Upload
raihan-imran-rahom
View
279
Download
0
Embed Size (px)
Citation preview
14-1
WELCOME
14-2
GROUP INTRODUCTION THIS IS GROUP-5 TOPIC : RECEIVABLES MANAGEMENT:
INTRODUCTION & OBJECTIVES
14-3
GROUP MEMBERS MD.RAIHAN IMRAN RAHOM (Group Leader) MD. AUWAL HOSSIAN MD. ABDUR RAHIM MD.HASIBUL HASAN BULBUL MD. KHAIRUL ALAM MD. SHORIF HOSSAIN MD. ARIFUL ISLAM MD. MAHBUBUR RAHMAN MD. MIZANUR RAHMAN MD. AL-AMIN
14-4
LET’S START
14-5
CONTENTS RECEIVABLES MANAGEMENT : DEFINITION RECEIVABLES MANAGEMENT: CRUCIAL
DECISIONS RECEIVABLES MANAGEMENT: OBJECTIVES OBJECTIVES OF RECEIVABLE MANAGEMENT:
COST OBJECTIVES OF RECEIVABLE MANAGEMENT:
BENEFITS FINAL COMMENTS
14-6
‘ANY FOOL CAN LEND MONEY,
BUT ITTAKES A LOT OF SKILLS TO GET IT
BACK’
14-7
WHAT ARE RECEIVABLES? Receivables are sales made on
credit basis So,the term receivables is defined
as ‘debt owed to the firm by customers arising from sales of goods or services.
14-8
RECEIVABLES MANAGEMENT Receivable management is the collection of
steps & procedure required to properly weigh the costs & benefits attached with credit policies.
Receivables management can also be called as ‘trade credit management’ as the company allows its customer an extension of credit or ‘trade credit , which enables them a reasonable period of time in which to pay for the goods or services received
14-9
RECEIVABLES MANAGEMENT:CRUCIAL DECISIONS Receivables management involves
crucial decision in three areas : Credit policies : It is the determination of
credit standards & credit analysis Credit terms :are basic criteria/minimum
requirements for extending credit to a customer
Collection policies : involves obtaining credit information & evaluation of credit applicants.
14-10
RECEIVABLES MANAGEMENT:CRUCIAL DECISIONS Credit Policies : Consisting of two
dimensions, 1. Credit standard : are basic criteria/minimum
requirements for extending credit to a customer
2. Credit analysis : involves obtaining credit information & evaluation of credit applicants.
Credit Terms : Comprising 1. Cash discount: is the incentive to customer
to make early payment of sum due.
14-11
2. Cash discount period : Is the duration of the period during which discount can be availed of
3. Credit period: is the time for which trade credit is extended to customer in the case of credit sales
Collection Policies : the types & degree of effort made to collect receivables from customers
14-12
WHAT ARE THE OBJECTIVES OF RECEIVABLE MANAGEMENT?
14-13
RECEIVABLES MANAGEMENT:OBJECTIVES Credit sales are used as marketing
tool for a company Maximise the return on investment
in receivables Maintaining up-to-date record Accurate billing Establish the credit policies
14-14
RECEIVABLES MANAGEMENT: COST & BENEFITS Management should weigh the benefits
as well as cost to determine the goal of receivables. The objective of receivables management is ‘to promote sales & profit until that point reached where the return on investment in further funding receivables is less than the cost of funds raised to finance that additional credit
14-15
Specific costs & benefits are relevant to the determination of the objectives of receivables management
14-16
DIFFERENT TYPES OF COST ASSOCIATED IN RECEIVABLES MANAGEMENT The major categories of costs associated with
the extension of credit & accounts receivables are:
Collection cost Capital cost Delinquency cost & Default cost
14-17
COLLECTION COST (Carrying Cost) Collection cost is the
administrative cost incurred in collecting receivables from the customers to whom credit sales have been made .Here including this category of cost are (a) Additional expenses on the creation and maintenance credit department.(b)Additional expenses for collecting credit information.
14-18
CAPITAL COST Capital cost is the cost on the use
of additional capital to support credit sales .There is a time lag between the sale of goods and payment by the customer. meanwhile the firm have to pay employees and suppliers of raw materials .The cost on the use of additional capital to support credit sales ,which alternatively could be profitably employed elsewhere.
14-19
DELINQUENCY COST Delinquency cost is the cost arising
out of failure of customers to pay on due date
14-20
DEFAULT COST Default cost are the over dues that
cannot be recovered. Such debts are treated as bad debts & have to be written off as they cannot be realised.
14-21
BENEFITS OF RECEIVABLE MANAGEMENT If a firm maintains a more liberal
credit policy then it can get two direct benefits:
Increased sales Anticipated profit intend to
increase the sales
14-22
BENEFITS OF RECEIVABLE MANAGEMENTBesides a firm can get benefits like: Capability to face competition Helps to increase customer satisfaction Takes control of sales processes It creates a good relationship between firm &
customer Receivables management save the small
business cause it can goods from large from on credit
It is less costly than working capital loan from local bank
14-23
FINAL COMMENTS From the above discussion, it is
clear that investments in receivable involve both benefits & cost
14-24
The extension of trade credit has a major impact on sales, costs & profitability. If the other things remain same, a relatively more liberal policy & therefore, higher investments in receivables, will produce larger sales
14-25
So, accounts receivable management should aim at a trade-off between profit(benefit) & risk(cost).
14-26
Though general economic conditions & industry practises have a strong impact on the level of receivables, a firm’s investments in this type of current assets is also greatly affected by it’s internal policy. A firm has a little control over environmental factors, but it can improve its profitability through a properly conceived receivable management.
14-27
THANK YOU