Corporate Finance Credit Management and Accounts Payable

Cash Management Remember its your money if you have supplied the service Keep a sense of urgency about collecting money due Reward managers on cash receipts not orders Be sure you know who you are dealing with

Cash Management Build strong relationships with customers Don’t allow debts to become overdue Ensure that bad paperwork does not become an obstacle to payment Get commitments on payment Terms and conditions should be clear Follow up!

Collections Have a strategy for: –Top 10 customers –Second tier to 30% –Bottom 70%

Collections Statements Phone calls Letters Personal calls 3 rd party Legal ( be sure it is someone who specialises in debt collection)

Funding Options Settlement Discounts –Expensive option EU legislation says that since 2002 interest on overdue debt of up to 7% above ECB rate can be charged Invoice financing

Measurement KPIs –Proper measurement –% Bad debts –% overdue –% Provisions –Number of New accounts opened –Credit limits reduced –Cash collection v targets

Accounts Payables Day to day cash control How do we pay – bank transfer, cheque, bank draft Consolidate AP – reduce banking fees European payments systems –BIC and IBAN –Costs the same for all eurozone payments

Accounts Payables How we pay depends on –Type of industry –Domestic v International –Customer Base –Product range –Currencies

Accounts Payables Payment Methods –Cash –Cheque –Draft –Purchasing card –Direct debits, Standing order –EFT –Foreign transfers

Accounts Payables Other considerations –In Ireland we have stamp duty on cheques –Single payment file will reduce costs –Bank charges –Admin costs –Reduce errors –Segregation of duties –Good control of cashflows