MODEL OF ACCOUNTS RECEIVABLE MANAGEMENT

Abstract

Every fourth company is experiencing serious problems with receiving payments from their customers. Unpaid bills increase an entry “receivables” in current assets of an enterprise, thus depriving it of the ability to correctly manage its cash flow. To optimize the process of receivables collection, a model of receivables management is proposed. This model consists of eight stages, which should be considered when planning the credit policy of enterprise. The model includes the whole process from the time of shipment to the receipt of funds from the debtor. Provision of commodity credit and sale on deferred payment terms are the necessary components of the enterprise activity. That is why one should develop general principles of commodity credits and establish credit policy. An important point of the management is also analysis of existing and future debtors. It is necessary to critically examine the list of debtors and to identify those who do not comply with the payment schedule. Considerable attention should be paid to marketing activities in order to attract new customers. When sale is on credit, the conclusion of the credit agreement is a must; the agreement has to include clearly articulated conditions of the credit provision: terms of delivery and payment, responsibility of the parties. After sale on credit, one should constantly monitor deadlines for debt payment and receipt of funds. In case of failure of payments on time, possible methods of payment should be discussed. If necessary, it is advisable to involve special collection agencies for the collection management, prepare cases for the consideration of the court, or use receivables as a financial asset. The ongoing improvement of skills and knowledge of receivables management is also a must.