accounts receivable management & credit policy.pdf
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Accounts Receivable Management Credit Policy
Energypac Electronics LimitedNovo Tower, 270 Tejgaon I/A, Dhaka-1208
Bangladesh
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Table of conTenT
SL No Items Page No.01.00 Purpose 1
02.00 Policy Statement 1
03.00 Factors Involving In Receivable Management 1
04.00 Who Should Know this Policy 1
05.00 Definition 1
06.00 Regulations 2
Classification 2
Rules 3
06.01 Customer Assessment 3
06.02 Approval of Credit Limit 306.03 Security of Credit Limit 3
06.04 Application for Credit 3
06.05 Receivables, Reporting and Its responsibilities 3
06.06 Category of Receivables on the basis of Customers 4
06.07 VAT & TAX Deduction at sources 4
06.08 Deduction from Salary 4
06.09 Authentication of Accounts Receivable 5
06.10 Allowable Structure for Credit Sales 5
06.11 Category of Accounts Receivables 5
06.12 Audit of Accounts Receivables 5
06.13 Collection through Post Dated Cheque 5
Schedule-I 6
Schedule-II 6
Schedule-III 7
Annexure-I
Annexure-II
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Accounts Receivable Management & Credit Policy 2015
nergyp c Electronics Limited Page 1
nergyp c
lectronics Limited
Accounts Receivable Management & Credit Policy(Enforceable from the 1
st day of July, 2015)
01.00 Purpose
A major activity of the Energypac Electronics limited (EELL) is the generation of Revenue through
the Sale of goods and services which enhance promote or support its Production, Trading, Project
Implementation and Govt. Regulatory functions. Revenue Generated from sales are credited to
various departments to support their ongoing operations. The EELL Accounts receivable
Management and/or Credit policy has been developed to prescribe the proper methods by which
such revenue shall be collected and recognized. ………………............................................................I
02.00 Policy Statement
Revenue generated by the EELL shall be recognized & collected in one of two ways: Cash basis orAccrual Basis. The Cash basis shall be used whenever payment for goods or services is to be received
in advance of their provision. If payment is due anytime during or after the provision of goods &
services, the accrual basis shall be employed. Variations of this
03.00 Factors involving in Receivable management:
The terms of credit granted to customers ;The policies and practices of EELL in determining which customers are to be approved
for credit.
The paying practices of credit customers.The vigor of the sellers, collection policies and practice.The volume of credit sales.
04.00 Who should know this Policy?
Budget Area Administration
Management Personnel
Head of the Departments
Supervisors
05.00 Definitions
For the purpose of this policy, the terms used are defined as follows:
a)
“Accounts Receivable” means receivable against all credit sales of goods and services except
non trading intercompany transactions.
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Accounts Receivable Management & Credit Policy 2015
nergyp c Electronics Limited Page 2
b)
‘’Benefit’’ amount or product or gift or incentives offered to the sales persons or distributors
or dealers or retailers or any other person during various occasions or promotions.
c)
“Customer” means a person or any proprietorship organization or any company or local
authority or any NGO or GOB department who purchase goods & services form Energypac
Electronics Ltd
d)
“Credit Sales” includes all sales except cash sales.
e)
‘’Credit Limit” a ceiling amount upto which credit sales may be allowed.
f)
“Due” the date when payment should be received by the company. receivable includes the
aggregate amount of unpaid sales.
g)
“Sales person’’ includes any person directly transect with customers.
h)
“Immediate Supervisor” is he, who supervises a sales person’s sales accounts.
i)
‘’Individual users’’ are who purchase goods directly from the company.
j)
“Retailers” are those groups of customers, who directly purchase goods from the company
and sale to final consumers.
k)
“Dealer/Distributors” are those groups of customers who are engaged in business with the
company under a dealership or distributorship agreement.
l)
“Corporate’’ are those group of repeated customers who procures goods or services from
the company through Work Order or Purchase Order or under Corporate Agreement/Deal in
the “Business to Business” principle.
m)
“Inter-company” are companies sister concern under the umbrella of Energypac.
n)
“Commission” includes commission on sales and collection at different rates at different
stages.
o)
“Enrolled shop” are those shops having business transactions in the company both as
present and regular customer. Others are Non-enrolled shop.
06.00Regulations
Classification:Regulations are classified into two major categories:
I.
General Sales
a)
Corporate;
b)
Retail;
c)
Distribution; and
d)
Show room
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nergyp c Electronics Limited Page 3
II.
Project Sales
a)
Professional Lighting Engineering & Compliance Audit;
b)
Renewable Energy; and
c)
Green Divisions.
Rules:
06.01 Customer Assessment:
Before allowing credit sales the concerned sales person will assess the customer and
the concerned manager will approve it on the basis of Category of business, Length
of Business History, Strength of Solvency, personal integrity & security against credit.
(Assessment Form Annexure-I & II)
06.02 Approval of Credit limit:
After assessing the customer, as well as on the basis of recommendation by theimmediate supervisor and vetting from Head of Finance & Accounts or Nominated
person by him, the concerned person will have to get approval of a credit limit from
the management of the company. Credit limit to be restricted in Software and it has
to be followed strictly.
06.03 Security of Credit Limit:
Credit limit is allowable upon receipt of any security in the form of:
a) A Security Cheque (Verified by the Finance & Accounts Department)
b) Irrevocable Bank Guarantee (issued by a scheduled bank)
c) Irrevocable Standby Letters of Credit or local LC.
06.04 Application for credit:
Every Customer (Retail, Distributor & corporate customer except those are issuing
Purchase/Work Order mentioning terms of payment) should approach on letter head
pad for enjoying any credit from the company for a specific period. Credit period shall
not exceed the period stated in the Schedule-I.
06.05 Receivables, Reporting and its Responsibilities
06.05.01: The Concerned sales person and immediate supervisor will be jointly
responsible for recovering the receivable against every single invoice before the
expiry of Credit period allowed.
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nergyp c Electronics Limited Page 4
06.05.02: The Concerned supervisor will report any overdue receivable to the Head of
Sales, COO, and Accounts department within 3 (three) working days after expiry of
credit period with justification.
06.05.03: Head of Sales will submit an overall receivable aging report with justification
within 5 working days to CEO/COO on month closing basis.
06.06 Category of credit on the basis Customers
06.06.01: Retail (Credit against sales directly to shop owners)
06.06.02: Distributors & Dealers (Credit against sales to the customers who are under
dealership/distributorship agreement
06.06.03: Corporate (Companies, NGOs, Local authorities & Government
Departments)
06.06.04: Inter-companies (Companies under the umbrella of Energypac)
06.06.02: Individuals users (employees of Energypac group, individual customers,
etc)
06.07 VAT Deduction at Sources & Tax Deduction at Sources:
Following conditions to be met in the case of VAT or TAX deduction at sources:
a)
Corporate and project division’s customers are only allowed to deduct VAT
and TAX against payment;
b)
Treasury Challan for VDS(VAT Deduction at Sources) must be submitted tothe EELL accounts to adjust the amount within 15 days from such deduction;
and
c)
Treasury Challan for TDS(Tax Deduction at Sources) must be submitted to
the EELL accounts to adjust the amount within 45 Days from such
deduction.
06.08 Deduction from salary:
The management may deduct (if thinks fit), any amount from gross salary, until full
settlement, will be deducted to adjust Accounts Receivable from the concerned sales
person in case of receivable exceeding 90(sixty) days overdue.
For any uncollectible credit then salary, TA/DA, Incentives or any other benefits
entitled by the employee to be held up until customer’s confirmation/clearance on
such credit.
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Accounts Receivable Management redit Policy I
2 15
06.09 Authentication of Accoun
ts
Receivables:
Where any dispute arises between party's own account and company sales account,
Company's Accounts department will check the transaction history and duly intimate
the
actual amount.
06.10 Allowable Structure for Credit sales
Schedule-1( one) of this policy categorizes customers in terms of Credit Limit, Credit
Period and Required Security.
06 11 Category of Accounts Receivables
Schedule-2(two)
of
this policy categorizes Accounts Receivable status grading A-E.
06.
12
Audit of ccoun
ts
Receiv
able
Company's internal audit Department or
the
accounts department, on its own
interest, w i
ll
audit
the
customers' accounts directly
at
any
time for
confirmation
of
balance wit h
out
any prior notice
to
any
party
06.
3
Collection through post dated c heque
No cheque will be accounted s collection according to date of cheque, Cheque will
be treated
s
collection upon clearing only.
06.14 Non enrolled customers
For non-enrolled customers minimum
of
6 months cash transaction
to
be conducted
to
make
them
enrolled.
06.14 mendment
The policy may be amended time
to
time
s
the management thinks necessary.
By
Engr Nurul
Aktar
CEO Director
nergypac
Electroni
cs
Limited
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Accounts Receivable Management & Credit Policy 2015
nergyp c Electronics Limited Page 6
Schedule: I
Allowable Structure for Credit Sales
Category of
CustomersCredit Limit
Credit Period
(days)Security Required
Approving
Authority
Non enrolledshops
N/A N/A N/A N/A
Enrolled shops 30,000/=Closure of the
monthSecurity Cheque/PDC Head of Sales
Distributors50% of
monthlysales
Closure of themonth
1. Bank Guarantee2. Post Dated Cheque
COO
Dealer
50% ofProven
monthly
sales
Half yearlyClosure
1. Post dated Cheque2. Bank Guarantee
COO
EnrolledCorporate
As peragreement
As per agreement(Maximum of 45
days)
1. Post Dated Cheque2. Bank Guarantee
3. Irrevocable StandbyLetters of Credit
COO
Non EnrolledCorporate&IndividualCustomers
50,000/= Maximum 21 days1. Post Dated Cheque2. Bank Guarantee
COO, In specialcases CEO may
recommend for anycredit limit.
Inter-company N/AMaximum 30
daysPost Dated Cheque N/A
Schedule: II
Category of Receivable
Period of Receivable Status of Receivable Grade of Receivable
Within allowed Credit Period Very Good A
1 to 15 days overdue Good B
16 to 30 days overdue Excellent C
31 to 60 days overdue Bad D
Overdue above 60 days Very bad E
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Accounts Receivable Management & Credit Policy 2015
nergyp c Electronics Limited Page 7
Schedule:
Set of documents for creating new customers’ account
Sl Documents Status Comments
1 Trade License
02 VAT Registration Certificate
03 TIN Certificate
04 Photographs
05 Bankers’ Certificate & Statement
06 Own Transport list
07 Manpower List
08 Guarantors’ Certificate
09 Business Address
10 Solvency / Credit Facility
11
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Annexure-I
Assessment Procedures for distributor
Initial Offer to the probable
Dealer/Distributor
Written Application to be
submitted by Interested
Distributor/Dealer
Assessment form to be fill up by
the Concern ZSM/RSM and
initially it is to be assessed by
ZSM/RSM (Schedule-4)
3 months observation period
with advance cash business upon
approving from Head of Sales
and Head of RnD
Recommendation from HOS and
HoRnD for distributorship with
the current transaction ledger
and assessment form
Agreement to be signed by the
COO
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1
Annexure-II
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Verified By SE/MO/SMO □ YES □ NO
Checked By AM/DM/RSM □ YES □ NO
Recommended By Head of Sales/R&D □ YES □ NO
Approved By COO □ YES □ NO
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