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Module 4 - Notes

Receivables management involves policies and practices for managing credit sales, including client evaluation and collection processes. It is significant for optimizing investments, analyzing customer credit worthiness, and increasing sales and profits. The role of a credit manager includes obtaining credit information, setting credit standards and terms, and controlling accounts receivable.

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14 views2 pages

Module 4 - Notes

Receivables management involves policies and practices for managing credit sales, including client evaluation and collection processes. It is significant for optimizing investments, analyzing customer credit worthiness, and increasing sales and profits. The role of a credit manager includes obtaining credit information, setting credit standards and terms, and controlling accounts receivable.

Uploaded by

petalsofcherrys
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

MODULE 4: RECEIVABLES MANAGEMENT

Performance Evaluation of Accounts


What is receivable management?
Receivables Management
 refers to the set of policies, procedures, and
practices employed by a company with Widely used important tools are:
respect to managing sales offered on credit. 1. Accounts Receivable Turnover
 It encompasses the evaluation of client 2. Days Sales Outstanding
credit worthiness and risk, establishing 3. Aging schedule
sales terms and credit policies, and
designing an appropriate receivables Accounts Receivable Turnover
collection process. Measures the average number of times
receivables are collected during a period. A
Significance of Receivable Management
high ratio is congruent with efficient receivables
 Optimum investment in receivables management and could indicate that the
 Analyze credit worthiness of customers company's credit and collection policies are
 Increase in Sales sound.
 Increase in profits
 Maximize the value of firm

ROLE OF CREDIT MANAGER


 Obtain Credit Information
 Analysis and evaluation of credit proposals
 Setting up credit standards
 Set up credit terms
 Credit granting decision
 Controlling account receivable
 Providing credit information to the top level
management

Credit standards - 5 CDs of Credit


 Character
 Capacity
 Capital
 Collateral
 Condition

Credit terms
 Credit period
 Cash discount
 Cash discount period

Collection policy
 Correspondence
 Telephone calls
 Personal Visits
 Legal action etc.

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