Accounts receivable are the debts of counterparties to the organization, money that has not yet been returned to it. Read in more detail what accounts receivable is, what types there are and how to work with it to prevent overdue debts.

What is accounts receivable

Accounts receivable (or, as financiers briefly call it, accounts receivable) are the debts of counterparties to the company. This is money that has not yet been returned to the company. In other words, accounts receivable are everything that is owed to your organization.

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How to reduce the risk of doubtful and bad debts

Every company strives to ensure that doubtful and bad debts do not appear in its activities. There are several effective ways to avoid them.

Prepayment. The company will avoid the risks of non-refund if it includes a 100 percent prepayment condition in the contract. The disadvantage of this method is that not all buyers are ready to work under such conditions.

Ensuring supply. For example, bank guarantee, surety agreement, pledge. If the counterparty does not fulfill its obligations, the company will receive collateral; the debt was paid for by the guarantor.

Letter of Credit. This form of calculation is not often used. In this case, a third party appears in the transaction - the bank, which opens the letter of credit. The buyer transfers funds for payment not to the supplier, but to a special bank account. The bank will notify the supplier that the money is in the account. After this, the seller ships the goods. As soon as the buyer provides the bank with documents confirming the shipment, the bank transfers the money to the supplier’s account. This method is safe for both the buyer and the seller. But it is not popular because of its cost - bank services are not cheap.

VIDEO: What are the risks of non-payment of receivables

Konstantin Anoshkin, a financial expert, explains in a video what the risks of not paying debts are and how to avoid them.

How to analyze accounts receivable in Excel

You can build an analysis graph accounts receivable, which will allow you to clearly see its composition by terms of late payment. The chart is suitable for analysis not only by type of delinquency, but also by client managers or branches. The dynamics of receivables indicating the total amounts will eliminate the need to count them additionally. See how to do it.

How to analyze an enterprise's receivables

The company monitors not only the amount of debt, but also indicators calculated on its basis:

Accounts receivable ratio (Rr). It shows how much of a company's assets are debts. It is calculated as follows:

Kdz = DZ/A, where

DZ – total amount accounts receivable

A – all assets of the organization.

Another indicator is the turnover ratio. That is, the speed of repayment of receivables - how quickly counterparties transfer money to the company for goods sold.

This ratio shows how many times during the period the company receives payment from customers in the amount of the average outstanding balance. It shows how effectively the company collects debts from counterparties. The indicator is calculated using the formula:

K odz = Vyr / SrOst dz, where

K Odz – receivables turnover ratio,

СрОст з – average balance of accounts receivable. To calculate it, add up the accounts receivable at the beginning and end of the period and divide by two.

Based on the turnover ratio, the average number of days during which the debt remains unpaid is calculated.

O dz = 365 / K dz

These indicators do not have normal values. Each company, depending on the specifics of its work, determines within what limits the indicators should be. The higher the turnover ratio, the faster buyers pay off debts. And this is better for any enterprise. But high turnover does not always indicate the efficient operation of the company.

Entrepreneurial activity requires direct interaction with a wide range of people, which includes suppliers, banks, buyers and others. All of them are called counterparties, that is, those agents who have a direct impact on the organization. The position of his company in the market and competitiveness depend on how competently an entrepreneur works with counterparties. Counterparties are divided into debtors and creditors. Counterparties are one of the parties to a contract in civil law relations.

And also, to make it easier to keep track of funds, similar concepts of “debit” and “credit” were introduced. Thanks to these concepts, the account is divided into two halves: debit is income, and expense is credit, the left and right columns of the account, respectively.

Who is a debtor?

Debtor is a counterparty ( outside organization), who is a debtor. That is, he has obligations to pay funds.

Accounts receivable are included in the financial statements and are recorded in account 62 “Settlements with buyers and customers” and 76 “Settlements with various debtors and creditors”. It is quite dynamic and depends on the company’s interaction with clients and partners. We can say that it is this type of debt that forms the company’s profit. At the same time, it is also a source of formation equity organizations.

What is accounts payable

The creditor is the one to whom debt is owed. In other words accounts payable- This is a type of debt that arises on a contractual basis. For example, a company purchases components for its own production. The cost of components is accounts payable. However, the debt does not include the costs of delivery and packaging of goods. Today there are two types:

• A debt for goods that must be repaid within a certain period of time;
• Debt for services and goods, the term of which has already expired;
• Debts to be paid in off-budget funds;
• Debts wages own staff.

Accounting is carried out according to accounts corresponding to a certain type of accounts payable. This type debt is reflected in financial statements. Thus, accounts payable represent not only overdue payments, but also Current responsibility organizations to their creditors whose terms have not yet expired. An organization can write off its debt if it is repaid, or if the creditor does not consider it necessary to collect it in a timely manner. The statute of limitations for a loan according to the law in Russia is 3 years (for Russian counterparties). Thus, accounts payable are the company’s obligations that must be repaid within a specific time frame. This column actually assumes the organization’s main expenses for its activities.

Types of accounts receivable

Accounts receivable are divided into two types:

• standard (or regular);
• expired (or unjustified).

The standard type of receivables includes the issuance of a loan (drawing out an agreement with a certain amount) for a specific period. Such debt is strictly planned and must be repaid before a specific date. As soon as the validity period expires, the debt becomes overdue. By violating the terms of the contract, the debtor company receives fines and penalties. To reduce the risk of unjustified debt, the creditor organization must:

• analyze reports in a timely manner;
• look for ways efficient work with debtors: automate the process, carry out restructuring, work only with recommended, reliable counterparties;
• assign the right to claim debts under an assignment agreement with assignment of rights.

Thus, regardless of the type of receivable, work with counterparties in this direction should be carried out constantly, since this type of debt is the key to the success of any organization.

How to write off accounts receivable?

Today, legislation gives organizations the right to write off overdue receivables only in the following cases:

• term limitation period expired at 3 years;
• there is a decision that it is impossible to collect such debt;
• if the debtor company is liquidated.

Wherein tax code establishes that a “receivable” can be written off as non-operating expenses, with the creation of a reserve for doubtful debts, if it is hopeless.

If the debt is written off at a loss, then such debt is legally canceled and does not reduce the tax base for income tax. This, of course, entails additional losses for the company. To write off debt, it is necessary to draw up an inventory report of receivables, as well as justification and an order from the head of the enterprise. It is possible to write off a debtor before the debtor is liquidated. Any liquidation process begins with a protracted bankruptcy procedure.

During this procedure, bankruptcy trustees hold meetings of creditors at which the main financial requirements to the debtor. At the same time, after the confiscation and sale of property, cash returned to the creditor company in order of priority. The legislation gives the right to completely write off the “debt” when receiving a debt during this period. Non-overdue receivables are written off when the debtor repays the invoice. Thus, handling accounts receivable and payable is important for the well-being of the company. To do this, it is necessary to conduct constant financial monitoring and carefully select counterparties for work.

DZ is one of the most liquid assets any company. Therefore, the company can sell it, transfer it, exchange it for property, products, the result of providing services or performing work. It should also be taken into account that with large amounts of deferred payments, there may be a lack of funding for the organization itself.

The majority of accounts receivable are unpaid invoices (or invoices receivable) for products delivered. But there is also a specific element - these are bills receivable, which are, in fact, commercial securities.

Types of remote sensing

There are two groups of items in the asset balance sheet sections:

• Short-term loan - repayment is expected within a year after the reporting date.
• Long-term - more than 12 months, respectively.

Depending on how the DM was formed, 3 types can be distinguished

• Normal. It arises during the implementation of the enterprise’s production tasks and is determined by the current forms of payment. When the organization operates as usual, payment occurs within one month.
• Acceptable. This category includes advances for the purchase of agricultural products, claims against contractors for short supply of material, debt of accountable persons, and similar negative examples.
• Unjustified. May arise as a result of violation of discipline, both settlement and financial. Debts can also be caused by deficiencies in accounting, shortages, or theft.

PD can also be divided into

• Real, which debtors will probably be able to repay on time.
• A dispute that an enterprise can settle through legal proceedings.
• Hopeless, the prospects for payment of which are virtually zero. When the statute of limitations expires, it will be necessary to write off the “debt” at a loss.

If we consider debt as an accounting object based on the payment term, then it can be

• Deferred, the maturity date of which has not yet arrived.
• Overdue, for which the deadline for fulfilling obligations has already arrived.

DZ insurance

The receivables insurance mechanism is as follows:

• Organization and Insurance Company enters into an agreement. It must define and clearly state the key terms of the insurance contract. This includes a complete list of insured events and the procedure for assessing the financial situation of debtors.
• The insurer, together with the policyholder, determines the composition and volume of receivables that will be subject to insurance. It is important to consider that the insurance company will not insure the damages in general, but in without fail will assess the risks of non-payment for each client of the policyholder.
• If an insured event does occur, then the insurer pays the insured company the amount of the insured liability minus that part of the debt amount that will be written off as the latter’s expenses. After this procedure, all claims on the debt are transferred directly to the insurance company.

Before concluding such an agreement, the enterprise is still recommended to compare upcoming expenses and possible benefits from this type of insurance.

It can be concluded that in order to ensure competitive commercial conditions for its counterparties (debtors), organizations should find a additional way financing your own expenses. This is the most rational approach, because an increase or decrease in the amount of receivables has a tremendous impact on the turnover of capital invested in current assets, and, as a consequence, on the overall financial position the organization as a whole.

Hello! In this article we will talk about the basics of managing accounts receivable for an enterprise.

Today you will learn:

• What are accounts receivable?
• How to prevent its uncontrolled increase;
• Is it possible to sell receivables?

The essence of accounts receivable

At any enterprise there are accounts payable and receivable. If everything is more or less clear with creditors, then the second option of obligations raises many questions not only for novice entrepreneurs.

Accounts receivable - these are the debts of other parties (buyers, recipients borrowed money) in front of your enterprise. That is, you are considered a creditor. For example, you shipped the goods to your partner, but he has not yet transferred the money to the account. It turns out that he is your debtor: he has receivables to you.

These obligations can be viewed in two meanings. On the one hand, “receivables” are the company’s losses, but on the other hand, they are future benefits. It all depends on the right financial policy management of the manager and integrity of recipients of goods and services. A competent approach to existing accounts receivable is the key to success.

Short- and long-term debt

Receivable obligations to an enterprise may have different durations. If your customers are behind on payments for up to 12 months, then the debt is considered short-term. Its presence is present in 100% of firms.

Most often it does not exceed several months (3-6). This is a normal phenomenon, since you can provide the counterparty with a deferred payment, or the transfer of money is delayed due to holidays, or the characteristics of the bank through which the payment was made.

If you have shipped the goods, and for Last year never saw the money for it, there is a place long term duties. They give reason to doubt the future solvency of the acquiring company. In order not to miss this moment and get your money, you need to immediately choose reliable business partners.

A long period for the collection of receivables has a negative impact on the entire enterprise. If you have a large volume of accounts receivable from several customers, then things are very bad. This means that there is less and less money in circulation.

If there comes a time when you urgently need funds, you will have to apply for a loan, which will make the company's situation even worse.

Overdue obligation

When you enter into an agreement with future partners, you set an acceptable payment period for the services provided. Due to current circumstances, the buyer either transfers the money on time or does not pay it at all.

The first case is the ideal option when the terms of the agreement are not violated. The buyer receives the goods, and you use the money for the purpose of the enterprise.

When payment is not received on time, overdue receivables arise. Its presence makes your company more vulnerable, you are limited in funds and must support the company with the remaining money.

Claims receivable and refunds for supplies or goods themselves are valid for three years after the date specified in the agreement with the partner as the payment period. If for some reason you do not take this into account, then after 36 months the statute of limitations for receivables will be canceled and the debtor company will write off the obligations on its income.

Doubt or hopelessness

If a debtor company delays paying its obligations, you must find out for yourself whether you can recover your money from it or not. There is a concept of doubtful debt, which is expressed in the hope of receiving funds from the buyer. This is expressed in the fact that he has no signs, and for some reason does not want to repay you.

Bad debt to an enterprise means that the company curtails its activities in the market and declares itself bankrupt. Then you will not be able to return your goods or money. In practice, such cases occur rarely and only with those managers who were unable to implement effective financial policies.

The period for writing off accounts receivable is three years; if you did not have time to file a claim in court before the bankruptcy procedure, then you may not see your money.

Doubts about the payment of funds by the debtor arise during lengthy negotiations, as a result of which he evades payment. In this case, re-delivery of the goods to his enterprise is not allowed in order to avoid the creation of a larger debt.

Before concluding an agreement with a new company, carefully study its activities in the market. If she has a history of unpaid obligations, then you should not make the delivery. It is better to immediately prevent such cases than to deal with the collection of receivables later.

Objects of obligation

Accounts payable are aimed at various objects of enterprise activity.

Common areas are debts for:

• Supply of products, services or works;
• Bills;
• Budget funds;
• Advances;
• Accountable amounts (for example, issuing money to an employee to purchase office supplies);
• Loans for employees.

Thus, debt can be not only outside the enterprise, but also within it. In addition, the form of obligations between branches of the same company is common.

The ratio of internal and external debt of debtors must be such that the company can function normally. The most acceptable form of debt is considered internal. It is much smaller than the external volume and, most likely, will be returned ahead of schedule.

For example, if you, as a manager, decide to lend to your company’s own employees at low interest, then you can be sure that such payments are made by employees. Each of them is interested in further work, in addition, contracts that limit the possibility of early dismissal allow them to be retained until the end of payments. If you trust the amounts accountable person should be aware of the possible consequences.

Why did accounts receivable arise?

Features of the functioning of firms at some stage lead to the formation of debtor obligations.

This established practice has some common reasons:

• Inaccurate wording in contracts between the supplier and the debtor;
• dishonesty of partners;
• Payment delay;
• Credit for goods.

The supplier may be to blame for the formation of receivables. The manager should not allow phrases in the contract that can be understood in two ways. It is necessary to indicate clear deadlines for the return of receivables so that the buyer does not have a single question. Agreements are usually drafted by competent and experienced lawyers who know all the intricacies of the law.

The fact of dishonesty of the parties to the contract may not escape even the largest and most well-known company. Dishonest managers who cannot cope with their work responsibilities always exist and cause a lot of trouble for other companies.

Deferment or credit are normal terms of relations between the parties. In this case, receivables are repaid according to established deadlines. Provide such payment options only to trusted businesses.

What can affect accounts receivable

There are various factors inside and outside the company that in one way or another can affect the nature of debt repayment or the solvency of the debtor.

TO internal sources include:

• Ineffective financial management policies;
• Inappropriate introduction of prices for goods;
• Untimely influence on the debtor.

The following can be considered as external influences:

• Inflation rate;
• Exchange rate ratios;
• Crisis state of the economy.

If your contract does not provide for measures to influence a willful defaulter, then the debt may not be repaid at all. This important feature is made as a separate clause of the agreement.

Also, you should not distribute goods in large quantities without monetary compensation to all debtors. You should try to avoid such moments. You can make a concession to a partner in whom you are confident.

Inflation can make your services more expensive. An increase in prices, which is provided for in the contract, may lead the other party to the agreement into confusion and delay in payment. The economic crisis also has a strong impact on the terms of the contract that have already been concluded. Depending on the current position of the debtor's company in the market, payment deadlines may not be met.

We manage debts of debtors

The efficiency of a company directly depends on the structure of accounts receivable. You need to approach this issue competently in order to avoid unpleasant consequences of the enterprise, including bankruptcy.

It is not only the organization's obligations to other suppliers that can significantly limit its functioning. The share of accounts receivable here is also large. In the process of managing it, the manager needs to decide for himself what this management will consist of.

Be sure to include here:

• Creation of a special department at the enterprise that will study the statistics of indicators;
• Understanding the objectives, functions and results of the policy for controlling debtors’ funds;
• Ensuring liquidity of debtors' obligations;
• Application of maximum attention to the turnover ratio of debtors' obligations.

A detailed and thorough analysis of accounts receivable should be carried out on a regular basis. This will help avoid unexpected disruptions in the development of the enterprise.

Who controls the cash flows of debtors

Any organization is interested in fruitful and effective cooperation with its counterparties. In order for this process to proceed at the proper level, several departments are created within the company that control the process of debtors’ activities.

Previously, this function belonged only to the financial manager. However, enterprises are growing, concluding an increasing number of contracts, and it is becoming more difficult to control each of them.

The internal composition of the company that affects accounts receivable indirectly or directly:

• The highest level is the manager;
• Commercial department (persons entering into contracts with partners);
• Sales managers;
• Financial sector (head of the financial department and his subordinates);
• Lawyers;
• Security Service.

The main direction of work for all departments is set by the head. Commercial representatives are looking for the most profitable partners who do not have significant debts. Lawyers competently draw up contracts or study agreements proposed by opponents.

Security service is only available in large companies. Its tasks are to protect the interests of the company from unscrupulous persons and fraudsters through a thorough study of the client base.

Control tasks

Before starting any activity with counterparties, an enterprise needs to set itself tasks that should be solved during cooperation.

Such tasks in managing debtor obligations include:

• Studying the process of functioning of the future debtor (he must have a good reputation and no debts);
• Taking care of the upcoming drafting of the contract by a competent lawyer;
• Search for funds to finance emerging obligations;
• Monitoring the dynamics of accounts receivable indicators;
• Acceptance of ways to repay debts;
• Work with debtors in the form of claims;
• Opportunity to prove yourself state level to receive free support.

Those employees who are involved in accounting and distribution of debtors' funds must be able to:

• Use management goals for the benefit of the organization;
• Ensure that assigned tasks are completed 100%;
• Develop motivating offers for debtors;
• Control the current situation;
• Analyze the state of the company and submit a report to the manager;
• Plan the activities of the organization (we determine the mission, strategy, policy decisions);
• Appoint subordinate employees, each of whom will deal with separate areas of accounts receivable;
• Compare readings current state firms with the planned.

The instigator of any new action must be the leader. By appointing competent specialists who understand the intricacies of debt management, he increases the chances of rapid development of the company's activities. Every skill and skill will come in handy for a positive customer experience.

Each accounts receivable management function is necessary for daily execution if you want your business to prosper. Management policy determines the future prospects for the development of the company at a high level.

What decisions are made for management purposes

When managing the flow of capital from debtors, an enterprise must make effective decisions aimed at various aspects of the development of receivables.

Decisions are made on the following issues:

• Accounting for indications of obligations for each specific date;
• Analysis of all actions preceding the occurrence of overdue receivables;
• Taking note of the latest developments in the field of accounts receivable management (every year new strategies appear, developed by market gurus and aimed at increasing the turnover ratio);
• Regulation and control of the status of debtors' debts due as of the current date.

We ensure liquidity of receivable assets

In order for an enterprise to develop correctly and quickly, it is necessary to use all available assets in turnover. This condition also applies to accounts receivable.

The very presence of debtor obligations, with a competent approach, allows the company to increase own resources and perform your activities more efficiently. This means that having received funds from the next debtor, you must put them into circulation again. The debt that remains in the hands of the debtor for a long time will have a bad effect on your organization.

To ensure that the liquidity of receivables does not suffer, it is best to avoid delays or long-term repayments. The faster money comes to the organization from the debtor, the higher the turnover of assets and income of the company will be.

An endless flow to debtors and back in a short time guarantees the successful existence of the company. The manager at the head of the financial department needs to competently influence customers and motivate them to pay as quickly as possible.

Turnover ratio and its characteristics

Accounts receivable are measured by the turnover ratio. It displays the amount of revenue per 1 ruble spent. The higher its value, the less time it takes the company to repay debts from customers.

To calculate the indicator, you need to find the average annual accounts receivable: (liabilities at the beginning of the period + debts at the end of the period)/2. The accounts receivable ratio is equal to the ratio of the enterprise's revenue to average annual amount obligations.

The effectiveness of the accounts payable management policy lies in increasing the ratio.

For these purposes you can:

• Increase revenue;
• Reduce accounts payable.

Using the balance lines, you can express the formula for calculating the coefficient in this way: line 2110/((1230 at the beginning of the report + 1230 at the end of the report)/2).

For example, accounts receivable at the beginning of the period amounted to 3,000,000 rubles, at the end - 3,200,000 rubles. Average is equal to: (3,000,000 + 3,200,000)/2 = 3,100,000 rubles. Revenue at the beginning of the period was equal to 2,300,000 rubles, at the end - 1,800,000 rubles. The turnover ratio will be in the first case: 2300000/3100000 = 0.74%, in the second: 0.58%.

In the example given, the coefficient decreased by 16%. This suggests that the company's affairs are not developing in the best way. The ratio decreased due to a decrease in revenue, and accounts receivable increased by the end of the year. The company needs to analyze its activities and change its performance for the better.

To calculate the accounts receivable turnover ratio in days, you need to divide the total number of days in the period by the ratio itself. For example, let’s take the obtained figures of 0.74% and 0.58%. Turnover in days: 365/0.74 = 493 days and 365/0.58 = 629 days. As one would expect, by the end of the year, repayment of debts to the company began to take longer.

Growth of accounts receivable and decline in enterprise development

The dynamics of indicators of the movement of debtors' funds to the enterprise and back plays an important role in the company's reporting. The balance between accounts payable and receivable has its own subtleties and varies for each enterprise.

If there is an increase in the debts owed to the company, then this phenomenon must be assessed at two stages. The first is the emergence of new partners, the enterprise reaching a new level and active trade turnover. A slight increase in the indicator in different periods is allowed and only signals a high-quality capital management policy.

If the increase in receivables reaches an uncontrollable level from period to period, then we are talking about an illiterate approach in interaction with partners. This process leads to a significant outflow of funds from circulation.

This may suspend the operation of the enterprise or limit its capital. Further failure to take proper measures leads to a significant reduction in the company's assets and either bankruptcy.

A rapid increase in the number of debtors may lead to the need to develop running business it becomes simply unprofitable. Such a company will bring losses to the owner and jeopardize its continued existence. Therefore, regular monitoring and management of the movement of receivables is necessary.

Sale of accounts receivable

Often, in the course of its activities, a company can act as both a creditor and a debtor. For example, you provided cargo transportation services to one company that has not yet paid for your work. You, in turn, received a certain product from the supplier, but do not have the means to pay. That is, you are waiting for your debtor to return the money, which you will transfer to your creditor.

This situation occurs quite often, and therefore the right to assign debt was invented at the legislative level, which greatly simplifies the process of repaying funds. This concession is called a cession. It turns out that you assigned your debt to your creditor. In other words, your debtor must now pay the creditor.

In this transaction, you are considered the assignor, and the new creditor is the assignee. An agreement is concluded between you that contains all the nuances of debt repayment. This action leads to stabilization of the enterprise’s condition and avoids unpleasant consequences in the event of overdue debt.

We account for accounts receivable

Typically, the sale of receivables is made at a lower price. For example, if the buyer owes you 23,000 rubles, you can make an assignment in the amount of 20,000 rubles.

Accounts receivable in the event of a sale will be recorded using the following entry:

Dr.	Kt	Amount, rub.	Record
62	90	230 000	Revenue
90	68	41 400
62	91	200 000	Accounts receivable sale amount
91	62	230 000	Write-off of liabilities
51	62	200 000	Received from a new lender
99	91	30 000	Lesion

Also, the new creditor has the right to resell the obligations to a new person at a premium. IN in this case receivables are transferred to the account of another assignee.

This will be reflected in the postings as follows:

Dr.	Kt	Amount, rub.	Record
62	91	220 000	Obligation sale amount
91	58	220 000	Write-off of accounts receivable
91	68	305	VAT
51	62	22 000	Transfer from a new creditor
91	99	1 390	Profit

Only the first creditor in the transaction has the right to resell existing receivables. All subsequent resales will relate to transactions involving the sale of financial investments.

In the first case, for profit tax purposes, the difference between the price of the initial purchase of the liability and its sale will be used. In subsequent transactions, the entire amount of funds received will be taken into account.