Development of credit policy. The procedure and stages of developing a credit policy of an enterprise Development of a credit policy of an enterprise tutorial
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Plan
Introduction
Chapter 1. Credit Policy
1.1 Development of the credit policy of the enterprise
1.2 Tools for the formation of credit policy
1.3 Commercial lending standards
Chapter 2
2.1 Doubtful and bad debts
2.2 Reflection of doubtful debts in the tax accounting of the seller
2.3 Reflection of doubtful debts in the tax accounting of the buyer
Conclusion
List of used literature
Introduction
The credit policy is part of the financial policy of the organization and consists in determining approaches to managing receivables in terms of contractual conditions for the sale of products or services. In the relationship between the seller and the buyer, credit is provided in the form of a deferred payment.
1) credit period;
2) payment collection policy;
3) discounts for early payment;
4) credit standards.
The credit period is the period for which a loan is granted and during which the buyer or client must pay for products or services. The average credit period is the period of turnover of receivables, and the balance of receivables is the total amount of loans issued to all customers of the organization in the form of deferred payment. credit commercial debt
The lengthening of the credit period stimulates sales growth. On the other hand, additional profit is reduced due to the occurrence of additional costs:
a) to attract monetary resources in exchange for those used by the buyer during the payment period;
b) losses from bad debts, since the longer the payment period, the higher the risk of non-payment;
The collection policy, or debt collection, is the methods used to collect the debt. These include written reminders of payment, negotiations, going to court, terminating partnerships, selling debt, etc. For different clients, different methods of collecting overdue debts may be applied.
Discounts are used to incentivize customers to pay before the end of the payment term under the contract. With the help of discounts, they attract those customers for whom it is important to reduce the amount of the contract. To decide on the size of the discount, the additional profit from expanding sales and reducing the payment period is compared with the losses from discounts.
Customer credit standards are the minimum requirements for the financial condition of customers in order to provide them with a deferred payment. Optimal credit standards, which are applied by this firm in relation to its customers, ensure the excess of profits from the expansion of sales due to the provision of a deferred payment over additional costs:
a) from non-fulfillment of obligations by customers of a higher level of risk;
b) to attract financial resources in connection with the lengthening of the credit period;
c) management, control and collection of receivables.
The credit risk of clients is assessed by the following indicators:
a) credit reputation;
b) creditworthiness assessed on the basis of financial statements, including indicators of capital: ratio "debts/assets", interest coverage (ratio "amount of interest/earnings before interest and taxes"), current solvency, etc.;
c) securing a loan;
d) external conditions of the loan (tax policy of the government, prospects for the development of specific industries, etc.).
After determining the credit risk of customers, including their creditworthiness, they can be grouped into risk classes. For example, class 1 - it is assumed that there are no losses from non-payment of invoices, class 2 - losses can be up to 0.5% of revenue, etc.
Chapter 1. Credit Policy
1.1 Development of the credit policy of the enterprise
Credit policy is a sonorous name, which means only the answer to three simple questions: to whom to provide a loan, under what conditions and how much? The main criterion for the effectiveness of the credit policy is the growth of profitability on the company's core business, either due to an increase in sales (which will occur with the liberalization of lending) or by accelerating the turnover of receivables (which is facilitated by the tightening of credit policy). The use of marginal analysis helps to find the optimal point in commercial lending, the formal language of which strictly determines the desired balance in the volumes and terms of deferred payment: liberalization of credit policy is appropriate until "until the additional benefits from increasing the volume of sales are equal to the additional costs of the loan provided ".
On average in the industry, receivables account for more than 50% of the amount of working capital. And if you look at business not as a swamp, where the only goal is to get out of the quagmire (or, as some directors say, to survive), but as a field of opportunities for realizing commercial interests, then the accumulated receivables contain huge reserves to improve the efficiency of your own business . If Western enterprises, in an effort to remain competitive, carry out large-scale campaigns, winning tenths or even hundredths of a percent in improving certain indicators, business still has the opportunity to increase economic profitability by tens or even hundreds of percent when establishing effective procedures regular management. The negative management experience accumulated in recent years only increases the chances of success with little effort, if only not to fall beyond the line, after which irreversible consequences begin.
The simplicity of the questions posed, however, implies certain volitional decisions of managers, multiplied by the methodical work of accountants and economists. It is naive to believe that the development of a credit policy can be entrusted to the sales department or a specially allocated structure that oversees the main debtors.
In a sense, the absence of rigid rules and control over their implementation by top management contributes to the formation of a creative approach to the performance of work on the part of functional management. As for working with debtors, in practice there is even a special terminology in this area - the debt market. However, following the same market criteria, it is not difficult to conclude that the greater the capacity of this very market, the more comfortable it is to work on it. Creative solutions to the problems that debt market players have to face can lead to monstrous consequences if the system-forming goals of the core business are ignored.
The assertion that one of the factors in the low competitive position of commodity producers is the lack of a clear understanding of their strategy in relation to commercial lending is not new. Trying to reduce the negative consequences of the creative initiatives of employees of sales structures, many directors independently began to make decisions on the most significant buyers. And as a result, they themselves have already fallen into a stalemate. Under what conditions should products be shipped? When is it beneficial to make concessions on payment terms? Where is the line after which it is necessary to tighten the previously agreed conditions? How much will it cost the company to conclude another major contract? And dozens of other questions, on which postponing decisions is fatal for the enterprise, and it is difficult to get an economically balanced answer if intuition is not supported by proven recipes and recommendations. Credit policy is designed to act as a kind of "cookbook", limiting
frenzy of creative initiatives and personal calculation of individual individuals. The substantive basis of the credit policy is the tools that guide sales structures when providing credit to suppliers and credit standards that establish reasonable rules and restrictions.
1.2 Tools for the formation of credit policy
Credit policy tools are both templates for assessing potential debtors, and the regulations or procedures for the operation of the relevant service. Following the three main questions of credit policy, it is possible to identify a number of tools that determine the answers to them.
The answer to the question "to whom to provide a loan?" to a greater extent depends on the risk of non-repayment of the loan or delay in the disposal of the received resources. Therefore, the distribution of buyers by risk groups is one of the main tasks of credit policy. One of the most common tools for solving this problem is the method of assessing credit history (credit scoring). It is based on the ranking of buyers according to a number of selected indicators and the introduction of criteria for making a decision on granting a loan. Using this method helps to assess how risky it is to grant a deferred payment to a particular buyer. Due to the wide distribution, the credit history assessment method has received various interpretations, so it is interesting to consider its use in a particular enterprise.
To assess the credit history of the main debtors at the plant for the production of power tools, five main indicators were identified:
the period of work with buyers - the scale for measurement was taken half a year;
the period of existence of the enterprise itself (number of years from the moment of its state registration);
the amount of accumulated receivables over one quarter - for this
it was necessary to preliminarily build a register of aging accounts receivable;
the average monthly volume of sales attributable to this buyer for the last six months;
net cash flow in the calculation (determined as the amount of settlements for shipped products, weighted by the cost of goods received through barter exchange).
The introduction of the net cash flow indicator is primarily due to the large share of barter transactions and the need to estimate the real money supply received for shipped products. Since the provision of loans to its customers is mainly justified by the growth in sales, the company decided that it did not make sense to stimulate sales that bring minimal cash flow.
The net cash flow indicator was calculated as follows:
where NM - net cash flow;
C - the amount of payment for the shipped products, received in monetary terms;
Qn is the volume of the n-th barter commodity in value terms;
P(a)n - market price of the n-th product when paying with "live" money;
P(m)n is the accounting price of the n-th product, fixed in the payment documents.
At the next step, all indicators were converted to a 100-point scale. In this case, the highest score in this scale is assigned to the most preferred value. So, if the enterprise does not have receivables with a period of more than one quarter, it will have 100 points for this indicator. Then, significance weights are assigned to each indicator, and the summary rating of the selected enterprise is displayed.
Significance weights in a power tool factory were assigned by the factory director. However, they can also be calculated on the basis of past data on the operation of the enterprise. To do this, statistics are collected on the selected indicators and, using the correlation coefficients, the influence of each of them on the repayment of receivables is determined.
You should not fully rely on the data of past periods - the environment of the enterprise and the conditions for working with it are changing too dynamically. However, alternative calculations may reveal previously unnoticed contradictions and offer additional options. One of the basic principles of management should not be forgotten - the quality of the decision made is directly proportional to the number of options considered and the amount of analytical work carried out.
Calculation of weighted estimates for all major debtors allows you to prioritize when considering options for their lending. Thus, the company takes the first step in optimizing the structure of receivables.
Any commercial structure is always limited in financial resources, so the task of their effective distribution with minimal risks is most relevant. If the method of assessing credit history allows you to weigh the risks associated with providing loans to individual buyers, then the method of determining the optimal loan term (the economic time of credit) gives an idea of the effectiveness of a commercial transaction, answering the question about the conditions for placing a commercial loan.
Enterprises act as creditors for their customers not at all out of a good attitude towards them. The main leitmotif of such transactions is an attempt to increase sales. Unfortunately, being in a weak competitive position, most industrial enterprises are more likely to consider the issue of reducing sales markets in case of refusal to accept the toughening requirements of buyers. In principle, this is just the other side of the same dependence: usually, an increase in the terms of receivables leads to an increase in sales.
The calculation of the optimal policy on the terms of loans is reduced to a comparison of additional income received as a result of increased sales and costs associated with financing increased receivables.
Consider the example of a wholesale trading company that sells household and personal care products. For a group of washing powders, based on historical data and ongoing negotiations with major buyers, a relationship was built between the term of a commercial loan and the level of sales or income.
Variable costs were recognized as the cost of a unit of goods purchased from the manufacturer. The remaining associated costs were classified as conditionally fixed. As a result, the contribution to cover (marginal profit) was calculated, which is found as the difference between income and the variable costs associated with its receipt. Since the volume of sales according to the calculated data increased with an increase in the term of the loan, all other things being equal, the optimal strategy was to provide the maximum possible loan for this group of goods.
However, being engaged in the sale of other groups of goods, the company was forced to attract fairly expensive credit resources to finance its working capital. The cost of borrowed capital was 6% per month. Therefore, when calculating the optimal loan term, it is necessary to adjust the contribution to cover the costs associated with the loan, which are calculated using the following formula:
where CC is the cost associated with providing a loan (credit cost),
VC - variable costs associated with income (variable cost),
IR - cost of attracted capital (interest rate) per day,
T - loan period (time) in days.
By adjusting the resulting calculation for the risk of bad receivables, it is possible to determine a more realistic term for providing a commercial loan.
Thus, the two methods outlined above, complementing each other, illustrate the general approach to the development of credit policy.
1.3 Commercial lending standards
If more than one person is engaged in sales at the enterprise, it becomes necessary to coordinate their activities. A further increase in personnel leads to a differentiation in the requirements for professional training and responsibility for decisions made. In addition, decisions to provide discounts or change the terms of delivery in relation to individual counterparties also affect aggregate sales. In some industrial enterprises, it has become common practice for commercial structures to negotiate exclusively with the directors' corps. Only this allows you to quickly resolve issues and apply for more favorable conditions. Such sales logistics, frankly, is not the most optimal. And the issue is not so much the desire of top management to close the main sales decisions, but the lack of unified approaches to the organization of this activity and procedures for monitoring and evaluating the effectiveness of its implementation. Not surprisingly, the need for standardization in sales activities is constantly voiced by senior management and is a hit in management consulting.
As it has already become clear from the tools presented above, the main parameters for setting and implementing a credit policy are:
Sales volume by individual groups of goods (segmentation by type of business or territorial basis can also be carried out);
The volume of investments in receivables and the cost of capital attracted for these purposes (free of debt to personnel and major suppliers is only apparent, causing irreparable damage to the enterprise in the longer term, therefore, in the case of a business, it also requires an assessment of alternative losses);
The amount of bad debts on receivables.
When developing standards for the provision of commercial loans, an enterprise does not at all introduce new standards that are binding and unambiguous in their interpretation. The standards are more about minimum allowable conditions that must be met by buyers than about normalized amounts and terms of credit. Therefore, standards are most often set not by absolute values, but by certain intervals.
With regard to the credit history assessment method discussed earlier, work with the rating of the main buyers is regulated as follows:
If the score is less than 50 points, no credit is granted to companies;
From 50 to 70 points, companies are offered limited lending, which can be expressed in additional conditions (for example, in the processing of sales using promissory notes that include interest income) or restrictions on the amount of the loan, followed by strict control of the repayment schedule;
Above 70 scores are credited on normal terms (the power tool manufacturer provided credit for 30 days and described in the main contracts penalties for late payments), and also exclusive terms are possible in case of strategic importance of a particular buyer or anticipated economic benefits in the future.
The regulation of managerial decisions on granting a loan by means of a score rating of buyers is built on the elementary principle of economic return (economic trade-offs), according to which all benefits from making any managerial decision must be correlated with the costs of implementing this decision. The benefits in our case are the increase in the contribution to cover as a result of an increase in sales volumes, and the costs are the cost of capital raised and the projected amount of bad debts.
The predicted contribution to cover after paying the cost of capital raised is calculated using the following formula:
where MPACC is the projected contribution to cover after the payment of capital costs (marginal profit after cost of capital);
P(i) - probability of the i-th outcome;
MP - contribution to coverage (marginal profit);
CC - the cost of capital attracted to finance receivables (cost of capital);
C is the total cost of production.
There is nothing strange in the fact that directors of enterprises carry out sales to some counterparties on extremely favorable terms. Surprisingly, they often do not understand at all what such charity costs the enterprise. In the presence of even very rough standards, it is quite obvious that if the buyer does not fit even into the 50-point barrier, and you really want to make a deal with him, you need to carefully calculate the effectiveness of such an operation before making a management decision.
Chapter 2
2.1 Doubtful and bad debtnness
Uncollectible debt - debt on taxes and fees, registered with payers and tax agents, the collection of which turned out to be impossible due to economic, social or legal reasons. According to the Tax Code of the Republic of Tajikistan, such debt is written off in the manner prescribed: for federal taxes and fees - by the Government of the Republic of Tajikistan; for regional and local taxes and fees - by the executive bodies of the subjects of the Republic of Tajikistan and local self-government, respectively.
So, in accordance with the law on profits, bad debts include:
Debt on obligations for which the limitation period has expired;
Overdue debt that turned out to be outstanding due to insufficient property from an individual, provided that the creditor's actions aimed at forcible collection of the borrower's property did not lead to full repayment of the debt;
Debt that remained outstanding due to the insufficiency of the property of an individual, which, in accordance with the law, may be levied;
Debt that remained outstanding due to the insufficiency of the property of an individual - a business entity, as well as a legal entity declared bankrupt in the manner prescribed by law, as well as upon their liquidation (deregistration as a business entity);
The debt that remained outstanding due to the insufficiency of funds received from the sale at open auctions (public auctions) of the borrower's property pledged as security for the specified debt, provided that other legal actions of the creditor regarding the enforcement of other property of the borrower did not lead to full repayment of debt;
Debt, the collection of which turned out to be impossible due to force majeure, natural disaster (force majeure) in the manner prescribed by law;
Arrears of deceased individuals, as well as those recognized by the court as missing, deceased or incapacitated, as well as arrears of individuals sentenced to imprisonment.
From the very definition of the term "bad debt" it follows that this debt can never be collected. However, the Law on Profit also mentions the term "doubtful debt", while this Law does not define it. It is contained in the Generalizing Tax Explanation on the Application of the Law "On Corporate Profit Taxation".
Thus, in the understanding of this document, a doubtful debt is a debt for shipped goods (work performed, services rendered) or debt for the payment of interest (commission), in respect of which there are doubts about its repayment by the debtor and which differs from bad debt. In other words, doubtful debts include those debts that can still be repaid (recovered) in the future. Moreover, not all debts can be classified as doubtful, but only debts for payment for goods (works, services), as well as for the payment of interest.
The Law on Profits contains the procedure for recording doubtful debts in tax accounting both from the seller and the buyer of goods (works, services). Let's deal with this in more detail. It is worth making a reservation that in this material we do not affect the procedure for the settlement and reflection in tax accounting of doubtful (bad) debts by banks and other financial institutions, because there is a special accounting specificity here.
2.2 Reflection of doubtful debts in the tax accounting of the seller
In accordance with the Profit Law, the seller of goods (works, services) has the right to increase the amount of gross expenses of the reporting period by the cost of goods shipped in the past or in the current reporting period (works performed, services rendered) in the event that the buyer of such goods (works, services ) without the consent of the seller, delays payment for goods (works, services) or the provision of other compensation for their value. The Tax Interpretation clarifies that the increase in gross expenses in respect of goods (works, services) for which there is a payment arrears can be carried out only in the amount in which the seller's gross income was previously increased when selling such goods (works). , services). For example, if gross income was increased only by the cost of goods (works, services), i.e., by the amount of the principal debt, then gross expenses may also be increased in the future by the same amount (excluding accrued penalties).
The seller of goods (works, services) has the right to increase gross expenses in the situation under consideration in the following cases:
The seller of goods (works, services) applies to the court with a claim against the buyer for the recovery of debt or with an application to initiate bankruptcy proceedings against the buyer.
In this case, the right to increase gross expenses arises in the reporting period in which the seller received a court ruling on accepting the statement of claim and initiating proceedings on the case, or the ruling of the economic court on initiating bankruptcy proceedings. In addition, if the seller files property claims against the buyer already within the framework of the initiated bankruptcy procedure, the procedural document that allows including the amount of the debt in the gross expenses is the ruling of the economic court on the inclusion of the seller's property claims in the register of creditors' claims.
The seller of goods (works, services) must notify the tax authority of an increase in gross expenses in the reporting period as part of the settlement of doubtful debts by providing information on the settlement of doubtful (bad) debts. This information is submitted to the tax authority in the form of an annex to the Declaration on corporate income tax. At the same time, as follows from the text of the Tax Interpretation, the application is submitted separately for each of the counterparties for which the company has begun the procedure for settling doubtful debts in the current reporting period;
The seller of goods (works, services) applies to the buyer with a claim for payment of the debt.
In this case, the right to increase gross expenses arises for the seller in the reporting period in which one of the events occurs first:
The end of the 90th calendar day from the date of expiration of the period established in the contract for making payments for goods (works, services);
Receiving from the buyer a positive response to the claim or the expiration of the period established by law for responding to it.
The procedure for filing claims within the framework of the pre-trial settlement of a dispute is currently established by the Economic Procedure Code of the Republic of Tajikistan. It should be noted that at present the procedure for pre-trial settlement of a dispute is not mandatory and can be applied if there is an agreement between the parties. According to the law, a response to a claim must be given within one month from the date of its receipt. However, there are times when this period can be longer. For example, the company to which the claim was addressed does not have all the necessary documents, so it turns to the applicant with a request to provide them. In this case, the term for consideration of the claim is extended by the time necessary to obtain the missing documents. The Tax Interpretation states that if the buyer rejects the claim within the time limit for a response, then the seller of goods (works, services) can no longer apply the doubtful debt settlement option described above, associated with filing a claim. In this case, in order to obtain the right to include the amount of the buyer's debt in the gross expenses, the seller must file a lawsuit with the court (and then the first option for settling doubtful debts will apply) or contact a notary to make an executive inscription.
In practice, there are often situations when the term for repayment of debts for goods (works, services) is not specified in the contract. This means that the term for the fulfillment of obligations is considered uncertain and therefore it is still impossible to talk about the occurrence of debt on the part of the buyer. In this situation, the company must send the buyer a demand for payment for goods (works, services), which the latter, in accordance with Art. Civil Code of the Republic of Tajikistan is obliged to execute within seven days from the date of its receipt. As practice shows, such a requirement is most often drawn up either in the form of an invoice or in the form of a letter of demand (not to be confused with a claim), sent by registered mail with a return receipt or handed over against receipt. If after this the obligation is not fulfilled, then after the expiration of the seven-day period (i.e., on the eighth day), we can say that the deadlines for repayment of the debt stipulated by the agreement have expired;
The seller of goods (works, services) applies to the notary for the execution of a writ of execution on the collection of debt from the buyer or on foreclosure on the pledged property of the buyer.
In this situation, the seller must increase its gross income by the amount owed to it by the buyer in the tax period in which the 90-day period for filing a lawsuit under this rule expired. In practice, the application of such a rule can cause certain difficulties. The fact is that if the buyer acknowledged the claim, the seller can no longer file a lawsuit in court to recover the amount of the recognized debt. In this case, due to the absence of the subject of the dispute, the economic court, in accordance with Art. 80 COD RT is obliged to terminate the proceedings. Moreover, currently Art. 8 COD RT provides for a different mechanism for collecting debt, which is recognized by the buyer in response to the seller's claim. Therefore, in this situation, the seller has two possible options for further action:
1. If the fulfillment of the obligation to pay for goods (works, services) is secured by a pledge, then the seller, having a recognized claim in his hands, may apply to the court with a claim for foreclosure on the pledged property of the buyer.
2. If the debt under a recognized claim is not secured by a pledge, the seller has the right, subject to certain conditions, to initiate bankruptcy proceedings against the buyer.
To do this, in accordance with the provisions of the Law, it is necessary that:
The amount owed by the buyer to the seller was 300 or more minimum wages. If this amount is less than the specified amount, the seller has the right to combine his claims with other creditors of the buyer and apply to the court with one application, common from all creditors, to initiate bankruptcy proceedings against the buyer;
The debt must not be repaid within three months from the date of the due date for its repayment (in this situation, the three-month period begins to be calculated from the moment the seller receives a response to the claim from the buyer).
In addition to an increase in gross income in the event of one of the three cases described above, the seller of goods (works, services) will also have to accrue and pay a penalty in the amount of 1.2 NBU discount rates on the amount included in gross expenses (today at the NBU discount rate 10% penalty is 0.03% per day). This penalty is accrued and paid (irrespective of the financial result of the enterprise) for a period of time starting from the 1st day of the tax period following the one in which the buyer increased its gross expenses, and ending with the last day of the tax period in which the buyer increased its gross income. At the same time, the fine is not charged on the debt, the payment of which was written off or settled by the terms of the amicable agreement as part of the bankruptcy procedure, starting from the moment the amicable agreement was concluded.
2.3 Reflection of doubtful debts in the tax accounting of the buyer
In the event that the seller of goods (works, services) begins the procedure for settling doubtful debts, this not only entails changes in the procedure for maintaining tax records for the seller itself, but also affects the tax records for the buyer. Thus, according to the Profit Law, the buyer is obliged to increase the gross income by the amount of the outstanding debt (its part), recognized in the order of pre-trial settlement of the dispute by the court or by the notary's executive inscription in the tax period in which the first of the events took place:
1) the onset of the 90th calendar day from the date of expiration of the repayment period for the debt (its part) provided for by the agreement or the recognized claim. Moreover, the foregoing is also applicable to the case when the buyer did not respond to the submitted claim within the time limits established by the COD RT.
The procedure for applying this paragraph can be found in the Tax Interpretation, where it is noted that:
If the buyer did not respond to the claim or acknowledged the claim, but did not indicate in it the maturity of the debt (its part), then the obligation to increase the gross income arises for the buyer at the end of the 90th calendar day from the date of expiration of the debt (its part) maturity, established by the contract;
If the buyer, in his response to the claim, indicated the maturity of the debt (its part), then the obligation to increase gross income arises for him at the end of the 90th calendar day from the date of expiration of the maturity of the debt (its part) specified in the claim. If the debt repayment period is not specified in the contract, then everything said above regarding the occurrence of a similar situation with the seller applies to this case;
2) the onset of the 30th calendar day from the moment the court decides to collect (recognize) the debt (or part of it) or the notary makes an executive inscription. In this case, it does not matter whether enforcement proceedings have already been started in relation to the collection of this debt or not.
If, within the above terms, the buyer repays his debt to the seller or part of it, the increase in the buyer's gross income by this amount does not occur.
Due to the buyer's obligation under the doubtful debt settlement procedure to increase its gross income, the Tax Interpretation states that:
Gross income also includes the amount of debt (its part) for those goods, works and services that are not intended for use in the economic activity of the buyer;
The obligation of the buyer to include the amount of debt (its part) in gross income does not depend on the status of the seller as a payer of income tax and on the procedure and reflection in tax accounting of the amount of debt from the seller.
If the buyer, who included the amount of his accounts payable in the gross income, began to repay it, then he has the right to include in the gross expenses the repaid amount of the debt (its part) in the tax period in which such repayment takes place.
As we noted at the beginning of the article, the concept of "doubtful debt" is not identical to the term "bad debt". In this regard, we will further consider how the seller and buyer of the debt that has become hopeless is reflected in the tax accounting.
Conclusion
When carrying out lending operations, a credit institution proceeds from the principles of repayment, urgency, payment, security and target nature and criteria for granting loans that comply with the approved credit policy of the credit institution.
Loans are granted to shareholders, insiders and employees of a credit institution on a general basis. Issues related to the volume of lending to these categories of borrowers are resolved taking into account the economic standards established by the National Bank of the Republic of Tajikistan.
The main criteria for determining the amount of payment for a loan for each borrower are: the duration of using the loan, the degree of risk of the credit institution, the emerging supply and demand for credit resources in the regional market, the quality of collateral, the business activity of the client, as well as changes in the discount rate of the National Bank of the Republic of Tajikistan and the cost credit resources for a credit institution.
The procedure and terms for paying interest are determined by the loan agreement with the borrower, interest is accrued in accordance with the requirements of the Regulations of the National Bank of the Republic of Tajikistan "On the procedure for calculating interest on operations related to the attraction and placement of funds by banks, and the reflection of these transactions in accounting accounts".
The provision of funds in the form of loans by a credit institution is carried out in the following order:
legal entities - only in a non-cash manner by crediting funds to a settlement or correspondent account (correspondent sub-account) of the borrower client opened on the basis of a bank account agreement, including when providing funds for payment of payment documents and for the payment of wages;
individuals - in a non-cash manner by crediting funds to the bank account of the client-borrower - an individual (deposit account or current account) or in cash through the cash desk of a credit institution.
The main directions in the formation of the credit market should be a high savings rate (both in the industrial and private sectors), wide corporatization of a large part of state property associated with the organization of the securities market, and the creation on its basis of an extensive network of specialized financial institutions.
List of used literature
Adabekov M.G. Credit Operations: Classification, Procedure for Attracting and Accounting / Ed. A.N. Achkasova. - M.: JSC "Consultbanker", 2003.
Bank lending: Russian and foreign experience / Ed. E.G. Ishchenko, V.I. Alekseev. - M.: Russian Business Literature, 2007.
Ermakov S.L. The work of a commercial bank in lending to borrowers: guidelines. - M.: Company "Ales", 2005.
Zakharova N.N. Loan agreement: A practical guide. - M.: Infra-M, 2003.
Ivanov Yu.N., Simulek V., Sotnikova R.A. Optimal credit policy of an enterprise and a bank // Economics and Mathematical Methods. 2005. No. 4.
Alborov R.A. Choosing an accounting policy for an enterprise: Principles and practical recommendations. M.: 1995 page 8.
Bakaev A.S., Shneidman L.Z. Accounting policy of the enterprise. / M.: "Accounting" 1994. page 7
Kozlova E.P. Accounting and reflection in the accounting policy of production costs. / Chief Accountant No. 8 1998 page 8
Table book accountant T.1. Compiled by Prudnikov V.M. / M.: Inform-M 1995. page 46.
Fundamentals of accounting. Ed. Sats B. / M.: 1995
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Credit as a form of movement of loan capital. Methods and principles of granting, credit classification criteria. The mechanism for granting loans and the principles of organizing the credit process. Credit policy of a commercial bank and development directions.
abstract, added 05.10.2009
The place and role of credit policy in the development strategy of a commercial bank. Classification of credit strategies. Features of the formation of the credit policy of a commercial bank: the principles and strategies of lending. Optimization of credit policy formation.
term paper, added 10/01/2012
Credit policy in the conditions of foreign countries. Internal factors influencing the formation of the bank's credit policy. The degree of riskiness and profitability of various types of loans. Analysis of the loan portfolio of legal entities of JSC "Sberbank of Russia".
thesis, added 05/01/2015
The state of the monetary sphere of Russia at the present stage. Theoretical foundations and main directions of monetary policy and organization of the Central Bank. Ways to solve the identified problems of the tools of the monetary policy of the Central Bank of the Russian Federation.
term paper, added 03/11/2009
Study and analysis of the lending process carried out by the Volgograd OSB No. 8621. The essence and objectives of the credit policy. Operational risk of lending processes. Evaluation of credit potential, a system of measures to improve the bank's credit policy.
The presence of a well-thought-out credit policy is a guarantee of the success and stability of an enterprise providing goods and services on a deferred payment basis. A well-conducted credit policy helps to raise the payment discipline of customers to a qualitatively new level, significantly improve the quality of cash flow and, as a result, increase the performance of the enterprise.
The most important result is an improvement in the quality of cash flow. This is due to the fact that debtors begin to take their financial obligations more responsibly, the volume of timely incoming payments increases and the terms and amounts of late payments decrease. Turnover is accelerating, profits are growing, the company's position in the market is becoming more stable.
In addition, the company receives the following additional benefits:
· receivables are under control, it is possible to predict the amount and timing of receipt of funds;
· the staff has clearly defined procedures for interacting with clients and collecting receivables;
· planning becomes more efficient, as the accuracy of forecasting the receipt and expenditure of funds and the need to attract borrowed funds, in particular loans, increases.
Credit policy should take into account:
· the strategic goals of the enterprise - increasing the volume of sales, maximizing profits from each unit of goods with the existing volume of sales, accelerating the turnover of assets;
· the current market situation - whether the provision of loans is a common practice for competing enterprises;
· the competitive position of the enterprise in the market - whether the enterprise is a monopolist or is in search of new effective means in the fight against competitors;
Features of distribution channels for goods and services - whether the company is focused on one-off transactions, working with retailers or with a limited number of distributors who purchase regularly.
Let's analyze the stages of developing a credit policy. First, it is necessary to determine the conditions for granting a commodity loan by type or segment of buyers. For some companies, the formation of the so-called price matrix - a document that regulates the level of prices for a product or service, depending on the timing of its payment and the fulfillment of other conditions. Secondly, it is required to calculate the maximum period for granting a commodity loan.
To whom to provide credit - standards for evaluating buyers;
on what conditions - the dependence of the cost of goods on sales volumes, payment terms, fulfillment of other tasks set by the buyer;
How much - definition of a credit limit;
· how to punish violators - what is the procedure for repayment of overdue receivables.
An important direction is the credit selection of customers. The provision of commercial loans to everyone will not lead to an increase in profits, but, on the contrary, to its reduction - due to the growth of uncollectible receivables with their subsequent write-off and a shortage of funds for settlements with suppliers - due to delays in payment terms. Therefore, determining to whom to provide a loan depends on the risks of non-return or delay in payment. Classification of buyers by risk groups - a kind of "foundation" of the credit policy.
Credit policy can be defined as a set of measures aimed at creating conditions for the effective placement of funds raised as loans in order to ensure a stable growth of the creditor's profit.
Credit policy is a system of measures and rules aimed at implementing control over the placement and use of loans provided by an organization or bank. The credit policy of the organization includes a system of rules for building relationships with customers, which includes the procedure for collecting debts.
The credit policy is adopted for a year, after which the goals and objectives, adopted standards, approaches and conditions are specified. Credit policy provisions can be reflected in a lengthy document containing detailed instructions, or take up only one page.
The credit policy should include:
- thoughtful work with the client: rules for segmenting types of customers and rules for working with each segment;
- distribution within the company of responsibilities for interaction with debtors;
- the procedure for collecting debts by internal forces;
- a description of the situations in which the debt is transferred for collection to a collection agency;
- description of situations in which the debtor is sued. The typical structure of this document includes:
- 1) objectives of the credit policy;
- 2) type of credit policy;
- 3) customer evaluation standards;
- 4) a list of departments involved in the management of receivables;
- 5) the procedure for the actions of the personnel;
- 6) formats of documents used in the process of managing receivables.
The objectives of the credit policy should be to increase the efficiency of investing in receivables, increase sales (profit on sales) and return on investment.
In addition to formalizing the goals of receivables management in the credit policy, it is necessary to determine the tasks, the solution of which will allow achieving the target values (for example, entering new sales markets, gaining a larger share of the existing market, building a reputation, minimizing the cost of credit resources). Each formulated task should have a quantitative dimension and deadlines.
It is customary to distinguish three types of credit policy: conservative, moderate, aggressive.
Buyers, as a rule, have different opportunities in terms of purchase volumes, timeliness of payment, and apply for different conditions for granting deferred payment. In order to differentiate the terms of commercial lending, it is necessary to develop an algorithm for evaluating buyers. The creation of an algorithm for differentiating the conditions for granting a deferred payment involves a number of steps.
- 1. Selection of indicators on the basis of which the counterparty's creditworthiness will be assessed (timeliness of repayment of previously granted deferrals of payment, business profitability, liquidity, net current assets, etc.).
- 2. Determining the principles for assigning credit ratings to the company's clients. The rating is assigned for a certain period, after which it must be reviewed, for example, once a month.
- 3. Development of credit conditions for each credit rating, i.e. definition:
- selling prices;
- payment delay time;
- the maximum size of a commercial loan;
- systems of discounts and fines.
It is necessary to strictly allocate responsibility for the management of receivables between commercial, financial and legal services. It is not uncommon for sales and collections to be handled by different departments with conflicting objectives. For example, a sales manager (commercial department) is motivated to sell as much as possible, and an accounts receivable manager (finance department) is motivated to receive cash and minimize debt levels.
The scheme of distribution of responsibility is substantiated, in which the commercial service is responsible for sales and receipts, the financial service undertakes information and analytical support, and the legal service provides legal support (drawing up a loan agreement, work on collecting debts through the court. It is necessary not only to distribute responsibility between departments , but also describe the actions of all employees involved in the management of receivables.
Credit policy can be classified according to various criteria (Table 10). Credit policy can be aggressive and traditional, classic.
Table 10
Types of credit policy
sign |
Types of credit policy |
By deadline |
|
By degree of risk |
|
|
|
By market type |
|
By geography |
credit policy pursued by:
|
By industry focus |
credit policy for lending:
|
By availability |
|
By lending methods |
|
Credit policy in a broad sense is an activity that regulates strategic relations between a lender and a borrower, aimed at realizing the properties of a loan and its role in the economy. With regard to each individual subject, the credit policy is an activity that regulates relations between the lender and the borrower in a certain period and is aimed at realizing their interests. Credit policy as the basis of the credit management process determines the priorities in the development of credit relations, on the one hand, and the functioning of the credit mechanism, on the other.
The main goal of the company is to achieve profit. As a rule, profit increases with an increase in sales. One of the most effective ways to increase sales is to provide goods on credit. There are the following reasons for this:
The ability to attract a buyer who does not have enough
funds for prepayment;
The buyer is able to buy more or more expensive goods.
This selling tool is so powerful that
firms that began to actively use it, managed to radically increase turnover. This applies not only to the sale of expensive goods, such as leasing cars, but also to the provision of small loans, for example, in the food trade.
When developing a company's credit policy, it is necessary to take into account not only the terms of the sale on credit, but also the internal structure of the organization's management. The credit department builds a credit policy proceeding not only from the task of reducing non-payments, but also from the need to increase sales. To increase competitiveness, you can use a deferred payment not only for 14-30 days, but even higher. The usual deferred payment in many countries is a period of 30-90 days, and sometimes 180 days. There are various options for deferred payment, for example, the usual is a discount of 2-3% in case of payment within a week after delivery or prepayment. A longer payment term will require more funding for this. Many organizations sell goods on credit without even naming the payment term, i. offering to pay for the goods after sale, often the organization maintains some balance with its buyer, without requiring payment on specific invoices. Unfortunately, a fuzzy credit system leads to the fact that control over debtors is lost, which ultimately leads to the emergence of bad debts. This problem can be solved quite simply by defining for each client the so-called credit limit, which means the amount for which it can be credited.
Financing of a commodity loan is possible at the expense of own funds, a bank loan, a commodity loan of its own supplier. Very often, in the case of the sale of goods to the final consumer, a leasing company is attracted for financing. Factoring is gaining popularity. Recently, you can also insure against non-payments. In this case, the insurance company will reimburse non-payments fairly quickly - for example, 30 days after the due date of payment.
It is necessary to monitor not only compliance with the volume of debt, but also daily check the timely receipt of payments. Studies show that the probability of receiving a delayed payment is very high and approaches 100% only if the measures for its return are started immediately. If the organization starts doing it a month after the due date, the percentage of return drops sharply. The probability of debt repayment after 4-6 months of delay decreases by 2-3 times.
Credit management in the firm is one of the main functions of the organization. Without the development of a credit policy and an appropriate organizational structure, it is impossible to increase sales while maintaining an acceptable level of non-payments. The efficiency of the use of financial resources is characterized by asset turnover and profitability indicators. Therefore, management efficiency can be improved by reducing the turnaround time and increasing profitability by reducing costs and increasing revenue.
Accelerating the turnover of working capital does not require capital expenditures and leads to an increase in production volumes and product sales. Current assets are used as working capital in the organization. Funds used as working capital go through a certain cycle. Liquid assets are used to purchase raw materials that are turned into finished products; products are sold on credit, creating accounts receivable; accounts receivable are paid and collected, turning into liquid assets.
Any funds not used for working capital needs may be used to pay liabilities. In addition, they can be used to purchase fixed capital or paid out as income to owners.
To accelerate the turnover of working capital in the organization, it is advisable:
- planning the procurement of necessary materials;
- the introduction of rigid production systems;
- use of modern warehouses;
- improving demand forecasting;
- timely delivery of raw materials and materials.
The second way to accelerate the turnover of working capital is to reduce accounts receivable. The level of receivables is determined by many factors: the type of product, market capacity, the degree of saturation of the market with this product, the settlement system adopted in the organization, etc. Accounts receivable management involves, first of all, control over the turnover of funds in settlements. The acceleration of turnover in dynamics is regarded as a positive trend. Of great importance are the selection of potential buyers and the determination of the terms of payment for the goods provided for in the contracts.
The selection is carried out using formal criteria: observance of payment discipline in the past, predictive financial capabilities of the buyer to pay for the volume of goods requested by him, the level of current solvency, the level of financial stability, the economic and financial conditions of the seller organization (overstocking, the degree of need for cash, etc.). P.).
Payment for goods by regular customers is usually made on credit, and the terms of the credit depend on many factors. In economically developed countries, a scheme is widespread, which means that:
- the buyer receives a two percent discount in case of payment for the received goods within ten days from the beginning of the crediting period;
- the buyer pays the full cost of the goods if payment is made between the 11th and 30th day of the credit period;
- in case of non-payment within a month, the buyer will be forced to pay an additional fine, the amount of which may vary depending on the moment of payment.
The most effective ways to influence debtors in order to pay off debts are sending letters, phone calls, personal visits, selling debts to special organizations.
The third way to reduce working capital costs is to make better use of cash. From the standpoint of the theory of investment, cash is one of the special cases of investing in inventory. Therefore, the general requirements apply to them. First, you need a basic supply of cash to perform current calculations. Secondly, certain funds are needed to cover unforeseen expenses. Thirdly, it is advisable to have a certain amount of free cash to ensure a possible or predictable expansion of activities.
Models can be applied to cash to optimize the amount of cash. This is necessary to evaluate:
- the total amount of cash and cash equivalents;
- what share should be kept on the current account, and what share in the form of marketable securities;
- when and to what extent to carry out the mutual transformation of cash and marketable assets.
Bank accounts in which organizations hold their liquid assets do not pay interest. However, other liquid assets (short-term government securities, certificates of deposit) generate income in the form of interest.
In Western practice, the Baumol model and the Miller-Orr model are most widely used.
According to the Baumol model, it is assumed that the organization starts with the maximum and expedient level of cash, and then constantly spends them over a period of time. The organization invests all incoming funds from the sale of goods and services in short-term securities. As soon as the cash supply is depleted, i.e. becomes equal to zero or reaches a certain predetermined level of security, the organization sells part of the securities and thereby replenishes the cash reserve to its original value. Thus, the dynamics of the balance of funds on the current account is a "sawtooth" graph (Fig. 8) .
Baumol's model is simple and quite acceptable for enterprises whose cash costs are stable and predictable. In reality, this phenomenon rarely occurs; the balance of funds on the current account changes randomly, and significant fluctuations are possible.
Top-up amount (0 is calculated by the formula:
where V- forecasted need for funds in the period (year, quarter, month); from - expenses for converting cash into securities; G - acceptable and possible for pre-
Rice. 8.
acceptance of interest income on short-term financial investments, for example, in government securities.
So the average cash balance is Q/ 2, and the total number of transactions for the conversion of securities into cash (to) equals:
The total cost (OR) of implementing this cash management policy would be:
The first term in this formula is direct costs, the second is the lost profit from keeping funds in a current account instead of investing them in securities.
The Miller-Orr model is a compromise between simplicity and reality. It helps answer the question of how to manage the cash supply if it is impossible to predict the daily outflow and inflow of cash.
The balance of funds on the current account changes randomly until it reaches the upper limit. As soon as this happens, the enterprise begins to buy enough securities in order to return the stock of funds to some normal level (point of return). If the cash reserve reaches the lower limit, then in this case the company sells its securities and thus replenishes the cash reserve to the normal limit.
The logic of actions for managing the balance of funds on the current account is presented graphically (Fig. 9).
Rice. 9. Miller-Orr Model 1
When deciding on the range of variation (the difference between the upper and lower limits), it is recommended to adhere to the following policy: if the daily volatility of cash flows is large or the fixed costs associated with buying and selling securities are high, then the company should increase the range of variation and vice versa. It is also recommended to reduce the range of variation if there is an opportunity to generate income due to the high interest rate on securities.
The main forms of commercial lending are:
- bill;
- accounts payable.
A bill of exchange is a written promissory note that gives its owner (bill holder) the unconditional right to demand payment of the amount of money specified in it from the person who issued the obligation (bill drawer) upon maturity. Distinguish bills: simple and transferable (drafts).
Accounts payable as a source of financing is formed as a result of the organization's existing payment system and includes debt to suppliers and contractors, to subsidiaries and affiliates, bills payable, payroll, social insurance and security debt, debt to the budget.
Traditional forms of short-term lending are associated with the use of such financial instruments as:
- accounting (bill) credit;
- acceptance credit;
- factoring;
- forfaiting.
An accounting (bill) credit is carried out by purchasing (accounting) a bill from the bill holder before the maturity of the bill.
An acceptance credit is carried out by accepting by the bank drafts (bills of exchange) issued by the exporter to the importing organization; used mainly in foreign trade.
Factoring is the sale by an enterprise of receivables at a reduced price to a specialized bank or financial institution in order to replenish the liquid components of working capital.
Forfeiting (forfeiting) is a form of short-term crediting of export operations. Forfaiting features:
- lending is carried out in the form of a bank purchasing from an exporter a bill of exchange accepted by an importer;
- the purchase of a bill of exchange by a bank is carried out, as a rule, at a discount (i.e., a bill is purchased at a price below its face value). The size of the discount depends on the solvency of the importer, the term of the loan, market interest rates for loans in a given currency, etc.;
- forfeiting frees the exporting enterprise from credit risks and reduces the amount of accounts receivable, increasing the share of the absolutely liquid component of the enterprise's working capital.
Non-traditional instruments of short-term lending to an enterprise are:
- insurance;
- forward contracts (transactions for real goods with delivery in the future);
- futures contracts (purchase and sale of the right to goods);
- repo transactions (an agreement on the sale of assets with their subsequent repurchase) (Fig. 10).
Own sources of capital increase are limited primarily by the ability to obtain the necessary profit. Thus, by managing current assets, the organization gets the opportunity to be less dependent on external sources of cash and increase its liquidity. Efficient management of current assets is considered as one of the ways to meet the need for capital.
Rice. 10.
Selling on credit causes the appearance of differences between accounting (accounting) and real monetary indicators of product sales. Until the moment of payment, the implementation process in terms of cash flow is still ongoing, which leads to the emergence of receivables.
Accounts receivable is divided into:
- payments for which receipts are expected more than one year after the reporting one;
- payments for which receipts are expected within the next reporting year.
Accounts receivable includes:
- accounts receivable for the main activity (sale of products by the enterprise on credit);
- accounts receivable for financial transactions (bills of exchange receivable; debts of participants on contributions to the authorized capital; advances issued to employees and employees).
The receivables management process includes
the following steps:
- 1) financial analysis of the activities of the organization-buyer (consumer);
- 2) development of the credit policy of the organization;
- 3) making a decision on granting a loan, insurance of receivables;
- 4) change in the credit policy of the organization;
- 5) control of the shipment of products, issuing an invoice and sending it to the buyer; drawing up a file of debtors;
- 6) control of the financial condition of debtors;
- 7) in case of non-payment of the debt or part of it, the establishment of operational communication with the debtor for the purpose of recognizing the debt;
- 8) appeal to the arbitration court with a claim for the recovery of overdue debts;
- 9) initiation of bankruptcy proceedings;
- 10) compensation for losses from the bad debt compensation fund.
The receivables must be financed before they fall due, and there is always the risk that the buyer (customer) will be late or not paid at all.
Undoubtedly, in today's market, selling on credit is necessary and important. Irresponsibility, which is usually present in dealing with credit policy issues, is not justified. In some cases, sales on credit cause a significant increase in receivables, which can lead to an increase in both costs and risks. In their sales policy, organizations should not only take into account the positive results of customer lending (increased sales and profits), but also take into account that this process is usually accompanied by increased costs and risks.
Evaluation of the positive and negative results of credit policy should be an integral part of receivables management. First of all, it is assessed how the current sales credit policy affects sales, receivables, production costs, risks of losses from bad debts.
A set of tasks determined by the objectives of the credit policy of the organization, the solution of which contributes, among other things, to the reduction of receivables:
- determination of credit limits in relations with buyers (customers) and control over them;
- control over the maturity of receivables and taking subsequent measures to collect them (reminder, sanctions, etc.);
- collection and management of information about buyers (customers);
- assessment of the solvency of the buyer (customer);
- control of payment terms of orders; Kovalev V.V. Introduction to financial management. - S. 547.
Credit policy is a system of measures and rules aimed at implementing control over the conduct and use of loans provided by a company or bank. The company's credit policy may include a system of rules for building relationships with customers, which includes the debt collection procedure.
The credit policy should include:
- - thoughtful work with the client: rules for segmenting types of customers and rules for working with each segment;
- - distribution within the company of work on interaction with debtors;
- - the procedure for collecting debts by internal forces;
- - a description of the situations in which the debt is transferred for collection to a collection agency;
- - description of situations in which the debtor is sued.
In modern commercial and financial practice, the sale of products on credit has become widespread. The formation of the principles of the credit policy reflects the conditions of this practice and is aimed at improving the efficiency of the operating and financial activities of the enterprise.
There are three fundamental types of credit policy of the enterprise in relation to buyers of products - conservative, moderate and aggressive, which characterize the fundamental approaches to its implementation from the standpoint of the ratio of levels of profitability and risk of the credit activity of the enterprise.
The conservative type of credit policy of the enterprise is aimed at minimizing credit risk. The mechanism for implementing this type of policy is:
- - a significant reduction in the circle of buyers of products on credit due to high-risk groups;
- - minimizing the terms of the loan and its size; tightening the conditions for granting a loan and increasing its cost;
- - use of strict procedures for repayment of receivables.
The moderate type of credit policy of the enterprise characterizes the conditions for its implementation in accordance with accepted commercial and financial practices and focuses on the average level of credit risk when selling products with deferred payment.
The aggressive (soft) type of credit policy of the enterprise sets the priority goal of the credit policy to maximize additional profit by expanding the volume of sales of products on credit, regardless of the high level of credit risk that accompanies these operations. The mechanism for implementing this type of policy is:
- - distribution of credit to more risky groups of buyers of products;
- - increasing the period of the loan to the minimum allowable size;
- - providing customers with the possibility of prolonged credit.
To select the best credit policy, a company must weigh the potential benefits of increased sales against the cost of providing additional trade credit (credit checks, additional administrative costs, etc.) and the risk of non-payment. Credit policy can be based on both formal and non-formal criteria:
credit conservative moderate aggressive
- 1) Purchase and payment history of buyers. Payment history can be obtained through informal contacts with banks and other partners of the client;
- 2) The solvency of buyers can be assessed on the basis of the credit history of the relationship between buyers of the enterprise;
- 3) Current analysis and prospective assessment of the financial stability of buyers. For this, the same sources of information as indicated above, as well as informal opinions of familiar professionals working in the client's industry, recommendations from independent analysts, news and reports from specialized business information agencies, can be used.
Caution in choosing a credit policy of an enterprise is due to the fact that doing business in the current conditions is associated with continued economic instability and numerous commercial risks. It is in such an environment that enterprises must make responsible decisions that affect not only their material interests, but also, accordingly, the interests of partners. The considered problem of choosing a credit policy in relation to buyers of products is important for almost everyone who is engaged in entrepreneurial activity.
Stages of credit policy development. First, it is necessary to determine the conditions for granting a commodity loan by type or segment of buyers. For some companies, the formation of the so-called price matrix - a document that regulates the level of prices for a product or service, depending on the timing of its payment and the fulfillment of other conditions. Secondly, it is required to calculate the maximum period for granting a commodity loan. Further, it is necessary to develop regulations for the implementation of credit policy
The following main factors should be taken into account in the process of choosing a credit policy:
- - modern commercial and financial practice of trading operations;
- - the general state of the economy, which determines the financial capabilities of buyers, their level of solvency;
- - the current conjuncture of the commodity market, the state of demand for the company's products;
- - the potential ability of the enterprise to increase the volume of production while expanding the possibilities of its implementation by providing a loan;
- - legal conditions for ensuring the collection of receivables; - the financial capabilities of the enterprise in terms of diverting funds into receivables;
- - the financial mentality of the owners and managers of the enterprise, their attitude to the level of acceptable risk in the process of economic activity.
Enterprises, when determining the type of credit policy, should keep in mind that a rigid version of it negatively affects the growth of their operating activities and the formation of sustainable commercial ties. At the same time, a soft version of the credit policy of an enterprise can cause an excessive diversion of financial resources, reduce the level of solvency of an enterprise, subsequently cause significant costs for debt collection, and ultimately reduce the profitability of working capital and used capital [4].
3.2 Development of the credit policy of the enterprise
Payment for goods by regular customers is usually made on credit, and the terms of the credit depend on many factors. To develop a policy, it is necessary to decide on the following key issues:
Terms, conditions and lending standards
The main criterion for the effectiveness of the credit policy is the growth of profitability on the main activity, either due to an increase in sales volumes, or due to an acceleration in the turnover of receivables. The credit policy is designed to act as a kind of template for limiting "creative" initiatives and personal calculation of individual employees. The basis of the credit policy are the instruments that guide the marketing structures when granting credit to suppliers and the standards for granting credits that establish rules and restrictions.
The granting of a loan to a greater extent depends on the risk of its non-return or delay in the disposal of the resources received. Therefore, the distribution of buyers by risk groups is one of the main tasks. One of the most common tools for solving this problem is the method of assessing credit history. It is based on the ranking of buyers according to a number of selected indicators and the introduction of criteria for making a decision on granting a loan. Using this method helps to assess how risky it is to grant a deferred payment to a particular buyer.
To assess the credit history of the main debtors in our company, four main indicators can be distinguished:
the period of work with the buyer - for example, with a scale equal to six months;
the period of existence of the enterprise itself (the number of years since its state registration);
· the amount of accumulated receivables over one quarter - for this it is necessary to build a register of aging accounts (see Table 3.9);
· the average monthly volume of sales attributable to this buyer, for the last six months.
Table 3.9. Register of aging accounts receivable as of 01.01.04 (thousand rubles)
No. p / p | Name of the debtor | Total | |||||
1 | CJSC "Instrument", Moscow | 618 | 401 | 1019 | 31,8 | ||
2 | JSC Mekhinstrument, Tver | 512 | 512 | 16 | |||
3 | JSC "Mashzavod", Yekaterinburg | 158 | 395 | 553 | 17,3 | ||
4 | MPP "Tekhnika", Omsk | 100 | 255 | 355 | 11 | ||
Other debtors | 577 | 58 | 45 | 87 | 767 | 23,9 | |
TOTAL (thousand rubles) | 1195 | 559 | 559 | 994 | 3206 | 100 | |
Share (%) | 37,2 | 15,4 | 17,4 | 30 | 100 |
At the next step, all indicators are converted to a 100 point scale. In this case, the highest score in this scale is assigned to the most preferred value. So, if the enterprise does not have receivables with a period of more than one quarter, it will have 100 points for this indicator. Then each indicator is assigned significance weights and a summary rating of the selected enterprise is displayed.
For example, for CJSC "Instrument" the rating calculation table is presented in table 3.10. Significance weights can be entered by the CFO, or they can be calculated based on the past performance of the enterprise. To do this, statistics are collected on the selected indicators and, using the correlation coefficients, the influence of each of them on the repayment of receivables is determined.
It is not worth relying completely on the data of past periods - the environment of the enterprise and working conditions are changing too dynamically. Calculation of weighted estimates for all major debtors allows you to prioritize when considering options for their lending. Thus, the company takes the first step in optimizing the structure of receivables.
The credit history method allows you to weigh the risks associated with providing loans to individual buyers. Consider a method for determining the optimal loan term, which gives an idea of the effectiveness of a commercial transaction. The calculation of the optimal policy on the terms of loans is reduced to a comparison of additional income received as a result of increased sales and costs associated with financing increased receivables.
To begin with, it is necessary, on the basis of past data and current negotiations with major buyers, to build a relationship between the term for providing a commercial loan and the level of sales or income for a particular product (see Table 3.11). The contribution to cover (marginal profit) is found as the difference between income and the variable costs associated with its receipt. Since sales increase as the length of the loan is extended, ceteris paribus, the optimal strategy is to extend the maximum amount of credit possible.
Table 3.11. Product indicators (thousand rubles)
Loan terms, days | 10 | 20 | 30 | 40 | 60 | 70 | 80 | 90 |
Income | 100 | 350 | 580 | 750 | 920 | 1080 | 1250 | 1400 |
variable costs | 80 | 280 | 464 | 600 | 736 | 864 | 1000 | 1120 |
Coverage contribution | 20 | 70 | 116 | 150 | 184 | 216 | 250 | 280 |
Loan costs | 1,6 | 11,2 | 27,8 | 48 | 88,3 | 121 | 160 | 201,6 |
However, it is necessary to take into account the need to attract credit resources to finance their working capital. Suppose the cost of borrowed capital is 6% per month. Therefore, when calculating the optimal loan term, it is necessary to adjust the contribution to cover the costs associated with the loan, which are calculated using the following formula: CC = VC × IR × T (3.2)
CC - costs associated with the provision of a loan (credit cost),
VC - variable costs associated with income (variable cost),
IR – cost of attracted capital (interest rate) per day,
T is the loan period (time) in days.
Rice. 3.2 Coverage contribution after loan costs
Figure 3.2 shows the value line of the contribution to cover after the cost of the loan, which is calculated as the difference between the contribution to cover and the cost of the loan. Thus, the optimal term for providing a commercial loan for this product will be 40 days with a contribution to cover after paying the costs associated with raising capital, equal to 102 thousand rubles.
By adjusting the resulting calculation for the risk of bad receivables, it is possible to determine a more realistic term for providing a commercial loan. Thus, the two methods outlined, complementing each other, illustrate the approach to developing a credit policy.
Commercial lending standards
The standards consist of minimum acceptable conditions that must be met by buyers. Therefore, most often they are set not by absolute values, but by certain intervals.
With regard to the credit history assessment method discussed earlier, work with the rating of the main buyers can be regulated as follows (see Fig. 3.3):
Rice. 3.3 Credit standards
· If the score is less than 50 points, credit is not granted to companies;
· From 50 to 70 points, limited lending is offered to companies, which can be expressed in additional conditions (for example, in registration of sales using promissory notes that include interest income) or restrictions on the amount of the loan, followed by strict control of the repayment schedule;
· with more than 70 points, a loan is provided on normal terms (provision of a loan with a description of penalties for late payments in contracts), and also exclusive conditions are possible in case of strategic importance of a particular buyer or expected economic benefits in the future.
The regulation of managerial decisions on granting a loan by means of a score rating of buyers is built on the elementary principle of economic return, according to which all the benefits from making any managerial decision must be correlated with the costs of implementing this decision. The benefits in our case are the increase in the contribution to cover as a result of an increase in sales volumes, and the costs are the cost of capital raised and the projected amount of bad debts.
The proposed standards are based on a limited number of indicators calculated over a limited period of time. Consequently, the formal criteria, expressed in a digital version, are supplemented by approval procedures, and, if necessary, overcoming the previously specified restrictions.
Doubtful debt provisioning system
Doubtful debt is the receivables of the enterprise, not repaid within the terms established by the contract and not secured by appropriate guarantees. Reserves for doubtful debts are created on the basis of an inventory of receivables. The amount of the reserve is determined for each doubtful debt, depending on the financial condition of the debtor organization and the assessment of the probability of repayment of its debt.
Discount system
In the previous paragraph, we talked about repressive methods of influence, but encouragement methods have a greater effect. Providing a discount is beneficial to both the buyer and the seller. The former benefits from a reduction in the cost of purchasing goods, while the latter benefits indirectly from faster turnover of funds invested in receivables.
In conditions of inflation, any deferred payment leads to the fact that the company actually receives only a part of the cost of products sold. Therefore, it becomes necessary to evaluate the possibility of providing a discount for early payment.
Algorithm that takes into account the effect of inflation:
The fall in the purchasing power of money over a period is characterized by a coefficient that is the reciprocal of the price index:
K u \u003d 1 / I c (3.3)
For our company, the annual revenue is 233,558 thousand rubles. Let us assume that 12% is sold on a prepaid basis (form No. 4, “advance payments received”) and, therefore, 88% with the formation of receivables, given that the amount of sales for cash is relatively small, i.e. 205531 thousand rubles Then the average period of repayment of receivables at the enterprise in 2006 will be: (99560 × 360): 205531 = 174 days.
According to forecasts, inflation in 2008 will be 8-10% per year. Let's take the pessimistic option as a basis, i.e. 10% per year. Then we calculate the monthly inflation rate (TI m) from the formula for the annual inflation rate (TI year):
TI year = (1 + TI m) 12 - 1 (3.4)
We get TI m \u003d 0.8% i.e. a month's delay results in only 99.2% of the cost of goods sold. Thus, the price index is equal to I c =1.008.
To assess the change in the purchasing power of money over the period of repayment of receivables, we use a formula based on the calculation of compound interest:
(3.5)
K u - the coefficient of the fall in the purchasing power of money,
T u - the amount of inflation growth per month,
k is a multiple of 30,
∆t is the time balance.
The essence of the formula lies in the fact that the coefficient of the decline in purchasing power at the end of the last full month is determined, and this amount is adjusted by the amount of change in purchasing power for the period of the temporary balance.
First, the multiplicity of the period and the value of the time balance are determined: , i.e. in our case it is
As a result, the coefficient of falling purchasing power with a monthly inflation growth of 0.8% will be equal to K u = 0.9548
Let's make a table with the option of equality of the turnover of receivables and payables (see Table 3.12).
According to the results of Table 3.12, inflation losses for each thousand rubles of the contract price, taking into account the provision of a 3% discount, will amount to 59.6 rubles, which exceeds the amount of losses under option 2. Therefore, a discount cannot be introduced under such conditions. We can either reduce the amount of the discount or shorten the payment term. Assume that a 1% discount is set for a 103-day payment term. Then the losses from inflation will amount to 39.6 rubles per thousand rubles. The gain compared to option 2 is a small 5.2 rubles. (45.2–39.6), however, the introduction of a 1% discount, subject to a 103-day payment period, would make it possible to obtain savings in the amount of 1,151 thousand rubles. (205531×5.6/1000).
Table 3.12. Analysis of the choice of payment methods with buyers and customers
No. p / p | Indicator | Option 1 payment term 103 days | Option 2 payment term 174 days | Deviations |
1 | 0,9704 | 0,9548 | -0,0156 | |
2 | 1000–970,4 = 29,6 | 1000–954,8 = 45,2 | +15,6 | |
3 | Losses from the provision of a 3% discount from each thousand rubles, rub. | 30 | - | |
4 | The result of the policy of providing a discount from the price when reducing the payment term (p. 2 + p. 3) | 59,6 | 45,2 | -14,4 |
Table 3.13 discusses options for reducing payment terms and opportunities for discounts. Thus, the company can provide discounts up to 3% when paying less than 50 days, up to 2% - less than 90 days, 1% discount when paying for 100 days.
Table 3.13. Analysis of the choice of payment methods with buyers and customers
Indicator | 30 days | 40 days | 50 days | 60 days | 70 days | 80 days | 90 days | 100 days |
The coefficient of fall in the purchasing power of money (K u) | 0,9921 | 0,9894 | 0,9868 | 0,9842 | 0,9816 | 0,979 | 0,9764 | 0,9738 |
Losses from inflation from each thousand rubles of the contract price, rub. | 7,9 | 10,6 | 13,2 | 15,8 | 18,4 | 21 | 23,6 | 26,2 |
The result of providing a 1% discount with a reduction in the payment term, rub. | 17,9 | 20,6
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