Corporate Finance
Credit Management and Accounts Payable
Cash Management
• Remember its your money if you have supplied the service
• Keep a sense of urgency about collecting money due
• Reward managers on cash receipts not orders
• Be sure you know who you are dealing with
Cash Management
• Build strong relationships with customers
• Don’t allow debts to become overdue
• Ensure that bad paperwork does not become an obstacle to payment
• Get commitments on payment
• Terms and conditions should be clear
• Follow up!
Collections
• Have a strategy for:– Top 10 customers– Second tier to 30%– Bottom 70%
Collections
• Statements
• Phone calls
• Letters
• Personal calls
• 3rd party
• Legal ( be sure it is someone who specialises in debt collection)
Funding Options
• Settlement Discounts– Expensive option
• EU legislation says that since 2002 interest on overdue debt of up to 7% above ECB rate can be charged
• Invoice financing
Measurement
• KPIs– Proper measurement– % Bad debts– % overdue– % Provisions– Number of New accounts opened– Credit limits reduced– Cash collection v targets
Accounts Payables
• Day to day cash control
• How do we pay – bank transfer, cheque, bank draft
• Consolidate AP – reduce banking fees
• European payments systems– BIC and IBAN– Costs the same for all eurozone payments
Accounts Payables
• How we pay depends on– Type of industry– Domestic v International– Customer Base– Product range– Currencies
Accounts Payables
• Payment Methods– Cash– Cheque– Draft– Purchasing card– Direct debits, Standing order– EFT– Foreign transfers
Accounts Payables
• Other considerations– In Ireland we have stamp duty on cheques– Single payment file will reduce costs– Bank charges– Admin costs– Reduce errors– Segregation of duties– Good control of cashflows
