Reducing accounts receivable leads to. Key measures to reduce accounts receivable

3.2 Reduction of accounts receivable

An increase or decrease in accounts receivable has a great influence on the turnover of capital invested in current assets, and at the same time on the financial condition of the organization. As can be seen from the above analysis (Table 2.9), its share in current assets has a fairly large fluctuation (56.75%, 63.56%, 51.96%).

A sharp increase in accounts receivable and its share in current assets may indicate an organization’s imprudent credit policy towards customers, or an increase in sales volume, or the insolvency and bankruptcy of some customers. A reduction in accounts receivable is assessed positively if this occurs due to a reduction in the repayment period. If accounts receivable decrease due to a decrease in product shipments, then this indicates a decrease in the organization’s business activity.

Consequently, an increase in accounts receivable is not always assessed negatively, while a decrease is assessed positively. It is necessary to distinguish between normal and overdue debt. The presence of the latter creates financial difficulties, since the organization’s activities will be affected by a lack of financial resources for the acquisition of inventories, payment of wages, etc. In addition, freezing funds in accounts receivable leads to a slowdown in capital turnover. Overdue accounts receivable also mean an increase in the risk of non-payment of debts and a decrease in profits, so each organization is interested in reducing the timing of payments due to it.

Analyzing the data on the structure of receivables (Table 2.13), it should be noted that at the end of 2008 the receivables of other debtors increased sharply. These are mainly overpayments of taxes and fees to the budget. Of course, returning money from the country’s budget is problematic, and sometimes even impossible. But even in this situation, there is a way out: you should write a letter to the tax office with a request to offset overpayments on some taxes against other taxes, the payment deadline for which will come in the near future. In this way, these receivables can be reduced to a minimum. I believe that during this work, the receivables of other debtors were reduced to 50 million rubles.

As for suppliers' receivables, it is necessary to analyze what part of this receivable was formed due to erroneous overpayments, and what part - due to the issuance of advances to suppliers and contractors against future deliveries. Based on accounting data, overpayments amount to 13 million rubles. In this situation, the supply department needs to send a letter to suppliers with a request to return the excessively transferred amounts of money. Receivables from suppliers in terms of overpayments can be reduced to zero.

The remaining part of the receivables from suppliers and contractors (RUB 435 million) represents advances issued against future deliveries. In 2007, activities were carried out to search for suppliers and contractors who agreed to work on the terms of subsequent payments. This led to a reduction in accounts receivable from suppliers and contractors by almost 3 times. Today, the global economic situation does not allow such events to be held, because Many suppliers are trying to reduce their commercial risks and require at least 50% advance payment for supplied materials.

The largest share in accounts receivable is occupied by customer debt. At the end of 2008, this value reached 15,008 million rubles. (Table 2.13). Overdue accounts receivable amount to 1,533.21 million rubles. (Table 2.15).

I suggest that the company file a claim in court to collect debts from customers who are behind on payments. The supply agreement stipulates that for each day of delay a penalty in the amount of 0.1% of the debt amount will be charged.

We will calculate the amount of penalties that can be collected from buyers.

Penalty (30 days of delay) = 756 · 0.001 · 30 = 22.68 (million rubles);

Penalty (60 days of delay) = 186.82 · 0.001 · 60 = 11.21 (million rubles);

Penalty (90 days of delay) = 590.39 · 0.001 · 90 = 53.14 (million rubles).

The supply agreement also provides for fines for violation of business agreements in the amount of 5% of the debt amount.

We will calculate the amount of fines that can be collected from buyers.

Fine = 1533.21 · 0.05 = 76.66 (million rubles)

Considering that some debtors may be at the stage of bankruptcy or may not have funds in their current accounts to repay their debt, we assume that 60% of the debt will be repaid through the court. Therefore, the amount of receivables from customers after these activities will be equal to:

DZ purchased = 1533.21 – 1533.21 · 0.6 = 613.28 (million rubles)

The amounts of penalties and fines received will be respectively equal to:

Penalty = (22.68 + 11.21 + 53.14) · 0.6 = 52.22 (million rubles)

Fine = 76.66 · 0.6 = 46 (million rubles)

After carrying out all the above measures, the amount of accounts receivable in the total amount of current assets will be equal to:

DZ = 0 + 43 5+ 14380.79 + 613.28 = 15429.07 (million rubles)

The total amount of savings due to the reduction of accounts receivable will be:

E = 15914 – 15429.07 = 484.93 (million rubles)

3.3 Calculation of the economic efficiency of using current assets from the proposed measures

To analyze the economic efficiency of using current assets, a number of indicators are used:

1. The turnover ratio of current assets (p) characterizes the amount of revenue from the sale of products per one ruble of current assets, and also shows the number of turnovers that current assets make during the analyzed period (formula 1.6).

An increase in the turnover ratio indicates a more efficient use of current assets.

2. The duration of one turnover in days (t) shows the average period for which funds invested in production and commercial operations are returned to economic circulation and is calculated by dividing the number of days in the analyzed period by the turnover ratio (formula 1.7).

3. The coefficient of consolidation of funds in circulation (Кз) characterizes the amount of current assets advanced per one ruble of proceeds from the sale of products, and is an indicator inverse to the turnover ratio (formulas 1.8, 1.9).

The lower the consolidation ratio, the more efficiently current assets are used.

4. The economic effect as a result of accelerated turnover is expressed in the relative release of funds from circulation, as well as in an increase in the amount of profit.

The amount of funds released from circulation due to acceleration of turnover (-ΔOA) or additionally attracted funds into circulation (+ΔOA) when turnover slows down is determined by multiplying the actual one-day sales turnover by the change in the duration of one turnover in days:

ΔOA = (t1 - t0) V: D, (3.3)

where t1, t0 - the duration of one turnover of working capital before and after the events, respectively, days;

B - revenue (net) from product sales, million rubles.

An increase (decrease) in the amount of profit from product sales can be calculated by multiplying the relative increase (decrease) in the turnover ratio by the amount of profit from product sales before the events:

ΔП = Po · Δп, (3.4)

where Po is the amount of profit from the sale of products before holding events, million rubles;

Δп - coefficient of relative increase (decrease) in the number of turnover of current assets. Calculated using the formula:

Δp = (p1 - p0) : p0 , (3.5)

where p1 and p0 are the turnover ratios before and after the events, respectively, the number of times.

Table 3.1 below presents the initial information for calculating the economic efficiency of the proposed activities.

Table 3.1 – Comparative table of indicators for the use of current assets

Based on the table data, it is possible to calculate the economic efficiency of the proposed measures. First, let’s calculate the amount of funds released from circulation due to the acceleration of turnover:

ΔOA = (t1 - t0) · V: D = (179.31 - 190.79) · 57788.95: 360 = - 1842.83 (million rubles)

Δp = (p1 – p0) : p0 = (1.89 - 2.01) : 1.89 = - 0.06

Let's calculate how much profit from product sales will increase due to an increase in turnover of current assets:

ΔП = Po · Δп = 5180.48 · 0.06 = 310.83 (million rubles)

As follows from the data in Table 3.1, after the measures were taken, the duration of turnover of current assets was 179.31 days, compared to 2008 it decreased by 11.48 days. This led to a change in turnover ratios (increased from 1.89 to 2.01) and consolidation of working capital (decreased from 0.53 to 0.5).

As a result of the acceleration of turnover of current assets, the relative amount of funds released from economic turnover amounted to 1,842.83 million rubles. The turnover of current assets after the events was 2.01 times, therefore, for the entire year, the amount of funds released from economic turnover is equal to 3,704.09 million rubles. (1842.83 · 2.01).

The amount of profit due to the acceleration of turnover of working capital increased by 310.83 million rubles.

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The main task of each market participant is to ensure the turnover of funds in the shortest possible time, which will allow you to quickly receive the long-awaited profit. But business conditions are such that in order to survive in a fiercely competitive environment, you have to make some concessions, offering partners conditions for deferred payments, as well as various discounts and bonuses. Thus, the concept of accounts receivable arises.

There are such types of accounts receivable as normal and overdue. The first arises as a result of standard relations between partners when providing some relaxations on the payment period. Overdue debt of debtors, in turn, means the expiration of the statute of limitations for its claim. As a result, this leads to a situation where debts are written off at a loss to the organization.

Ways to minimize accounts receivable

In order to minimize the risk of such debt moving from the status of ordinary and normal in business circles to the status of impossible to recover, there are a number of actions aimed at managing it. This set of measures usually includes the following methods of reducing accounts receivable:

development of an individual credit policy for each buyer and focused on certain types of products;

offering certain working conditions to customers depending on their purchasing and payment history;

careful control of calculations;

developing ways to collect debts in the shortest possible time;

development of special sales conditions, which will contribute to the initial rapid turnover of funds at the agreement stage, and more.

As a rule, company economists do a lot of work to analyze this parameter, because accounts receivable represent a diversion of funds from the company’s turnover. If it is not controlled, the enterprise may face the problem of a lack of funds not only to cover its costs, but also, importantly, the inability to cover credit lines, which are important for the smooth functioning of the enterprise and increasing capacity.

Accounts receivable management methods

The main methods of managing accounts receivable are the following measures. The first thing you should pay attention to is the establishment of strict control over customer payments. As a rule, the terms of contracts provide for deferred payments for up to 30 days. In practice, these requirements are often violated, which is why it is so important to conduct monthly reconciliations with partners to identify the size of the debt and violation of deadlines for it.

Accounts receivable valuation

When evaluating receivables and payables separately, you should not forget to conduct a comparative analysis of these two indicators. If the level of debt of debtors exceeds the debt on loans of the enterprise, a situation of extreme financial instability may arise, to resolve which it will be necessary to attract new financial flows, the use of which will also have to be paid.

If the agreement provides for long-term payment of material assets, it will be relevant and in demand to provide discounts to buyers if certain conditions are met. So, for example, if the contract contains terms for an installment payment of a couple of weeks, providing a discount, say 5%, for payment at the time of shipment of the goods to the buyer will mean crediting him at this rate for the agreed installment period. After performing some simple arithmetic operations, it is not difficult to understand that the annual assessment of this loan will be equal to 120%. Thus, by providing such a kind of loan, the manufacturer is able to reduce its risks due to high interest rates.

Thus, accounts receivable management allows you to ensure the efficient operation of organizations, reduce the risk of unplanned losses and build profitable partnerships.

Accounts receivable means the amount of funds that an enterprise must receive from other companies or individuals in connection with the provision of services or making deliveries, or fulfilling contracts, for other obligations.

This indicator is reflected in accounting and tax accounting until the counterparties complete settlements in full or when funds are written off upon expiration of the statute of limitations due to the liquidation of the debtor.

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What does a decrease in accounts receivable indicate, what are the reasons for a decrease in this indicator for an enterprise, what measures need to be taken to reduce the value and what nuances are encountered in this area in practice. About everything in detail in this material.

What does this indicate?

Often, high levels of debt are the result of an ineffective business organization.

A decrease in this indicator indicates the restoration of the company’s activities, reaching a new level of supplies or sales of services, the availability of assets at the enterprise and the correct marketing policy.

Causes

There are two types of debt:

Measures to reduce accounts receivable

In order to reduce the level of debts on shipped products or completed work, an enterprise can develop an internal mechanism for selecting reliable counterparties. It is possible to reduce debt in some ways after it has been formed.

These include:

• analysis of information about the work of another enterprise or obtaining information about the integrity of a citizen ordering goods or services. At the stage of concluding a contract, it is necessary to check the documentation for the company; certificates of registration with Rosreestr and the tax service are requested, papers on the authority of the person signing the documents on acceptance of the goods or an act on the work performed in order to establish the legal capacity of the company. It is advisable to obtain information about the activities of a private individual about work experience in a certain field, feedback on interaction in the field in order to establish solvency. It is important to find out about the existence of debts from the counterparty and prevent the conclusion of the work and the implementation of obligations until the shipment or transfer of the result of the work;
• To minimize economic risks, it is necessary to include in the contract provisions on penalties for failure to comply with requirements: in the form of fines, compensation for losses. This will reduce the risk of non-payment;
• if it is impossible to pay the debt under the contract in full within the specified time frame, it is possible to conclude an additional agreement to defer the payment of funds or draw up a payment schedule, the implementation of which will gradually reduce the amount of debt;
• as an incentive measure, it is possible to establish payment discounts for timely payments;
• An important link in the creditor-debtor chain is the company’s personnel. To keep employees interested, you can establish a bonus system not only for completing sales tasks, but also for payments from buyers or customers. You can also impose disciplinary measures for cooperation with unscrupulous debtors by issuing reprimands, deprivation of bonuses, etc.;
• In order to reduce the level of accounts receivable, which has a beneficial effect on all economic indicators of the company, strict regulations are often introduced. It describes how the work of the enterprise is organized. It is also important to maintain statistics on sales and timely payments to conduct analysis and identify “weaknesses” in the organization of the process;
• formation of a “black list” of debtors with payment problems;
• As a measure to reduce debt, constant calls to counterparties can also be carried out in order to encourage them to pay.

All methods of reducing accounts receivable can be divided into the following categories:

Ways to reduce debt are:

• resolving the issue of payment out of court by filing a claim with the debtor. According to statistics, the percentage of a positive outcome of a case is not high when sending a letter. It all depends on its content and the integrity of the counterparty. The text must indicate that if the requirements are ignored or there is no payment, the issue will be referred to the court. A limited period of time is provided to make payments. This method is also effective in cases where the payment period is not established by the main agreement. The loan has the ability to stipulate that the debt must be repaid within 30 days from the date of receipt of the notification;
• If the dispute is not resolved during the claim procedure, then the only opportunity to claim money is to apply to an arbitration court or an instance of general jurisdiction with an appropriate claim.

If the contract stipulates the obligation to resolve a claim dispute, then the issue is resolved in the order of priority - first by sending a letter demanding payment, and then you can go to court.

If the first stage is not followed, the application may be returned due to non-compliance with the legal order.

If, according to the claim, the debtor agreed with the debt, expressing this in writing, then it will be much easier to obtain a positive decision. If the debt is recognized, the limitation period is restored.

The presence of receivables for an enterprise that is actively operating is inevitable. It is considered as one of the economic indicators taken into account when developing a company's marketing policy.

Its characteristics influence the scale of increasing product sales and controlling the amount of debt.

Nuances

In some cases, the reason for the formation of receivables is not the client’s reluctance to pay for goods or services, but an error by the accounting or legal department in the calculations or terms of the contract.

It is also possible that there is a lack of documentation in the materials distribution department, for example, a lack of accounting for returns.

If the debtor has a difficult financial situation, the creditor can make concessions - agree on a debt repayment schedule.

It is likely that failure to take such a measure will lead to significant delays in the transfer of funds under the contract or complete non-payment of funds if they are insufficient in full.

In order to confirm receivables, counterparties can exchange reconciliation reports.

Reflection of the debt in the debtor's documents means his agreement with the amounts. This, in the event of filing a claim, will serve as the main evidence of the lack of payments and their recognition.

One of the ways to reduce accounts receivable in accounting and tax accounting is to write them off.

Such a measure is taken after the expiration of the statute of limitations or in connection with the liquidation of the enterprise during bankruptcy, in other cases when the financial situation of the debtor indicates the insolvency of the company.