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Credit Controls and Accounts
    Receivable Management
“Any fool can lend , but it takes a lot of skill to get it back”
Introduction

Please give:
• Your name
• Your job & Company name
• Your commercial experience
• What specific expectations do you have?
Learning Objectives
• The objectives of credit and accounts receivable
  management
• How credit and account receivable management fit into
  corporate finance and treasury operations
• How companies develop credit policies
• How companies calculate the costs and benefits of credit
  policies
• The forms of credit extension
Learning Objectives Cont…
• The commonly used terms of sale, including credit terms
• How companies make customer credit decisions
• How companies measure and monitor accounts
  receivable
• How companies finance accounts receivable
• How the cash application process works
• Auditing the Receivables Cycle.
Learning Objectives Cont…
•   Learn how to calculate the following:
•   Annualized cost of trade credit
•    Days’ sales outstanding (DSO)
•   An aging schedule
Receivables Cycle
 What   are receivables?
•Receivables are sales made on credit basis.


Why do we need receivables?
                                    Cash               Receivables

                                           Operating
Understanding Receivables                   Cycle
•As a part of the operating cycle
•Time lag b/w sales and                    Inventory
receivables creates need for working capital
The Customer to Cash Process
Customer

  Credit Risk      Collections   Credit Debit
 Management       Management     Adjustments



PO to Shipment
                    Payment      Forecasting &
   to invoice
                   Processing      Reporting
 Reconciliation


                  Deductions &
                                    Cash
   Billing &
                    Dispute
   Invoicing
                  Management
Credit Policy and Collections


Order    Order           Sale                            Cash
Placed   Received                                        Received
                          Accounts         Collection
         < Inventory > < Receivable >      < Float >


                                                        Time ==>
             Accounts            Disbursement
           < Payable >          <    Float   >
         Invoice                Payment          Cash
         Received               Sent             Paid
Credit Terms or Payment Terms
• It is the length of time a buyer has to repay the amount
  of debt owed on an obligation. This includes:
      1- The maximum time allowed for repayment.
      2- Discount for cash or early payment
      3- And the amount or rate of late payment penalty
Collection Methods
• Centralized / Decentralized collection system
• Post – dated check
• Pay Orders / Bank drafts
• Bills of Exchange
• Lock – box System
• Drop – box System
• Factoring
• Collection staff/ agents
• Debt collector
• Del Credere agent
• Concentration banking
Audit Program for Receivables and Revenue
                    Substantive Procedures
      Substantive Tests                  Audit Objectives
Obtain aged listing of receivables Clerical accuracy
and reconcile to G/L
Obtain analyses of N/R and
related interest
Inspect notes on hand         and Existence, occurrence, and rights
confirm those not on hand
Confirm receivables with debtors   Existence, occurrence, and rights
                                   Valuation
Flowchart of the Confirmation Process
                                                    A

      Develop Audit Objectives
                                       Prepare and Mail the Requests

Choose Appropriate Confirmation Form
                                       Send 2nd requests for positive
                                              confirmations
       Determine the timing
            and extent                 Perform alternative procedures
                                       For non-respondents
   Identify the information to be
             confirmed                      Resolve exceptions

                                       Document the procedures and
Select the accounts for confirmation   results

               A
Thank You For Coming Today!




            Facilitator: Antoine Tabbakh

Tel: +961 1 385 825 / website: www.bsf-lb.com
            Email: info@bsf-lb.com




/BestSolutionFinance       Company/bsf     #bsfbeirut

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Effective Accounts Receivable Management and Credits Controls

  • 1. Credit Controls and Accounts Receivable Management “Any fool can lend , but it takes a lot of skill to get it back”
  • 2. Introduction Please give: • Your name • Your job & Company name • Your commercial experience • What specific expectations do you have?
  • 3. Learning Objectives • The objectives of credit and accounts receivable management • How credit and account receivable management fit into corporate finance and treasury operations • How companies develop credit policies • How companies calculate the costs and benefits of credit policies • The forms of credit extension
  • 4. Learning Objectives Cont… • The commonly used terms of sale, including credit terms • How companies make customer credit decisions • How companies measure and monitor accounts receivable • How companies finance accounts receivable • How the cash application process works • Auditing the Receivables Cycle.
  • 5. Learning Objectives Cont… • Learn how to calculate the following: • Annualized cost of trade credit • Days’ sales outstanding (DSO) • An aging schedule
  • 6. Receivables Cycle  What are receivables? •Receivables are sales made on credit basis. Why do we need receivables? Cash Receivables Operating Understanding Receivables Cycle •As a part of the operating cycle •Time lag b/w sales and Inventory receivables creates need for working capital
  • 7. The Customer to Cash Process Customer Credit Risk Collections Credit Debit Management Management Adjustments PO to Shipment Payment Forecasting & to invoice Processing Reporting Reconciliation Deductions & Cash Billing & Dispute Invoicing Management
  • 8. Credit Policy and Collections Order Order Sale Cash Placed Received Received Accounts Collection < Inventory > < Receivable > < Float > Time ==> Accounts Disbursement < Payable > < Float > Invoice Payment Cash Received Sent Paid
  • 9. Credit Terms or Payment Terms • It is the length of time a buyer has to repay the amount of debt owed on an obligation. This includes: 1- The maximum time allowed for repayment. 2- Discount for cash or early payment 3- And the amount or rate of late payment penalty
  • 10. Collection Methods • Centralized / Decentralized collection system • Post – dated check • Pay Orders / Bank drafts • Bills of Exchange • Lock – box System • Drop – box System • Factoring • Collection staff/ agents • Debt collector • Del Credere agent • Concentration banking
  • 11. Audit Program for Receivables and Revenue Substantive Procedures Substantive Tests Audit Objectives Obtain aged listing of receivables Clerical accuracy and reconcile to G/L Obtain analyses of N/R and related interest Inspect notes on hand and Existence, occurrence, and rights confirm those not on hand Confirm receivables with debtors Existence, occurrence, and rights Valuation
  • 12. Flowchart of the Confirmation Process A Develop Audit Objectives Prepare and Mail the Requests Choose Appropriate Confirmation Form Send 2nd requests for positive confirmations Determine the timing and extent Perform alternative procedures For non-respondents Identify the information to be confirmed Resolve exceptions Document the procedures and Select the accounts for confirmation results A
  • 13. Thank You For Coming Today! Facilitator: Antoine Tabbakh Tel: +961 1 385 825 / website: www.bsf-lb.com Email: info@bsf-lb.com /BestSolutionFinance Company/bsf #bsfbeirut