1. Receivables Management

2. Characteristics of Receivables
Risk Involvement
Based on Economic Value
Implies Futurity

3. Objectives of Accounts Receivables Management
Maximizing the value of the firm
Optimum Investment in sundry debtors
Control and managing the cost of trade credit

4. Costs of Accounts Receivables Management
Capital Cost
Collection Cost
Bad Debts

5. Benefits of Accounts Receivables Management
Increased Sales
Increase in Market Share
Increase in Profits

6. Factors Affecting The Size of Investment in Accounts Receivables
Volume of credit sales
Credit policy of the firm
Trade terms
Seasonality of business
Collection policy
Bills discounting & endorsement

7. Credit Policy Lenient Credit Policy Advantages Disadvantages
Increase in sales
Higher profits
Disadvantages
Bad debt loss
Liquidity problems
Stringent Credit Policy
Advantages
Less bad debt losses
Sound liquidity position
Disadvantages
Less sales
Less profits

8. Credit Evaluation Obtaining credit information Credit analysis
Quantitative
Qualitative –5C’s
Character
Capacity
Capital
Collateral
Conditions

9. Monitoring Accounts Receivables
Receivable Turnover Ratio
= Credit Sales/Average Debtors
Average Collection Period (ACP)
= 365 / Receivables Turnover
Days Sales Outstanding
= Receivables at time ‘t’/ Sales per day