Working with pdz dz formulas. Effective work with accounts receivable
This page presents the structure of the regulations for the defining activities carried out by various officials of the company, within the framework of a single process of control and collection of receivables.
The specified document is an element of the management system accounts receivable of the enterprise.
Regulations for the control of receivables (hereinafter referred to as receivables) and collection of overdue receivables (hereinafter referred to as PD)
1. Purpose of the Regulations.
This Regulation is intended for:
- Systematic prevention of the occurrence of overdue receivables (hereinafter referred to as ORD), prevention of the occurrence of irrecoverable and chronic receivables.
- Reducing the average time of delays and reducing the average volume of reserves.
- Maintaining the size of the maximum permissible limit within the planned and normative values.
2. Scope of application of these Regulations.
2.1 These Regulations apply to all clients working with deferred payments and to all cases of occurrence of DZ and PD, regardless of categories of clients, except for cases for which there is a written order from management to completely or partially exclude them from the scope of application of these Regulations.
2.2 The Regulations come into force from the moment the client has a liability to the organization (that is, from the moment he receives the first shipment of goods on deferment).
3. Classification of clients (statuses) and their defining characteristics.
Based on settlement and payment discipline, when repaying debt, all clients of the organization are assigned 4 main categories or statuses:
3.1 Reliable payers- clients who, having a deferred payment over a one-year period, have never been late in repaying their debt, or have made no more than 2 delays lasting up to 1 week, with a preliminary warning of the delay and agreement on the terms of debt restructuring.
3.2 Clients with uncertain reliability- clients for whom there is no statistics of interaction on PD during the previous one-year period, or clients for whom payment statistics are unstable. That is, in up to 50% of cases there is a delay for periods of time (from 1 to 2 weeks), with or without warnings, while there is always consent to debt restructuring.
3.3 Clients at risk of delinquency- clients who allowed during the one-year period:
- one-time delays for periods longer than 1 month;
- more than 1 (one) delay per month for periods of more than 2 weeks, mostly without warning;
- delay of up to 1 month in more than 50% of cases;
- avoidance of contacts and opposition to the terms of debt restructuring he proposed.
3.4 Non-paying clients- clients:
- those who had a history of interaction over the past year period of more than 1 (one) delay in payment of debt for a period of more than 2 weeks, without warning, protested against the proposed conditions for debt restructuring and allowed evasion of contacts;
- with whom legal proceedings have already taken place;
- to whose address letters of claim have already been sent.
4. Assigning initial categories (statuses) to clients.
4.1 Initial categories (statuses) are assigned to clients at the beginning of the calendar year, based on the history of interaction with them and statistics on timely/untimely repaid debts to the company, taking into account the criteria given in clause 3.
4.2 The assignment of customer categories is carried out jointly by the Head of the Sales Department (ROD) and the Head of the Financial Control Service (RSFC), then approved by the Commercial Director (CD) of the enterprise.
4.3 Depending on the status (category) assigned to the client, the following terms of delivery/payment for goods provided by the organization are automatically established:
| № | Client status | Initial terms of cooperation |
| 1. | Reliable payers | |
| 2. | With uncertain reliability | Shipment limit:__;discount:__;deferred payment duration:__. |
| 3. | Clients threatened due to late payment (non-payment) | Shipment limit:__;discount:__;deferred payment duration:__. |
| 4. | Non-paying clients | Shipment limit:__;discount:__;deferred payment duration:__. |
4.4 Over time, depending on the statistics of payments and delays, the client’s category may change, either upward or downward, and along with it, the delivery conditions established for this client will also change.
4.5 Monitoring payment statistics and changes in clients’ credit history is carried out jointly by the Head of the Sales Department (ROD) and the Head of the Financial Control Service (RSFC).
4.6 Review (confirmation or change) of client statuses (categories) is carried out based on the results of 3 months of interaction, also by the Head of the Sales Department (ROD) and the Head of the Financial Control Service (RSFC).
5. Proactive actions.
5.1 The main working documents for monitoring the dynamics of remote receivables/receivables are: 1C report on receivables of counterparties, route sheet and payment history.
5.2 In relation to new clients (clients for whom there are no statistics because work has not been carried out with them previously), in order to have an adequate understanding of their solvency, Sales Representatives (TRs) must, at a minimum, collect information about the personal data of the owner, manager and Decision maker, about which a note is made on the client’s card.
5.3 Also, without fail, the TP is required to enter into the card the status of the outlet, availability of goods, location, brand representation, price level and inventory (to determine a safe shipment limit).
5.4 To select the terms and conclude the Agreement, the Sales Representative is required to have the following package of documents:
- A certified copy of the Certificate of state registration of a legal entity.
- Certified copy of Legal Registration Certificate. persons at the tax authority.
- A certified copy of the Certificate of entry into the Unified State Register of Legal Entities.
- Extract from the Unified State Register of Legal Entities no later than 30 days.
- A certified copy of the charter (information on the size of the authorized capital, location of the enterprise or private enterprise, competence and terms of appointment of the director).
- A certified copy of the protocol or decision on the appointment of the head of the enterprise.
- Letter requesting a deferment agreement.
- Details of the enterprise and personal contact information about the top officials of the enterprise (Director, Chief Accountant, Merchandiser, Purchasing Specialist), indicating work, home and personal mobile phones.
In the absence of at least one of the points listed above, the decision to conclude the Agreement is made personally by the General Director.
5.5 For clients who have previously been late in repaying their loan payments, employees of the Sales Department (SD) apply advance warning of the due date of payment, however, depending on the category assigned to the client (see P 4 of these Regulations), the intensity of the reminder should be different.
| Category (client status) | Reminder intensity |
| Reliable clients | A reminder may be excluded altogether, or a one-time reminder 1-2 days before the payment is due is sufficient. |
| Unspecified clients | 2 reminders 4 and 2 days before the payment is due. |
| Threatened clients | At least 3 reminders 7, 4, 1 days before the payment is due. |
| To defaulters | Deferred payment is not available |
5.6 Warning calls are made by TP as planned, every Friday, in relation to clients who have a payment due date in accordance with the Agreement next week.
6. Monitoring the dynamics of remote sensing and critical sensing
6.1 Performed by sales representative.
6.1.1 Communication with the client during the visit preceding the payment due date: During the visit preceding payment, the TP, after completing the main goals of the visit, reminds the decision maker (hereinafter referred to as the decision maker) of the Client about the deadline for the upcoming payment, indicating the date, number, amount of the payment invoice, form of payment. Then, based on clause 5.1, it is checked with the Client’s data.
6.1.2. TP analyzes the Client’s behavior in relation to the debt.
Options:
| a. | The Client’s behavior and the state of the outlet do not raise doubts about timely payment. | Specifies the time and date of contact (based on the route sheet). Thanks the Client for his constructive approach and says goodbye. |
| b. | The Customer’s behavior and the state of the outlet raise doubts about timely payment. |
Specifies the time and date of the contact (based on the route sheet). Thanks the Client for understanding that timely payment is an important element of the working relationship, says goodbye to the Client. Makes a note in the route sheet about the need to remind the Client about payment in advance. If necessary, requests assistance from the supervisor (hereinafter referred to as SV) in achieving the goal. |
| c. | The Customer's behavior and the state of the outlet indicate a high risk of loss of funds (hereinafter referred to as DS). | Immediately informs the immediate supervisor about the current situation. Coordinates further actions with the immediate supervisor and follows his instructions. |
6.1.3 Communication on the day of payment:
- After greeting and establishing a positive contact with the decision maker, he indicates, as one of the goals of interaction, payment for the current invoice (indicating the date, number, amount).
- Variant situations:
| a. |
The client pays for the delivery |
Records the receipt and transfer of funds. Thanks the Client for the timely fulfillment of obligations (in the situation of non-cash payments, specifies the date, number, amount of the payment order). Moves on to the next purpose of the visit. |
| b. | The client requests an additional delay |
1. Clarifies:
2. Analyzes the Client’s behavior in relation to the debt. |
| a1 | The credit history is beyond doubt (reliable payer), the Client’s behavior, the state of the outlet does not raise doubts about the execution of agreements |
Agrees on the time and date of contact (no more than five days from the current moment, a period of more than 5 days is agreed with the immediate supervisor), the amount and invoice number. Expresses the hope that the agreements will be implemented on time. Makes an appropriate note on the itinerary sheet and proceeds to the next stage of the visit. |
| b1 | The outlet has a new or credit history, the Customer’s behavior, the state of the outlet raises doubts about timely payment (a client with uncertain reliability and a client at risk of being overdue). |
Sets the time and date of contact, amount and invoice number (no more than three days from the current moment, a period of more than three days is agreed with the immediate supervisor). If the Client:
|
| c1 | The Client’s behavior and the state of the outlet indicate a high risk of losing the DS (regardless of the client’s status). | Immediately (at the point of sale) informs the immediate supervisor about the current situation. Coordinates further actions with the immediate supervisor and subsequently follows his instructions. |
6.2 Performed by supervisor.
(Working documents: 1C report on contractors’ debts, weekly work plan, checklist, route sheets, etc.)
- Personally monitors late payments for more than 5 days from the date of payment under the contract; in case of a delay of more than 10 days, he submits a memo to the NOP with a report on the work done and a request for further collection from the defaulter.
- At the end of the working week, analyzes the situation with overdue receivables of subordinates, plans (with inclusion in the operational plan) measures to eliminate late payments in the form of:
- individual or group work with a sales representative in the office. Including sending a sales representative to a training group on the topic: "Negotiations with a debtor client" ;
- individual work with a sales representative in the territory;
- a telephone call or personal visit to the debtor Client;
- coordinated interaction with the SFK employee.
6.3 Performed by the head of the sales department
(Working documents: 1C report on accounts receivable from counterparties, weekly plans for supervisors, work plans for the week, operational plan for the month.)
1. Personally controls and takes part in the process of collecting late payments lasting more than 10 days from the date of payment under the agreement.
2. Checks the weekly work planning of sales department supervisors (hereinafter referred to as OP), to see if there are any measures in the plan to reduce debt and work with debtor clients.
2.1. Monitors in daily reports (checklist) the actions of TP and SV in situations of late payment, including the availability of training goals.
3. Based on the results of monitoring the work of the department, the NOP from days 10 to 15 makes a decision on:
- providing the SV with an additional period of time to collect the maximum allowance;
- unconditional recovery of funds. In this case, a memo is drawn up to the immediate supervisor with a report on the measures taken to return the PD.
4. Plans and reflects in the operational plan measures to reduce the percentage of late payments in the OP.
5. Determines, based on an analysis of work for the period, the planned percentage of late payments for the month and approves it by the Director.
6.4 Director of LLC
(Working documents: 1C report on accounts receivable from counterparties, supervisors’ route sheets, monthly operational plan for the head of the sales department (NOP), personal operational plan.)
1. Personally controls the process of returning late payments of more than 15 working days from the date of payment under the agreement.
1.1 Within 10 calendar days from the date of the deadline under clause 1. decides on:
- providing the NOP with an additional period of time to collect the maximum allowance;
- inclusion of a task for a specific PP situation in the SFK employee’s plan;
- debt restructuring (partial return of goods, compensation with other goods, additional deferment with payment of penalties);
- change in the client’s reliability status and subsequent change in commercial conditions in the 1C program;
- unconditional collection of funds;
- transferring the PD to the irrevocable PD database.
2. Monitors the presence in the operational plan of the NOP of measures to reduce accounts receivable (RA) and work with the Client as a debtor.
3. Approves the acceptable planned percentage of late payments for the next month of the OP.
6.5 Legal department
- Based on the request of the OP, SFK or instructions from the director of the LLC:
- draws up claims against counterparties and debtors;
- organizes work to collect the maximum allowance in accordance with the current legislation of the Russian Federation and the requirements of the company’s internal standards;
- keeps records of work with PDZ in the network diagram.
7. Cost of delay and terms of debt restructuring
7.1 By decision of the management of the LLC, before the formal filing of the claim with the court, a delay of no more than 3 calendar weeks (or 15 banking days) from the date of the delay is allowed. In other words, after 4 calendar weeks or 20 banking days, the overdue payment must be repaid, a debt restructuring program must be adopted, or the client must be transferred to the South Ossetia and the SFK to ensure the claim procedure for collecting the PDZ.
7.2 This period of time is a resource for the work of sales representatives, supervisors and the head of the sales department to resolve the issue pre-trial in the interests of both parties and agree on the restructuring of overdue debt.
7.3 Delay in repayment of a loan is actually a commodity lending to the defaulting client, therefore, if the client changes the repayment terms of the loan, it will also be fair to change the terms of payment for the overdue amount.
7.4 If the client agrees to restructure the overdue debt, an additional agreement to the current Agreement is concluded with the client, according to which the following table applies:
|
Overdue time (months-weeks) |
1st month | 2nd month | ||||||
| 1 Week | 2 week | 3 week | 4 week | 1 Week | 2 week | 3 week | 4 week | |
|
Late price (% of the amount) |
1.5 | 3 | 4.5 | 6 | 2 | 4 | 6 | 8 |
7.5 At the same time, the competence of the sales representative managing this client includes the ability to exclude payment for late payments during the 1st week of delay (if full repayment of the DZ takes place within this week).
7.6 The ability to exclude payment of late payments for the second week (at the oral request of the leading client of the sales representative and subject to full repayment of the payment for this period) is within the competence of the Head of the Sales Department.
7.7 Other decisions on the provision of benefits and exceptions are within the competence of the LLC Director.
7.8 In case of partial repayment by the client of the arrears indicated in the table (clause 7.4 of these Regulations), the rate will be charged on the outstanding balance of the PDZ.
8. Enforcement measures in case of late payment
If the scheduled payment is not received on the appointed day, and there is no warning from the debtor, the following actions are taken:
| № | Action | Purpose of action | Executor |
| 1. | Contact the debtor, notify about the lack of payment and the occurrence of arrears under the Agreement, find out the reason for the lack of payment and the actual repayment period of the debt. | Notify the client about his violation of payment discipline. Clarify the circumstances of the delay and evaluate the client’s behavior. | Sales Representative |
| 2. | Based on the deadlines for repayment of the PDZ indicated by the client: notify the client about the proposed terms of restructuring and request a letter of guarantee from him indicating the repayment period of the PDZ and the obligation to reimburse payment for late payments. Agree on a date for the meeting and exchange of documents. | Agreeing with the client on the conditions for restructuring the sales contract, changing the initially provided delivery conditions, launching the restructuring process. | Sales Representative |
| 3. | Make a reconciliation report, changes/additions to the supply agreement (with restructuring conditions). Meet with the client and formalize the terms of the restructuring. | Receiving from the client a written request for a deferred payment, indicating a new payment deadline and guarantees of reimbursement of not only the main cost, but also payment for late payment. | Sales representative, supervisor |
| 4. | If the client avoids contact, hides, refuses to give explanations or indicate reasonable terms for repayment of the PDZ, as well as refuses to discuss the terms of restructuring the PDZ, the following is delivered to the address of this client (in person against signature or by a valuable letter with notification):
If full or partial payment is not received on the appointed day, and the client still does not engage in dialogue, then the claim is processed, and the day the letter of demand is delivered to the client becomes the beginning of the 30-day period established by current legislation for pre-trial settlement of the issue. |
Exerting measured pressure on the client in order to force him to enter into a dialogue on restructuring the property liability or its repayment. |
Sales representative, supervisor, NOP, SB, Lawyer |
| 5. | If the client repays part of the TDS, but still does not enter into dialogue, repeat step 3 or steps 3, 4, taking into account the remaining outstanding amount of the TDS. | Exerting repeated dosed pressure on the client in order to force him to enter into a dialogue on restructuring the payable liability or its repayment. | Sales Representative. |
| 6. |
If the client makes contact, participates in dialogue, accepts the terms of the restructuring, however, does not comply with them with a warning and asks for a deferment again, such a deferment can be granted to him:
|
Encouraging a conscientious client approach to the terms of the contract, a dialogue mode for solving problems and readiness to accept the terms of the restructuring. |
Head of Sales Department, Director of LLC |
| 7. | Resolving the situation pre-trial (settlement agreement) and in court. | Compulsory collection of traffic regulations and corresponding penalties. |
Lawyer, SFK, Director of LLC. |
Reference list
The flip side of increased sales is almost always an increase in accounts receivable. In the modern post-crisis situation, increasing production and sales is no longer a key factor in the development of the company. The main indicator of stability is competent control, planning and management of receivables.
At the stage of making a decision to provide a loan to a buyer, the following are of primary importance:
- the validity period of the contract for deferred payment (as a rule, standard contracts with a predetermined loan period are used);
- the level of solvency and reliability of the client, while special attention when collecting information is paid not only to open sources, but also to unofficial ones (for example, personal connections in regulatory and law enforcement agencies);
- creating a system of reserves in case of bad debts. The most reliable and honest client, on the basis of any standard contract, is exempt from liability in the event of force majeure circumstances, and although force majeure circumstances are rarely the real reason for non-payments, they should not be discounted;
- creation of a reliable mechanism for working with problem payers. As a rule, this responsibility is assigned to the enterprise security service. In addition, financial instruments are used, such as charging a penalty for each day of delay, including the day of payment, revising the terms of the contract as a whole;
- providing a discount, the size of which is inversely proportional to the loan term. Thus, the client becomes interested in repaying the debt as quickly as possible.
First, the level and dynamics of debt in the previous period are analyzed using the formula:
Kdz = Z/A,
where Kdz is a coefficient showing the level of involvement of working capital in accounts receivable;
Z - amount of debt;
A is the total amount of working capital.
An important indicator of the quality of receivables is the turnover rate of working capital invested in debt, which is calculated using the following formula:
KO = OR/Z,
where KO is the number of rotations of the remote control in the period under review;
OR - the amount of turnover in the period under review;
After this, the level of bad debt is determined using the formula:
Kpr = Zpr/Z,
where Kpr is a coefficient expressing the level of overdue debt;
ZPR - debt not paid under the contract in the period under review;
Z - the amount of debt in the period under review.
Then the efficiency ratio of investing working capital in accounts receivable is determined:
Edz = Pdz - Zdz - Pdz,
where Edz is the efficiency ratio of investments in receivables;
Pdz - profit received due to sales on contractual terms;
Zdz - costs associated with lending (verification, work with debtors, etc.);
Pdz - the amount of financial losses from non-repayment of debts.
Sdz = Or + Ks x (Pdn + Ppr),
where Sdz is the amount of funds invested in accounts receivable;
Or - planned sales volume on credit;
Kc - the ratio of cost and product price;
Pdn is the weighted average of the number of days for which goods are shipped on credit;
Pdr - period of late payments, days.
When a company cannot invest the necessary funds in accounts receivable, it is necessary to make adjustments to the planned revenue and profit received from sales on debt.
One of the new methods of debt management is the refinancing of receivables, the main forms of which are factoring, forfaiting, and bill accounting.
Of particular interest to the company is factoring as a tool that covers a significant amount of supplier risks. In addition, the capital turnover period increases; for a relatively small percentage, the company optimizes its financial structure and does not incur additional costs for working with problem customers.
One of the key conditions for granting a loan is determining the duration of the agreement. Due to an increase in the duration of the contract, sales volume and revenue increase, but the amount of funds that need to be invested in accounts receivable increases, and the company’s financial cycle increases. When setting the limit of a loan agreement, it is necessary to take into account all the stated points.
Determining for itself the importance of each factor, weighing all potential risks, the company builds its credit policy, which determines the credit limit for each individual period.
In combination with the period for which the loan is provided, its cost is of particular importance. Determined by a system of price discounts for immediate payments for the supply of products. Based on these indicators, the interest rate for the loan provided is calculated:
Pg = Cs x 360/Sp,
where Pg is the interest rate on the loan provided;
Tss - discount for immediate payment without deferment;
SP - validity period of the loan agreement.
A special feature of establishing this norm is that it is linked to the interest rate on a bank loan. In any situation, it should be lower than in financial institutions. Otherwise, it is more profitable for the counterparty to take out a loan from a bank and pay for the delivery on an advance payment basis.
Based on the experience of domestic companies, it is possible to create an algorithm showing the degree of responsibility of each employee in the process of managing accounts receivable. As a rule, the commercial division of the company (sales department) oversees sales and cash flow issues, while the financial service is responsible for information and analytical work. The legal service is responsible for the impeccable state of document flow for problematic shipments (a necessary condition in the event of litigation). If the debt becomes problematic, the company’s security service gets involved.
In addition, it is important that the functions of performers when working with a client are not duplicated. Otherwise, there is inconsistency between departments, leading to a decrease in operational efficiency. Therefore, it is necessary not only to clearly distribute functions between departments, but also to clearly describe their actions at all stages of working with a problem client (see table).
Distribution of functions of performers when working with clients
Accounts receivable management stage | Actions of departments for managing receivables | Responsible department |
| Establishing a payment period within the scope of the contract | Signing the contract | Financial Director |
| Issuing an invoice for payment | Sales department | |
| Shipment of goods and support of shipment (issuing invoices, receiving confirmation from the client that the goods have been received in the proper quantity and quality) | Sales department | |
| Reminder of the payment date (three working days before the end of the contract) | Sales department | |
| Control of overdue payments up to 7 working days | Finding out the reasons for the delay in payment | Sales department |
| Coordination of a repayment schedule for overdue debts | Financial department | |
| Stopping further shipments | Commercial Director | |
| Written notification of the commencement of application of penalties | Financial Director | |
| from 7 to 30 working days | Calculation of a fine | Financial Director |
| Daily calls reminding you to pay | Sales department | |
| Personal meeting with the director or owner of the debtor company | Commercial Director, Sales Department | |
| Written notice of preparation for trial | Legal service | |
| from 30 to 60 working days | Repeated personal meeting with the manager or owner of the debtor’s company, taking all possible measures to find a compromise solution | Head of Security Service, Sales Department |
| Official complaint (written) | Legal service | |
| more than 60 working days | Filing a claim in court | Legal service |
An additional incentive that can reduce the number of bad debts is such an unpopular measure as establishing a relationship between bonus payments to sales employees and the state of the company's total accounts receivable. Despite the fact that all divisions of the company, without exception, take part in the process of assessing the solvency of a potential client, his reliability, it is the sales department specialists who are the first link in the chain of starting contractual relations, they always have more reliable and timely information about the state of the market, the solvency of certain counterparties. It is on the basis of information transmitted by the sales department to other divisions of the company that decisions are made to sign or not to sign contracts for deferred payment.
No less responsible is the financial department of the company, whose responsibilities include conducting an error-free analysis of the state of total accounts receivable for the company as a whole. System errors that can be made in this case are no less dangerous for the company’s activities than the occurrence of bad debts due to the collection of incorrect information about potential clients.
Accounting and timely analysis of the status of accounts receivable is currently impossible without the use of special computer programs and automation of cash receipts accounting. This is due to an increase in shipment volumes, the number of invoices issued and deferred payment agreements. At the same time, it is possible to perform an analysis not only by counterparties and periods, but also to identify for which product groups and in which price segment bad and problem debts most often arise. This, in turn, allows you to more accurately assess risks when deciding whether to sign an agreement with a particular buyer.
In conclusion, we would like to add that in the process of managing accounts receivable, professionalism and a high degree of motivation of the personnel involved in this process are of great importance. The preparation of all necessary documents confirming the fact of shipment and the imposition of obligations on the counterparty must be completed exactly on time and in the proper manner. Practice knows many examples when the debtor was released from payments during the trial due to the fact that the plaintiff did not submit all the necessary, correctly executed documents confirming the fact of shipment and the provision of a loan.
- Good afternoon! Your payment has arrived today, but we haven’t seen the money.
- And what?! Today is just the payment day. We'll put it up for payment next week. More likely…
This is how it is in Russia - very often the payment date is determined by an authorized person or the current situation, and not by the terms of the contract. In the current economic climate, payment discipline has certainly not improved. I won’t say why it is important to have liquidity of working capital - and without financiers you can bend a lot of obvious fingers.
The technique that I will describe below is universal and easy to use, like a script. Consists of 2 main blocks: control algorithm And tactics for dealing with objections. Let's start with the algorithm:
8 stages of the algorithm for monitoring overdue receivables (APR):
- Call 2-3 days in advance and notify about the upcoming payment. Responsible manager;
- On the day of payment - clarification on the fact of payment. Responsible manager;
- Lack of payment and/or delay of 2-3 days. Find out the date of the planned payment, emphasis on the importance of compliance with the obligation, control. Responsible manager;
- Delay of more than 5-7 days / notification from the Buyer of a significant increase in the payment period / violation of the agreed payment deadline. Finding out the reasons, contacting the decision maker regarding payments, arguing the need for payment. If, conditionally, there is no payment on the next day, it is necessary to receive from the Buyer a letter of guarantee with an agreed payment schedule (with a stamp). Responsible: manager, supervisor (control);
- Delay of more than 7 days without receiving a payment schedule / violation of the payment schedule. Sending a notice of violation of the terms of the contract indicating the number and points relating to payment. Responsible: manager, supervisor, lawyer (filling out the notification);
- Overdue for more than 12 days. Collection of documents necessary for drawing up a pre-arbitration claim. Responsible manager;
- Overdue for more than 14 days. Drawing up and sending a claim by mail with acknowledgment of receipt, by e-mail. Search for a settlement solution with the Buyer's decision maker. Notification from the director (com/finance/sales). Responsible: lawyer, manager;
- Overdue for more than 28 days. Legal formalities have been completed. If your management decides, you can sue.
If the periods are plotted on a chart and signed, it will be much more readable. If you can't handle it, write to PM, I'll send it :)
Of course, the timing may vary, but a delay of more than 1 month is completely suspicious. There is a risk of later discovering a company on the way to bankruptcy or new owners registered in Dagestan. It is important to learn how to get real answers and not fall for the following speech modules:
“We put you on payment”– if repeated 2 or more times, request a payment order, otherwise use the algorithm;
“I have submitted you for payment, please wait”- can be overcome with persistence or demand access to the decision maker regarding payments;
“We have rent, taxes, salaries, loan payments”- do not forget that your employer is in an identical situation and do not give in;
“Your turnover is poor, you ask for money in advance of sales”- disagree, look for solutions in reducing the next deliveries in quantity, rotating the assortment to a more liquid one (ABC analysis) or holding promotions. You didn't sign up for these contractual obligations;
“There is no money because there is no trade”— it is important to understand the situation regarding your products. Often, the realized funds of one supplier are used to pay for the supply of products from another, less liquid one. And if in this case your products are liquid, this is leverage. As a last resort, it is easier to take away part or all of the products. And sometimes it turns out that the product has already been sold! Where is the money, Zin?!
The buyer always pays faster and more to those who (1) are important to him and (2) who achieve this more actively than others. I hope that in terms of strategic importance you have already shown and proven your importance. Therefore, we are working on the second one - this is not begging, but a requirement to keep your part of the deal, don’t forget.
What is the best tactic for dealing with arrears? There are several options with humorous names.
6 tactics for dealing with objections to overdue accounts receivable (OR):
- “Already good” – a product limit so that the client does not buy more than he can sell and pay for;
- “Not like a boy” - this is the same “stop shipment” before payment. Although recently it is better to reduce large receivables gradually, implementing the principle of “50% shipment for 100% payment”;
- “Put on the counter” – imposing fines and penalties. Court. It works, yes, but it is usually rarely possible to continue cooperation after this tactic;
- “You - to me, I - to you” - the provision of some additional preferences or concessions from the Supplier for making a payment. In regional networks, Suppliers often hear offers to carry out promotions that are not entirely profitable, which will help them see their money faster. Although it is always better to come to an agreement, this is already on the conscience of the Parties;
- “Take it to heart” - “If you don’t pay, I will be left without a bonus. Why are you doing this to me!? What did I do wrong to you!?” etc.;
- "Have a conscience!" - “We always met you, tolerated delays, got into the situation. Now we have N containers at customs, we are collecting money for salaries and taxes - pay today, we are partners!”
The main rule here is not to make boring calls “when will you pay?” Every call you make should be an event, because you really need to get this money urgently. Record every agreement, monitor and ensure its implementation.
Write the most effective techniques and interesting examples in the comments!
When it comes to accounts receivable, it is important to timely assess the extent of losses and find a new effective business scheme. In 2012, we managed to reduce the level of overdue accounts receivable by 2.5 times - from 24% to 9.5%, and increase the company’s financial turnover by 15%. This was the result of the coordinated activities of three departments at once: financial, sales and security. How to competently implement an algorithm for working with debtors?
There are about 800 regular customers in our company's database. With such a volume of turnover, it is difficult to control the level of receivables. For example, if in January we sold goods for 100 thousand rubles. (conditionally) with an average delay of 30 days, which means that in February 100 thousand rubles should arrive in our account. However, often no more than 70 thousand were transferred to us, and the remaining amount was returned in March or even later. Thus, in 2011, the monthly level of overdue debt reached 24%, and the volume of unreturned receivables amounted to 0.05% of the total financial inflow. Not only were we losing part of the profit, but the company's cash flow sharply decreased, which slowed down further activities. It became clear that it was necessary to find a way how to deal with debtors. Already in 2012, the level of receivables decreased to 9.5%, and the level of non-repayment - to 0.005%. Let's consider the main steps of building a new system for managing and monitoring accounts receivable and credit for a wholesale company operating in the b2b sector with a turnover of several billion rubles. in year.
How to deal with debtors: 5 steps
Step 1. It is necessary to change the motivation of sales managers to collect debts from the debtor
If a company uses a deferred payment scheme, then the issue of motivating sales managers is extremely important, and the implementation of a business process should be based on the personal interest of the employee. Previously, in our company, the seller was given a bonus depending on the volume of goods shipped to the client and was cut for exceeding the norm for overdue accounts receivable, but now for each sales manager a minimum point for receiving funds from the client has been determined, which is also the starting point for calculating bonuses. The minimum point depends on the company's break-even point. For example, the lower threshold of monthly revenue should be conditionally equal to 100 thousand rubles. It is clear that if a company employs ten managers (and the turnover of each of them is approximately the same), then the minimum point is 10 thousand rubles. The accrual of bonus interest begins after the manager passes this point, which is determined individually for each employee, taking into account certain factors ( picture 1). The minimum point is set for a certain period, for example a year.
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If a manager does not reach his minimum point, he receives only a salary (our salary varies depending on the length of service and sales volume of a particular employee, the minimum rate is 25 thousand rubles).
Thus, the manager monitors the result, which consists of several sources (prepayment, current payments or overdue receivables) and strives to ensure maximum cash flow. For the company, this is a rather profitable scheme of work: if one of the customers does not meet the payment schedule, the manager is interested in finding options for replacing the receipt of payments in his group of clients.
Step 2. Weekly financial control of receivables and credits
Previously, the manager monitored the level of accounts receivable once a month (usually at the end), and payments were often received unevenly - the peak occurred at the end of the month, when the entire department frantically began to collect money. The situation changed after the introduction of a system for weekly monitoring of receivables and credits: the financial department generates the amount of overdue receivables for each invoice and distributes the information to the sales service. Managers make comments - “the client has already paid, we are waiting for the funds to be credited”, “I informed the client, he will pay tomorrow” - and send the information to the heads of the commercial and financial departments. In non-standard cases like “the client asks for a reconciliation and is ready to pay after signing,” the manager is also required to notify the financial service and his manager.
Based on data on overdue accounts receivable for the past month, a black list of debtors is formed - clients who systematically violate payment discipline for up to 10-12 days. After written notification, such a customer is transferred to 50–100% prepayment for a period of up to three months.
Step 3. Control of expected payments
According to a pre-drawn schedule for the receipt of funds (at least four weeks in advance), the manager organizes further actions. As soon as the goods are shipped and received by the client, it is necessary to find out whether there are any problems with the quantity, assortment and quality of delivery, and remind them of the planned payment deadline. A week before the payment deadline, the manager reminds the client in writing about the need to include our invoice in the payment schedule (previously, many payments did not arrive on time because the client simply forgot about it). Also, a reminder is sent three days before the payment and on the eve of the scheduled date of receipt of funds. In this way, we minimized late payments by collecting debt from the debtor, and if the client cannot pay the payment on time, then, as a rule, he warns about this in advance. However, the risk of non-payment still exists.
If the payment does not arrive on time, then the manager, within ten working days after the overdue payment date, independently works to return the funds - sends out reminder letters, conducts telephone conversations. During this period, it is necessary to document all stages of communication with the client: save letters, maintain a register of telephone calls ( Table 1). Automatically, all overdue customers are included in the stop list, and the program does not allow the manager to generate further shipments.
If a new order is received from a customer within ten days, and the payment for the previous order has not yet been received, then only the financial department can authorize the shipment after checking the client (department employees keep statistics on the timeliness of payments) and with an official letter of guarantee.
Customers who are more than two weeks late on payments, also go to the stop list. The financial service sends a notification letter to the client about the complete cessation of shipment until the funds arrive in the account. In addition, the client must provide a schedule of expected payments. Usually we try to come to an agreement with the counterparty and agree on a solution to the issue that suits both parties. When an agreement cannot be reached, the manager sends the customer one of the claim options ( figure 2). New conditions are fixed for a period of one to three months, depending on the frequency of the client’s purchases. A return to the previous system of work is possible subject to financial discipline.
If the problem cannot be resolved within 21 days(the client does not make contact or asks for significant preferences), representatives of the security service begin work. Data on work results is generated in the form of a report (table 2).
If payment is not received, the collection of all documents related to the contract begins (the amount of remaining goods, collection of invoices) for possible appeal to the judicial authorities. But this is an extremely rare measure - mostly customers transfer money at the stage of hitting the stop shipment.
Step 4. In order to understand how to deal with debtors, it is necessary to structure receivables
Often, the problem of late payments can be hidden in unresolved paper issues. For example, reconciliation has not been carried out and there is an unverified debt, the goods have not been returned, and complaints have not been closed. To avoid such problems, we classified receivables by type: debt for a promotion (for example, goods for opening a store), returned goods, short delivery, other complaints. All information is collected weekly. A request for a solution is immediately sent to the appropriate service, which analyzes and solves the problem (to the complaints department, to the service department). All these issues are also controlled by both the manager and representatives of the financial department.
Step 5. Compliance with the limit and formation of priority for shipments
Another innovation is the shipment limit. The manager does not have the right to ship (sell) to the client a volume that exceeds the value of his average monthly order for the last three months. Previously, the seller worked with any request, and the client could afford to delay payments. Now, if the average monthly order is (conditionally) 5 million rubles, and the client sends an application for 7 million, the manager is obliged to coordinate it with the commercial director, as well as with the heads of the security service and financial department, who must confirm solvency or request a letter of guarantee from the company -client.
As a result, the company has virtually no “hot” Fridays (the period of urgent fundraising for the past week) and the first week of the month is a failure in terms of financial receipts. The schedule of shipments and payments has leveled out significantly.
It must be emphasized that priority in shipments is given primarily to those companies that work on an advance payment basis or make timely payments under the contract. Thus, in 2012, we increased the company’s cash turnover by 15% and doubled the level of control over accounts receivable and credit.
Expert opinion
What to do if the regulations don’t work
Maxim Tarasov,
Sales Director, Rockwool
In practice, it happens that competent actions are carried out only on paper, and real work is carried out contrary to the regulations. Some typical mistakes when working with the system: creating non-working formal processes, lack of criteria for evaluating results and a mechanism for corrective and preventive actions, neglect of regular monitoring of performance, insufficient involvement of company management, lack of motivation and clearly defined tasks for employees. To avoid this, it is necessary to periodically monitor work with regulations at all levels - management, middle managers, and ordinary performers.
In some cases, it makes sense to reconsider business process indicators: perhaps you have set the bar too high? For example, we thought that an effective indicator of our work was a minimum of complaints. A survey of our customers showed that many are dissatisfied with the speed of response to complaints (up to two weeks, and even longer in remote regions, such as the Far East).
We did some internal work and revised our performance indicators. The criterion for performance was the indicator “time to respond to the client” (maximum three days), and not the absence of complaints at all, as was before. A repeated survey of customers showed that it was the speed of response to complaints that became the main advantage of our company over competitors.