MANAGEMENTOFACCOUNTSRECEIVABLEINACOMPANY外文翻译原文

1、21MANAGEMENT OF ACCOUNTS RECEIVABLE IN A COMPANYAbstractAccounts 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

2、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 ord

3、er 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 differe

4、nt 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 policy1. INTRODUCTIONAccou nts receivable is the mone

5、y owed to a compa ny as a result of hav ing sold its products to customers on credit. The primary determ inants of the compa nys in vestme nt in accou nts receivable are the in dustry, the level of total sales along with the compa nys credit and the collecti on policies.Accou nts receivable man agem

6、e ntin cludes establish ing a credit andcollecti ons policy.Credit policy con sists of four variables: credit period, discou nts give n for early payme nt, credit sta ndards and collecti on policy. The three primary issues in accou nts receivable man ageme nt are to whom credit should be exte nded,

7、the terms of the credit and the procedure that should be used to collect the mon ey.The major decisi on regard ing accou nts receivable is the determ in ati on of the amou nt and EKON. MISAO PRAKSA DBK. GOD XXII. (2013.) BR. 1. (21-38)Kon tu?, E.: MANAGEMENT OF ACCOUNTS.22terms of credit to exte nd

8、to customers. The total amou nt of accou nts receivable outsta nding at any give n time is determ ined by two factors: the volume of credit sales and the average len gth of time betwee n sales and collecti ons. The credit terms offered have a direct beari ng on the associated costs and reve nue to b

9、e gen erated from receivables. If credit terms are tight, there will be less of an in vestme nt in accou nts receivable and fewer bad debt losses, but there will also be lower sales and reduced profits.We hypothesize that by appl ying scie ntifically-based accou nts receivable man ageme nt and by es

10、tablish ing a credit policy that results in the highest net earnin gs, compa nies can ear n a satisfactory profit as well as a retur n on in vestme nt.The purpose of this study is to determ ine ways of finding an optimal accou nts receivable level along with mak ing optimum use of differe nt credit

11、policies in order to achieve a maximum return at an acceptable level of risk. In striv ing to fill in the gaps relat ing to net sav ings from cha nges in credit policy, the study makes its own con tributi on to research and thereby to man agers by giv ing them gen eral recomme ndati on. With the aim

12、 of complet ing these gaps, the study will in vestigate accou nts receivables, their man ageme ntand explore costsand ben efits from cha nges in credit policy as well as net profitability.When a compa ny is con sideri ng cha nges in its credit policy in order to improve its in come, in creme ntal pr

13、ofitability must be compared with the cost of discou nt and the opportu nity cost associated with higher in vestme nt in accou nts receivable.The outcome represe nts a new mathematical model for calculat ing net sav ings from cha nges in credit policy and with this model a compa ny can con sider dif

14、fere nt credit policies as well as cha nges in credit policy in order to improve its in come and profitability.2.LITERATURE REVIEW2.1.Accounts receivable managementAccou nts receivable represe nts a sizable perce ntage of most firms assets. In vestme nts in accou nts receivable, particularly for man

15、 ufactur ing compa ni es, represe nt a sig nifica nt part of short-term finan cial man ageme nt. Firms typically sell goods and services on both cash and a credit basis. Firms would rather sell for cash tha n on credit, but competitive pressures force most firms to offer credit. The exte nsion of tr

16、ade credit leads to the establishme nt of accou nts receivable. Receivables represe nt credit sales that have not bee n collected. As the customers pay these accou nts, the firm receives the cash associated with the orig inal sale. If the customer does not pay an accou nt, a bad debt loss is in curr

17、ed1Whe n a credit sale is made, the follow ing eve nts occur: inven tories are reduced by the cost of goods sold, accou nts receivable are in creased by the sales price, and the differe nee is profit, which is added to reta ined earnin gs. If the sale is for cash, the n the cash from the sale has ac

18、tually bee n received by the firm, but if the sale is on credit, the firm will n ot receive the cash from the sale unl ess and un til the accou nt is collected. Carryi ng receivable has both direct and in direct costs, but it also has an importa nt ben efit-i ncreased sales.Accord ing to Chambers an

19、d Lacey there are three primary issues in the man ageme nt of accou nts receivable: to whom to exte nd credit, what the terms of the credit should be, and what procedure should be used to collect the mon ey. Exte nding credit should be based upon a comparis on EKON. MISAO PRAKSA DBK. GOD XXII. (2013

20、.) BR. 1. (21-38)Kon tu?, E.: MANAGEMENT OF ACCOUNTS.23of costs and ben efits. The an alysis must build in un certa inty because we are un certa in of future payme nt, and we will han dle this by computi ng the expected costs and expected ben efits through payme nt probabilities. The pote ntial cost

21、 of exte nding credit is that the customer will not pay. Although there is a temptati on 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 pote ntial ben efit of exte nding credit is not just the hope for profit on

22、the one tran sacti on; rather, it is the pote ntial value of the customer for a lon g-term relati on ship.The decisi on of how much credit to offer must be made whe n the customer in itially requests credit and whe n the customer requests additi onal credit. The fun dame ntal pri nciple that guides

23、finan cial decisi onscan be used: marginalben efit versus marg inal cost. The marg inal cost is the additi onal pote ntial lost costs of the product. The costs of past un collected sales are sunk costs and should not be in cluded as a marg inal costs. The marg inal ben efits are the pote ntial sales

24、 and1Pinches, G.: Financial Management, Harper Collins College Publishers, New York, 1994., p. 701-702.2Chambers, D. R., Lacey, N. L.: Modern Corporate Finance, Hayden McNeil Publishing, Michigan, 2011, p. 518.in terest reve nues in clud ing the pote ntial to recover past sales that rema in3un colle

25、cted .Once the decisi on to grant credit has bee n made, the firm must establish the terms of the credit. Credit terms are ofte n separated into two parts: the credit period and the credit discou nt.Collecti on of accou nts receivable is an importa nt process for a corporati on and requires a well-d

26、esig ned and well-impleme nted policy. One tech ni que is the factori ng of accou nts receivables. In a typical factori ng arra ngeme nt, one firm will sell their accou nts receivable outright to ano ther firm for an agreed-up on price. There ia usually no recourse in such tra nsacti ons, such that

27、the buyer (also known as the factor) takes the loss if the purchaser of the goods does not ultimately pay for them.Ano ther tech ni que to expedite the receipt of accou nts receivable is to utilize lock boxes. Lock boxes are payme nt collecti on locati ons spread geographically so as to reduce the a

28、mou nt 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 reducti on of maili ng time and check cleari ng time for the banks can produce sig nifica nt

29、sav ings whe n large sums of money are in volved.Payme nts of accou nts receivable should be closely mon itored to detect pote ntial problems such as would be in dicated by slow payme nts. Follow ing up on slow-pay ing customers is an importa nt fun cti on of the credit departme nt. Procedures shoul

30、d be carefully developed and con siste ntly impleme nted 4.The major decisi on regard ing accou nts receivable is the determ in ati on of the amou nt and terms of credit to exte nd to customers. The total amou nt of accou nts receivable is determ ined by two factors: the volume of credit sales and t

31、he average len gth of time betwee n sales and collecti ons. The credit terms offered have a direct beari ng on the associated costs and reve nue to be gen erated from EKON. MISAO PRAKSA DBK. GOD XXII. (2013.) BR. 1. (21-38)Kon tu?, E.: MANAGEMENT OF ACCOUNTS.24receivables.In evaluating a potential c

32、ustomer s ability to pay, consideration shouldbe given to the firm s integrity, financial soundness, collateral to be pledged, andcurrent economic conditions. A customer s cseditaycbeicteieluatedthrough qua ntitative tech ni ques such as regressi on an alysis. Bad debt losses can be estimated reliab

33、ly whe n a compa ny sells to many customers and whe n its credit policies have not cha nged for a long period of time. In man agi ng accou nts receivable, the followi ng procedures are recomme nded:? establish a credit policy?establish a policy con cer ning billi ng?establish a policy con cer ning c

34、ollecti on.Ibidem, p. 520.4Ibidem, p. 521-522 .The establishme nt of a credit policy can in elude the followi ng activities:? A detailed review of a potential customer s soundness should be rprior to exte nding credit. Procedures such as a careful review of the customer s finan cial stateme nts and

35、credit rati ng, as well as a review of finan cial service reports are com mon.? As customer finan cial health cha nges, credit limit should be revised.?Marketi ng factors must be no ted since an excessively restricted creditpolicy will lead to lost sales.? The policy is finan cially appropriate whe

36、n the retur n on the additi onal sales plus the loweri ng in inven tory costs is greater tha n the in creme ntal5 cost associated with the additi onal in vestme nt in accou nts receivable .The followi ng procedures are recomme nded in establish ing a policy con cer ning billi ng:?Customer stateme nt

37、s should be sent with in 1 day subseque nt to the closeof the period.? Large sales should be billed immediately.? Customers should be in voiced for goods whe n the order is processed rather tha n whe n it is shipped.?Billi ng for services should be done on an in terim basis or immediatelyprior to th

38、e actual services. The billi ng process will be more uniform if cycle billi ng is employed.?The use of seasonal dating s should be considered.In establishi ng a policy concerning collecti on the followi ng procedures should be used:Accou nts receivable should be aged in order to ide ntify deli nque

39、nt and high-risk customers. The aging should be compared to in dustry no rms.Collecti on efforts should be un dertake n at the very first sig n of customerEKON. MISAO PRAKSA DBK. GOD XXII. (2013.) BR. 1. (21-38)Kon tu?, E.: MANAGEMENT OF ACCOUNTS.256finan cial un sou ndn ess .2.2.Managing the credit

40、 policyThe success or failure of a bus in ess depe nds primarily on the dema nd for its products.Shim, J. K., Siegel, J. G.: Financial Management, Third edition, Mc Graw Hill, New York, 2007, p. 107-108.6Ibidem, p. 108 .The major determ inants of dema nd are sales prices, product quality, advertisin

41、g, and the company s credThfinancial manager is responsiblefor administering the company s credit policy. Receivables management beginswith the credit policy. Credit policy con sists of four major comp onen ts: credit sta ndards, credit terms, the credit limit and collecti on procedures.Credit sta n

42、dards refer to the required finan cial stre ngth of acceptable credit customers.Based on finan cial an alysis and non finan cial data, the credit an alyst determ ines whether each credit applica nt exceeds the credit sta ndard and thus qualifies for credit. Lower credit sta ndards boost sales, but a

43、lso in crease bad debts. The mi ni mum sta ndards a customer must meet to be exte nded credit are: character, capital, capacity, con diti ons and collateral.The credit period, stipulat ing how long from the in voice the customer hasto pay, and the cash discount together comprise the seller s credcom

44、pany s credit terms are usually very similar to that of other companies in itsin dustry7 8 9 10.Discou nts give n for early payme nt in clude the discou nt perce ntage andhow rapidly payme nt must be made to qualify for the discou nt.If credit is exte nded, the dollar amou nt that cumulative credit

45、purchasescan reach for a given customer constitutes that customer s credit limit. Thecustomer periodically pays for credit purchases, free ing up that amou nt of the credit limit for further orders. The two primary determi nants of the amou nt of a customer s credit limit are requirements for the su

46、pplier s products and the abiof the customer to pay its debts. The latter factor is based primarily on the customer s recent payment record with the seller and others and a review andanalysis of the customer s most recent financial statements8Detailed stateme nts regard ing whe n and how the compa n

47、y will carry outcollection of past- due accounts make up the company s collection procedures.7Maness, T. S.,乙 etlow, J. T.: Short-Term Financial Management, Third Edition, Thomson SouthWestern, Ohio, 2005, p. 139.8Ibidem, p. 139 .9Ibidem, p. 141 .10Brigham, E. F., Daves, P. R.: Intermediate Financia

48、l Management, 8th edition, Thomson SouthWestern, Ohio, 2004., p. 715 .EKON. MISAO PRAKSA DBK. GOD XXII. (2013.) BR. 1. (21-38)Kon tu?, E.: MANAGEMENT OF ACCOUNTS.26These policies specify how long the compa ny will wait past the due date to in itiatecollecti on efforts, the methods of con tact with d

49、eli nque nt customers, and whetherand at what point accou nts will be referred to an outside collecti on age ncy .9Collecti on policy is measured by its tough ness or laxity in attempti ng tocollect on slow-pay ing accou nts. A tough policy may speed up collecti ons, by it might also an ger customer

50、s, caus ing them to take their bus in ess elsewhere .10A firm may liberalize its credit policy by exta nding full credit to prese ntly limited credit customers or to non-credit customers. Full credit should be give n only if net profitability occurs. A finan cial man ager has to compare the earnings

51、 on sales obta ined to the added cost of the receivables. The additi onal earnings represe nt the con tributi on margin on the in creme ntal sales because fixed costs are con sta nt. The additi onal costs on the additi onal receivables result from the greater n umber of bad debts and the opportu nit

52、y cost of tying up funds in receivables for a lon ger time period.If a firm con siders offeri ng credit to customers with a higher-tha n-no rmal risk rat ing, the profitability on additi onal sales gen erated must be compared with the amou nt of additi onal bad debts expected, higher in vest ing and

53、 collecti on costs, and the opportu nity cost of tying up funds in receivables for a lon ger period of time. When idle capacity exists, the additi onal profitability represe nts the in creme ntal con tributi on margin (sales less variable costs) since fixed costs rema in the same.3.RESEARCH3.1.Metho

54、dologyThis paper prese nts results from the empirical research un dertake n on a represe ntative sample of Croatia n compa nies with the aim of explori ng their receivables, accou nts receivables and, fin ally, explore cha nges in credit policy especially costs and ben efits as well as net profitabi

55、lity from cha ngesin creditpolicy.The empirical research was based on a sample of ran domly selected compa nies in the Republic of Croatia. The an alyzed sample comprises 60 large compa nies and 60 medium-sized compa ni es.We an alyzed the structure of receivables used by sample compa nies in the Re

56、public of Croatia in 2010, accou nts receivable ratios along with a depe ndence betwee n accou nts receivable levels and profitability. Usi ng methods from statistics, we in vestigated whether there was a relati on betwee n accou nts receivable ratios and profitability expressed in terms of return o

57、n assets. To improve the quality of an alysis and descriptive statistics an alysis, we used finan cial ratios.Our body of data in cludes: receivables levels, accou nts receivable divided by curre nt assets, accou nts receivable divided by total assets and Retur n on Assets (ROA).We also an alyzed co

58、sts and ben efits from cha nges in credit policy as well as net ear nings from cha nges in credit policy. The in depe ndent variables which determ ine net earnings from revisi ng the credit policy have bee n selected and the relati ons betwee n them have bee n defi ned. On the basis of research resu

59、lts, weEKON. MISAO PRAKSA DBK. GOD XXII. (2013.) BR. 1. (21-38)Kon tu?, E.: MANAGEMENT OF ACCOUNTS.27Structure of receivables in Croatia n compa nies in 2010(in 000 kun a)have introduced a new model for calculating net earnings from changes in credit policy which is a system of mathematical equati o

60、ns.3.2. Results of analysisWe an alyzed the structure of receivables used by sample compa nies in 2010, accou nts receivable ratios along with a depe ndence betwee n accou nts receivable levels and profitability as well as changes in credit policy.3.2.1. Structure of receivables used by Croatian com