(II) Credit conditions Credit conditions refer to the conditions under which an enterprise requires customers to pay the sales amount, including credit term and cash discount policy. Credit term is the longest payment term that an enterprise allows customers. Generally speaking, extending the credit period can increase sales revenue to a certain extent, but the following bad debt loss expenses and dunning fees will also increase greatly. Cash discount policy refers to the maximum preferential payment policy given by enterprises to encourage customers to pay in advance. (III) Collection policy Collection policy refers to the relevant expenses incurred by enterprises in order to reduce the bad debt loss of accounts receivable after credit sales, including the salary expenses and various travel expenses of account collection personnel. Generally speaking, the greater the collection efforts of credit enterprises, the greater the possibility of accounts receivable collection and the smaller the possibility of bad debt losses. Second, the analysis of the impact of the credit policy of accounts receivable on enterprises (1) Whether the credit standard is reasonable will affect the realization of sales revenue of enterprises. Under the background that the overall supply exceeds demand in the current commodity market, selling on credit is an inevitable choice for enterprises to participate in market competition. Relaxing the credit standard will greatly increase the sales of enterprises, and then increase the profits of enterprises, thus achieving the business objectives of enterprises. However, the cost of bad debts and the cost of urging fees will also increase greatly, which will greatly reduce the realized profits of enterprises. If the credit standard implemented by the company is too strict, the credit sales of the enterprise will be greatly reduced. Although the cost of bad debts and the charge for reminders will be reduced, the profit level of the enterprise will be continuously reduced due to the sharp reduction of sales revenue, thus deviating from the profit maximization and finally realizing the financial management goal of enterprise financial maximization. (2) Whether the credit conditions are properly set will affect the recovery amount of enterprise accounts receivable. If the credit period given by the enterprise is too long, it will bring about a substantial increase in sales, thus increasing the profit of the enterprise; If the credit period given by the enterprise is too short, it will reduce the sales of products and reduce the profit margin of the enterprise, which is not conducive to the development of the enterprise. Therefore, enterprises should weigh the increased benefits and increased costs of extending the credit period. Theoretically, enterprises should extend the credit period as long as the increased income is greater than the increased cost. The greater the cash discount provided by the enterprise, the more products will be sold on credit, the stronger the customer's willingness to pay, the less the subsequent collection cost and bad debt loss, and the realization possibility and turnover efficiency of cash assets will be greatly enhanced; The lower the cash discount rate, the lower the customer's willingness to pay, the greater the possibility of bad debts of accounts receivable, and then the collection cost increases. Therefore, enterprises should weigh the increased income and increased cost after the implementation of cash discount, and provide cash discount as long as the income is greater than the cost.
(3) Whether the formulation of collection policies reasonably affects the turnover efficiency of accounts receivable of enterprises, enterprises should take various measures to urge them to recover accounts receivable as soon as possible after they occur. The shorter the overdue time of accounts receivable, the smaller the possibility of bad debt loss, the less liquidity that enterprises need to replenish in production and operation, and the higher the turnover efficiency of accounts receivable. Enterprises should formulate reasonable collection policies in daily life, judge the possibility of bad debts through aging analysis and average collection period analysis, and correctly estimate the price of accounts receivable by constantly adjusting the amount of bad debt reserves; Secondly, different collection methods are adopted for customers with different overdue time, which will neither lose customers because of frequent interruptions, nor bring economic losses to enterprises because of insufficient collection efforts. Therefore, enterprises should weigh the increase of collection cost and the decrease of bad debt loss, and choose the most favorable collection policy for enterprises. Reference [1] Zhao Lifang. Strategic analysis and application of accounts receivable [J]. China Science and Technology Information, 20 1 1(05). [2] Wang Xiumin. Strengthening the management of accounts receivable and determining the credit policy [J]. Science and Management, 20 13(02).
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Credit policy of accounts receivable and its influence analysis
Credit policy of accounts receivable and its influence analysis
Author: Wu
Source: Modern Communication 20 16, 08.
Abstract: Accounts receivable is a kind of creditor's right formed when enterprises sell goods or provide services on credit, and it is an important part of current assets of enterprises. Formulating a reasonable credit policy is not only conducive to expanding sales, but also can improve the turnover rate of accounts receivable and continuously reduce the risk of bad debt losses, which is of great practical significance to enterprises.
[Keywords:] factors affecting the credit policy of accounts receivable
[China Library Classification Number] F275 [Document Identification Number] A [Contribution Number]1009-5349 (2016) 08-0051kloc-0/
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Under the condition of market economy, due to the objective existence of market competition, enterprises must relax the sales conditions to ensure the smooth sales of products, continuously reduce the inventory rate and improve the operating efficiency of assets. The influence of sales accounts receivable on credit depends on whether the enterprise's credit policy is reasonable. Credit policies mainly include credit standards, credit conditions and collection policies.
First, the composition of accounts receivable credit policy
Credit standard
Credit standard refers to the minimum conditions for customers to obtain commercial credit and represents the maximum payment risk that the company is willing to bear. The most common evaluation method is the "5C" system, that is, the quality, ability, capital, guarantee and conditions of customers.
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Quality refers to the attitude of customers to repay debts. In order to reduce the possibility of bad debt losses in product credit sales, enterprises should reduce the amount of credit sales to enterprises if customers maliciously default on payment in communication with enterprises. Ability is the customer's ability to repay debts. Generally speaking, the more current assets a customer has, the more monetary assets in current assets, and the stronger its short-term solvency.
Capital refers to the economic strength and financial status of an enterprise. The larger the enterprise scale, the stronger its profitability, the more stable its financial situation, and the less likely it is to lose bad debts. Guarantee is an asset provided by customers as a security guarantee for credit granting. When enterprises don't know much about customers, the greater the value of collateral provided by customers, the stronger the liquidity or the stronger the economic strength of the guarantor provided by customers, the lower the risk of bad debts; Conditions refer to various economic environments that may affect customers' debt paying ability, which reflects customers' debt paying ability.
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(2) Credit conditions
Credit conditions refer to the conditions under which an enterprise requires customers to pay the sales amount, including credit period and cash discount policy. Credit term is the longest payment term that an enterprise allows customers. Generally speaking, extending the credit period can increase sales revenue to a certain extent, but the following bad debt loss expenses and dunning fees will also increase greatly. Cash discount policy refers to the maximum preferential payment policy given by enterprises to encourage customers to pay in advance.
(3) Collection policy
Collection policy refers to the related expenses incurred by enterprises in order to reduce the bad debt loss of accounts receivable after credit sales, including the salary expenses and various travel expenses of collection personnel. Generally speaking, the greater the collection efforts of credit enterprises, the greater the possibility of accounts receivable collection and the smaller the possibility of bad debt losses.
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Second, analyze the impact of the credit policy of accounts receivable on enterprises
(A) whether the establishment of credit standards is reasonable will affect the realization of enterprise sales revenue.
Under the background of oversupply in the current commodity market, selling on credit is an inevitable choice for enterprises to participate in market competition. Relaxing the credit standard will greatly increase the sales of enterprises, and then increase the profits of enterprises, thus achieving the business objectives of enterprises. However, the cost of bad debts and collection of accounts will also increase greatly, which will greatly reduce the realized profits of enterprises. If the credit standard implemented by the company is too strict, the credit sales of the enterprise will be greatly reduced. Although the cost of bad debts and the charge for reminders will be reduced, the profit level of the enterprise will be continuously reduced due to the sharp reduction of sales revenue, thus deviating from the profit maximization and finally realizing the financial management goal of enterprise financial maximization.
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(2) Whether the setting of credit conditions is appropriate will affect the recovery of accounts receivable of enterprises.
If the given credit period of an enterprise is too long, it will bring about a substantial increase in sales, thus increasing the profit of the enterprise; If the credit period given by the enterprise is too short, it will reduce the sales of products and reduce the profit margin of the enterprise, which is not conducive to the development of the enterprise. Therefore, enterprises should weigh the increased benefits and increased costs of extending the credit period. Theoretically, enterprises should extend the credit period as long as the increased income is greater than the increased cost. The greater the cash discount provided by the enterprise, the more products will be sold on credit, the stronger the customer's willingness to pay, the less the subsequent collection cost and bad debt loss, and the realization possibility and turnover efficiency of cash assets will be greatly enhanced; The lower the cash discount rate, the lower the customer's willingness to pay, the greater the possibility of bad debts of accounts receivable and the higher the collection cost. Therefore, enterprises should weigh the increased income and increased cost after the implementation of cash discount, and provide cash discount as long as the income is greater than the cost.
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(3) Whether the formulation of collection policy reasonably affects the turnover efficiency of enterprise accounts receivable.
Enterprises should take various measures to promote the early recovery of accounts receivable after their occurrence. The shorter the overdue time of accounts receivable, the smaller the possibility of bad debt loss, the less liquidity that enterprises need to replenish in production and operation, and the higher the turnover efficiency of accounts receivable. Enterprises should formulate reasonable collection policies in daily life, judge the possibility of bad debts through aging analysis and average collection period analysis, and correctly estimate the price of accounts receivable by constantly adjusting the amount of bad debt reserves; Secondly, different collection methods are adopted for customers with different overdue time, which will neither lose customers because of frequent interruptions, nor bring economic losses to enterprises because of insufficient collection efforts. Therefore, enterprises should weigh the increase of collection cost and the decrease of bad debt loss, and choose the most favorable collection policy for enterprises.
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