Receivables Management,

Credit Policy
Financial Management
Receivable Management
Receivable management, often called accounts receivable
management, is a vital part of financial management for businesses. It's
all about handling the money that's owed to a company by its
customers. This money might be from selling products, providing
services, or offering credit to customers. Receivable management is like
a financial safety net for businesses. It helps ensure that you get paid
for your hard work, maintain a healthy cash flow, and build trust with
your customers. By using smart strategies, you can keep your business
running smoothly and even expand it.
Objectives of Receivable Management
1.Timely collection of payment
The primary objective of accounts receivables management is to ensure the
timely collection of outstanding payments from customers. This involves
setting clear payment terms, sending invoices promptly, and following up on
overdue payments to minimize delays in cash inflow. It will help to bring
timely payments to the organization.

2.Minimize bad debts

Another objective is to minimize bad debts or uncollectible accounts. This
can be achieved by conducting proper credit assessments before extending
credit to customers, establishing credit limits, and implementing effective
collection strategies to reduce the risk of default.
3. Optimize cash flow
Managing accounts receivables effectively help optimize cash flow within an
organization. By reducing the average collection period (the time it takes to
convert receivables into cash), a company can free up cash for immediate use
in meeting its own financial obligations or reinvesting in the business.

4. Optimize working capital

Accounts receivable management contributes to optimizing working capital,
which is the capital required to fund a company’s day-to-day operations.
Credit Policy
A credit policy is a set of guidelines and rules that a business
establishes to determine how it extends credit to customers. It outlines
the terms and conditions under which customers can purchase goods
or services on credit
what a credit policy typically includes:

1.Credit Approval Criteria: The policy should specify the criteria customers must
meet to be eligible for credit. This may include assessing their creditworthiness,
financial stability, and payment history.

2.Credit Limits: It defines the maximum amount of credit that can be extended
to a customer. This limit is based on their financial capability and the level of risk
the business is willing to take.

3.Credit Terms: The policy outlines the terms of the credit, including the
payment period any applicable interest rates, and any discounts for early
payment.
4.Credit Application Process: It explains how customers can apply for credit,
what information they need to provide, and the steps involved in the approval
process.

5. Credit Monitoring: The policy should detail how the business will monitor the
creditworthiness of customers over time. This may include periodic credit
reviews or checks.

6. Collections Procedures: It outlines the steps to be taken if a customer fails to

make payments on time. This might involve sending reminders, imposing late
fees, or eventually referring the debt to a collections agency.

7. Credit Reporting: Some credit policies include provisions for reporting

customer payment behavior to credit bureaus, which can impact their credit
scores.
THANK YOU