Flaws
1. Percentage of overdue debt in the total amount of receivables	Orientation of commercial services to the standard of overdue accounts receivable (%APR), to payment exactly on deferment	Slowing down collection of solvent debtors
2. Average period of overdue receivables in days		Slowing down collection of solvent debtors
3. Percentage of fulfillment of the cash flow plan	Accelerating the collection of funds, the emergence of clients who are ready to work in advance payment or upon delivery for an additional discount	The system for issuing plans should be as accurate and fair as possible
4. Percentage of overdue receivables to turnover	Increased sales, increased cash collection	Possible shipment to “blur” the delay to unreliable customers

conclusions

The optimal criterion for assessing the effectiveness of accounts receivable management is the percentage of overdue accounts receivable to turnover, since there are no significant shortcomings in it, and the positive aspects include changes in two main variables - a reduction in overdue accounts and an increase in sales.

The solution to managing accounts receivable must be approached comprehensively and systematically. The optimal system is one in which the motivation of sales managers depends on one criterion (percentage of overdue accounts receivable), and the motivation of their manager depends on another (percentage of fulfillment of the cash flow plan). In this case, the company will receive a subconscious desire of sales managers to reduce delays (the task of the sales team), and this will allow them to fulfill the cash flow plan (the task of the commercial director).

The indicators “Percentage of overdue debt in the total amount of receivables” and “Average period of overdue receivables in days” will act only as reference and auxiliary indicators reflecting the effectiveness of the proposed receivables management model (through %PDZ T and %VP ds as the main evaluation criteria efficiency of accounts receivable management).

N. N. Rodin, Deputy Financial Director of BSP LLC

Indicative for the comparative analysis of accounts receivable and accounts payable is a special coefficient characterizing the ratio of accounts payable and accounts receivable. It is calculated as the ratio of accounts payable balances to accounts receivable balances at the beginning and end of the period under study and shows what share of the institution’s obligations can be repaid when the institution’s resources diverted to accounts receivable are received.

Online calculator for calculating penalties

A penalty is a penalty interest that a negligent counterparty is obliged to pay for late payment of a debt.

The penalty is set as a percentage of the overdue amount for each day of delay.

The amount of the penalty is determined by the parties themselves when signing the agreement. For example, a penalty of 0.1% will correspond to 36.5% per annum. In the event that there have been partial repayments of overdue debt, penalties are calculated separately for each overdue payment, taking into account the number of days overdue for each payment.

Calculation of the term and amount of trade credit

What makes a company provide trade loans to its counterparty partners? Competition is forcing many companies to increasingly offer deferred payment sales to their customers. And if the purpose of deferring payment for the supplied goods or services is to increase sales volumes, then the other side of this “coin” is an increase in the volume of doubtful debts.

Therefore, it is necessary to realistically assess all the advantages and losses, take into account the positions of competitors and develop the most flexible policy in this matter.

Funds received from debtors are one of the main sources of income for manufacturing enterprises.

In an unstable market economy, the risk of non-payment or late payment by customers of invoices increases, this leads to the appearance of receivables. The appearance of accounts receivable leads to a cash shortage, increases the organization's need for current assets to finance current activities, and worsens the financial condition.

Calculation of accounts receivable turnover

The formula for calculating accounts receivable turnover from textbooks on financial analysis has shortcomings, and in practice, financiers make mistakes when applying it. We offer an adjusted calculation methodology. RTD – receivables turnover period in days; DZn and DZk – its size, respectively, at the beginning and end of the period in rubles; B – revenue in rubles; CD – number of days in the period.

Cunning numbers: why it is not enough to know “plan” and “fact” to calculate KPI

Oleg, good day. I decided to join the discussion.1. A good article due to the use of specifics in the description of the model.

It becomes clear what they wanted to say with their calculations.2.

I think your concept of a “base” is a good point for limiting and clarifying the calculation of an employee’s effectiveness.

As I understand it, the specifics of the calculation formulas and the base itself are the lot of the managers of a particular enterprise themselves.3.

According to accounting standards, accounts receivable are defined as amounts due to a company or other person from customers or other debtors. The most common type of receivables is the debt of buyers and customers for goods, materials, services supplied to them, work performed and not paid for on time; the excess of debt on loans issued by the organization to its employees over loans received for these purposes.

Planning and Economic Department

“from the last paragraph of the calculation it follows that there is a threshold at which it is not at all profitable for the manager, having arrears of 300,000, to reduce the total amount of debt (1,300,000) at the expense of solvent clients, because

in this case, its coefficient will decrease!

rather, it is more profitable for him not to take money from solvent clients. Then such motivation is not in favor of the employer. PDZ must necessarily participate in motivation!

I’m looking for an answer to what to “link” it to in the calculation?” Tatyana Answer: I will quote the paragraph in question: “Let out of 1,300,000 rubles.

Analysis of receivables and payables

The level of accounts receivable is determined by many factors:

applied forms of non-cash payments for these products
type of product for which payments are made
degree of market saturation with this type of product
market capacity

The analysis should establish the dynamics of accounts receivable.

those. change in its size over the analyzed period; consider its composition.

It is necessary to control accounts receivable for an enterprise not only for the sake of analyzing and tracking the necessary information on debtors, but also so that the management of the enterprise always has access to real information about the state of working capital for a given period.

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Such debts from individuals, legal entities or even government agencies threaten the enterprise with financial losses and the risk of loss of material assets. Therefore, they must be under control, and how to do this, you should study the methods and schemes in more detail.

What it is

Accounts receivable control is the settlement, management and accounting of the amount of debts in an enterprise formed by users of the working capital of a legal entity - debtors (debtors), which can be other enterprises, companies, organizations, as well as individuals.

The importance of such control is relevant not only for large corporations, concerns or industries, but also for small and medium-sized businesses. What will happen if you don’t control the so-called “receivables” for the enterprise?

In this case, the following scenarios may develop:

Amounts of money may be lost, and in impressive amounts, which will be very difficult to find. We will have to additionally hire specialists, auditors, and experts to conduct an investigation into the finances of the enterprise. The loss of amounts may especially occur when collaborating with fly-by-night companies, for example.
Financial instability in the enterprise will be recorded from month to month. This, in turn, will affect the regularity of payment to workers, the repayment of obligations to the state - tax or utility payments, and so on.
Inefficiency in spending the enterprise's resource base arises. Due to the fact that it will be necessary to involve the efforts of all key officials (directors, accountants, managers, lawyers and others), new projects will be slowed down, and the costs of legal fees in litigation with debtors will simply reduce the income of the enterprise.
The business reputation of the enterprise may suffer in the face of new customers who will understand that they are threatened with delays in deliveries or production of orders due to a decrease in the monetary resource base of the enterprise by its debtors.
The degree of competitiveness decreases due to the fact that due to accounts receivable the company incurs unnecessary expenses.

As you can see, everything goes like a chain - because of someone’s debts, the enterprise begins to lose its activity, stability, reliability and productivity.

But the main danger when ignoring this point of accounting and auditing is that the enterprise will simply come to an inevitable and uncontrollable increase in debt and material losses. And this, in turn, will create great obstacles to business development and growth.

Accounts receivable are perceived as an asset (that is, repayable funds are considered a replenishment of the cash register, part of the property of the enterprise) and are distinguished according to the following classification:

Short-term debt involves the company receiving back payments within 1 calendar year, if we take the reporting date as the starting point.

In the long-term option, the terms increase and exceed 12 months after the reporting dates. When the current debt is determined, this means that payments are expected within the period of time specified in the contract.

In case of doubtful debts, the enterprise itself is confident that it will receive its money back, despite the fact that the debtor has already missed the deadline for their payments.

Bad debt indicates the impossibility of debt repayment and the absence of real ways and opportunities for debt repayment.

Note! Large corporations or companies, or, conversely, small businesses, may well establish their own types of receivables. It all depends on the scale of activity of the legal entity.

How to control

A reasonable approach to conducting business activities is to measure and take into account all financial indicators, including accounts receivable, as accurately and constantly, methodically.

In order to ensure competent control of accounts receivable, every manager of an enterprise must know a number of important activities that must be carried out.

“Receivables” should be controlled according to a certain algorithm of actions, which are expressed in the following stages:

Appointment of an official authorized to regularly monitor the status of receivables. This position is often simply called an auditor.
Identification of dates for control actions.
If a mechanism such as deferred payment is used, then introduce specific and understandable regulations for the transfer of products and monitor its implementation.
Accounting actions for volumes and amounts of debt.
Establishing limits on deferred payments and their duration for all counterparties without exception.
Weighing the composition of the debt - how much is the debt and when it was formed.
Conducting a comparative analysis between the timing of debt elimination and the timing of obtaining loans.
Carrying out collection calculations using special coefficients that would show what proportion of payments were made for the current period of time before the products were shipped.

In all this, it is very important to keep constant records of companies, enterprises, organizations and even individuals with whom the enterprise in one way or another conducts partnership activities.

It does not matter how long-term or short-term the cooperation between the parties will be. At the same time, records are kept of all contractors who are already considered to be indebted to the company.

Such maneuvers will allow you to timely track deadlines, who owes and how much. And such timely output makes it possible to take certain measures in a timely manner so that debts are repaid as soon as possible or have a high degree of repayment guarantee.

The procedural steps for controlling accounts receivable are as follows:

shipment of finished products to the consumer;
control that payments for shipped products are made on time;
debt inventory;
issuing penalties to the violator of contractual obligations in case of delays in payment;
legal proceedings to recover debts from debtors;
connection of reserve funds.

Methods

Lately, most enterprises have felt the burden of more and more growing accounts receivable. According to experts and researchers, this state of affairs most often manifests itself due to the slow pace of payment transactions (turnovers) between organizations, firms, and enterprises.

To do this, in order to avoid such phenomena, it is necessary to manage debt constantly. At the same time, along with management, the “receivables” must correspond with other points of the general financial policy of the enterprise.

At the same time, control and management of such debt must also be consistent with marketing policy.

There are quite optimal methods for controlling accounts receivable, which are as follows:

Monitoring the status of accounts receivable.
Ranking of debtors, where debtors with large debts are identified.
Analysis of debts by type of product, profitable and unprofitable goods.
Realistic assessment of securities and the possibilities for their profitable sale.
Carrying out work with debtors in court and pre-trial procedures.
Tracking the balance of accounts payable and receivable.
Market expansion, increase in consumers.
Finding ways to optimize credit policy.
Motivate employees working to sell products.
Promote and encourage early and timely payment for products.

When solving problems that control accounts receivable, they use special indicators, which are presented in relative values, and even in dynamics over a certain period of time - quarters, years.

The most key indicators are the following:

collection ratio - thanks to it, you can determine the amount and time of receipt of money from sales in a specific period of time, these are the expected receipts from the sale of products;

receivables turnover ratio;

the period when the “receivable” is repaid;

coefficient of normal repayment of “receivables”.

The results from the calculations that are made using such formulas can even be used to monitor and manage the organization's credit policy.

There are also ways to refinance receivables, which consist of the following methods - factoring, forfaiting, accounting and pledging bills as collateral, as well as other forms of financing receivables for a short period of time.

When studying the composition of debt, the results of the analysis of reserve data, doubtful debts, and losses that are recorded as actual are necessarily taken into account.

To prevent the growth of accounts receivable, you can take into account and use the following methods for its optimization:

Require advance payment from new customers before shipping products.
Provide a guarantee of payments by the consumer in the form of collateral, surety, or some kind of bank guarantee.
Plug the “holes” of accounts receivable with accounts payable.
Connect a letter of credit - a third party capable of resolving the issue of solvency of the consumer of the product.
Obtaining a loan as debt refinancing.

Note! The letter of credit service is very expensive, so it is used extremely rarely, and because of this, it is not particularly popular when resolving issues with receivables.

Internal control of accounts receivable

It should be noted that there are no universal methods to combat the growth of receivables.

Everything is so relative and each individual case has its own specifics that specialists have to look for more and more new ways to control and manage accounts receivable each time.

In many ways, a large role is played by the economic activity of the enterprise itself, what amounts pass between the accounting department and customers or clients, as well as the situation in the market itself, in the niche in which the organization operates.

But there are already proven methods that, in a standard situation, will act as a classic method of internal control of “receivables”:

There should always be a planned level of debt. If the level exceeds the planned level, measures are taken to reduce the growth of debts.
The use of deferred payments or loans, but not for all clients, but for those who are guaranteed to repay their debt. In this case, you should always set a specific deferment period and secure this with an additional agreement to the cooperation agreement. Usually 15 or 30 days of deferment are used.
Motivate employees to increase productivity. Here it is desirable to use a system that could make the payment of earnings to employees closely dependent on the timing of receivables.
Develop the very scheme according to which the procedure for deferred payments provided to clients will take place.
It is important to determine the parameters and evaluate the information provided by the consumer about valuable property that can be used to cover receivables in the event of their intensive growth.
It is necessary to correctly distribute the responsibilities that legal, commercial and financial services, departments of the corporation bear when monitoring receivables.

Accounts receivable are classified:

by maturity (short-term - payments are expected within 12 months after the reporting date; long-term - payments are expected more than 12 months after the reporting date);
according to the degree of possibility of collection (current - debt within the payment terms established by the contract; doubtful - the repayment period has already been violated, but the company is confident that the funds will be received; bad - debts that are unrealistic for collection).

Depending on the size of their operations, companies may establish their own classifications of accounts receivable.

How to prevent doubtful and bad debts

There are several ways to prevent or minimize bad debt.

1. Prepayment

If there is a risk of problems with the buyer, it is better to conclude an agreement with him on an advance payment basis. Moreover, the prepayment in this case must be 100%. Then you, as a supplier, will not have problems with debts.

2. Security in the form of collateral, surety, bank guarantee

3. Counter debt (accounts payable)

When there is a counter-debt, you can relatively safely ship products without prepayment, without collateral or other safety net options. If there are accounts payable and accounts receivable arise, it is always possible to cover them through offset.

4. Letter of credit

This is a rather exotic option, although undeservedly forgotten. A letter of credit is one of the forms of non-cash payments, the meaning of which is as follows: when both parties to a contract (for example, for supply) do not trust each other (that is, the supplier does not trust the buyer, because he is afraid that he will not pay, and the buyer is afraid make an advance payment because you are not sure that the supplier will ship the goods), the problem can be solved by a third independent party represented by a bank (issuing bank).

In this case, the bank opens a letter of credit: part of the funds in the buyer’s current account is transferred to a special account in this bank, and the buyer has no right to dispose of this money for a certain period of time. The bank then informs the supplier that the money is “reserved” for him in a separate account and this money will be transferred to him as soon as he submits documents confirming the shipment.

Unfortunately, this service is not very popular. Probably because it's not cheap. But from a financial and civil legal point of view, this is a good option for preventing the accumulation of debts.

6 methods of internal control of accounts receivable

It must be said right away that there are no universal methods for controlling accounts receivable. Everything is very specific, and a lot depends on the activities of the enterprise, its scale, the amounts processed, clients, and the market in which the enterprise operates. There are too many factors to consider. However, you can focus on several important criteria.

1. Planned level of accounts receivable

The maximum allowable amount of accounts receivable is determined by calculation. It is expressed in absolute values and/or as a percentage of revenue.

We are talking about the amount of debt that a company can afford without serious damage to its financial and economic activities. It is better to set this amount in a fixed amount, that is, in rubles. Additionally, you can set it as a percentage of revenue.

2. Conditions for providing deferred payment (credit) to clients

The company may have a specific deadline - 15 or 30 days, for example. But one deadline doesn't work for everyone she works with.

If we are talking about a key or regular client, then the period for him may be longer. After all, he, as a rule, makes large orders and regularly fulfills his obligations.

If a new client appears that the company is not yet sure of, then it makes sense to revise the deadline downward. A problem client needs to set either a minimum period or even insist on prepayment.

3. Employee motivation

It is advisable to develop a system in which an employee’s salary will depend on the period of receivables.

4. Procedure for granting deferred payment to clients

The information collected about him plays a major role in deciding whether to grant a loan to a client.

You can start by analyzing information from open sources and the information that is requested from buyers. How long have they been on the market? Which of their counterparties can you contact for feedback? How accurately are they calculated? A lot of valuable information for analysis can be extracted from the company’s website.

It is best to visit the buyer's office in person. This will give you an idea of how risky it will be to work with him.

5. Determination of parameters for assessing information provided by the client

In this case, it is important to take into account the availability of property through which debt can be repaid, the size and dynamics of accounts payable, potential financial difficulties and problems with solvency.

6. Distribution of responsibility for managing accounts receivable between commercial, financial and legal services

It all depends on the scale of the enterprise, but even in a small enterprise it makes sense to determine who is responsible for what in dealing with accounts receivable, and how responsibility is distributed.

From a logical point of view, the commercial department should be responsible for providing deferred payment and exercise control over current accounts receivable. The area of work of the legal department is doubtful and hopeless accounts receivable (personal meetings, negotiations, correspondence, claims, statements of claim). Accounting includes accounting, control over registration and write-off of receivables.