Description: Do you calculate how much interest your company is losing every day on overdue debtors? This is your own money being drained out of business either because you do not have an effective credit and collection system in place or because you are not doing enough to collect your money on time. Cash is like oxygen to a company. Business houses who respect liquidity know one important thing: they can keep their cash flow healthy simply by managing debtors. Collection must assume a critical role in today’s sluggish economy. The ideal approach is to prevent collection problems. The next best thing is to tackle them in time. Is there a solution? Yes, there is. This updated and fully-revised edition will help you avoid a cash crisis.
The highlights of the book:
• Discusses ways to give momentum to your cash flow
• How to collect money from consumers and government departments in time
• Provides a way out for most of the collection problems
• Equips you with organised knowledge on credit and collection
• Serves as a ready reference for management, sales, commercial and collection personnel
Contents: What experts say • What they say about the book • What they say about our workshop
1. THE CHALLENGE: Turn Mistakes or Losses into Opportunities • Era of Customerising • Categorising a Customer • Understand the decision makers and the power players at customer’s office • In the projects you will have to find out who’s who • Don’t over-commit • deliver what is promised • An order or a contract is not a political promise • Customer-Oriented follow-up • Practising Credit and Collection Management • Who is a customer? One who pays on time... a mutual respect • Overdue debtors – How much money are you losing per day? Get rid of the dead-beat customers • Make a difference • Three Success Stories: Case I: An Organised Collection Effort, Case II: Cash-flow Slow-down, Case III: An Overdue Situation • 2. CREDIT AND COLLECTION MANAGEMENT—THE NAME OF THE GAME: Cash Cycle • Working Capital • Advantages of Credit Trading • Credit, Liquidity and Profit • Cost of Credit • Opportunity Cost of Funds • Credit Sells – Receivables • Cost of Servicing Accounts Receivables • The Role of Credit Control Department • Credit Policy • Business Plan • Types of Growth • Types of Credit Policy • Credit Procedures and Credit Policy • Assessing Credit Policy • Credit Manual Preparation • Suggested Contents of a Credit Manual • 3. THE WINNING TEAM – COLLECTING MONEY IS EVERYBODY’S BUSINESS: Relation with other Departments • Hiring a Credit Manager • The Credit Controller Should be of a Special Brand • Helping a Credit Manager Settle In • Organisation of Credit Control Department • Duties and Responsibilities of Credit Manager • Functions of a Credit and Collection Department • Over Head Budget Follow-up • List of Files and Folders Maintained • Case Study • 4. OUR MONEY IN OUR POCKET AT THE AGREED TIME – TERMS OF PAYMENT: Objectives and Establishment of Terms of Payment • Credit Terms • Time-based Credit vs Cash Discounts • Payment Related to Delivery • Cash Discount • Interest Charges • Advance • Bank Guarantee (BG) • Indemnity Bond • Security Deposit/Earnest Money Deposit (EMD) • Other Terms of Payment • Some Important Inco-terms • Other Commercial Points • Supplier’s Performance • The Customer’s Point of View • 5. WILL THEY PAY? THEY WILL, IF . . .: Credit Ratings: Know Your Potential Customers • GDOC Categorization • ABCD Categorization • Credit Procedure • Documents and Guarantees • Trade and Competitor’s Opinion • DGS & D Registration • CRISIL • Credit Visit • Balance Sheet • Registrar of Companies • Press Reports • Ledger History • The Other Three ‘C’s of Credit • Time Required for Assessing Credit Worthiness • Conclusion: Which account is Credit-Worthy? • Time Required for Assessing Credit Worthiness • Agency for Information on Credit & Status Report and Collection from International Parties • Credit Information Bureau (India) Limited (CIBIL) • The Benefits of a Credit Bureau • Operating Efficiencies • Credit Information Companies (Regulation Act) (CICRA) • 6. QUALIFYING THE UNDERSTANDING – ORDER ACCEPTANCE AND CONTROL: Risk Category • Order (Oral and Written Contracts) • Basic Requirements for a Contract • Contract and Cash Traps • Order Referral • Cost of Discount • Public Sector Customer • The Dealer • High Credit or Extended Credit • Constant Monitoring of Credit Accounts • Accounts receivable—Good quality and Poor quality • Good Quality Accounts • Poor Quality Accounts • 7. THE GAME OF DEBIT AND CREDIT – NOW WITH COMPUTERS: Debtor Accounting • Fundamental Requisites of Good Debtor’s Accounting • Receivable Ledger • The Customer Master Files • Statement of Accounts • Age Analysis • Points to Note • Credit Notes (Customer’s Debit Notes) • Filing • Aid to Programmers • Accounts Receivables (Module) • Sales–Order Processing (Module) • Order Entry (Module) • Sales Analysis • Inventory Management (Module) • Transport Management (Module) • Integrating Controls • 8. IN HOW MANY WAYS CAN I GET MY MONEY?: Methods, Credit Services and Other Modes • Common Methods and Services Available • By Cheque or Demand Draft • Documents through Bank • Letter of Credit (L/C) • Checklist for Letters of Credit • IDBI/ICICI Bill Discounting and Rediscounting • Instalment Facilities and Hire-Purchase Schemes • Leasing • Factoring • EDI Factoring and GEDIS Network • Credit Cards • Collection Agencies • Contra Accounts • Consignments Sale • Electronic Data Interchange and Credit Control • Lockbox or Cash Management Product (CMP) • Franchising • Bank Channel Financing Schemes • Summarizing Payment Terms • Bad-Debt Cover • 9. FIRST THINGS FIRST – TOOLS FOR THE JOB: Collection Programme—Pre-requisites • Design Customer Friendly System • Orders to be Checked and then Acknowledged • Maintaining Up-to-date and Correct Status of Each Order • Order Clearance Chart • Points Check Before Forwarding Invoice • Control of Float • A Check-list with Regard to Bill Passing Procedure • Case Study • About APSEB: From Order to Payment • 10. THE GAME PLAN: Planning, Organising and Controlling the Collection Activities• Target setting and Collection Planning • Minimum and Maximum Amount Collectable • The Pareto Principle, Organising Collection—The 80/20 Rule • Preparation to Achieve Target and Control of the Operation • The Pareto Principle • Age Analysis • Rules for Collection • Rules for Follow-up • Plan for Overdue Collection • Plan During Cash-Flow Drive • Case Study • 11. THE RIGHTS OF THE SUPPLIER • 12. THE ART OF COLLECTION – COLLECT THE MONEY BUT KEEP THE CUSTOMERS: Collection Follow-up • Customer-oriented follow-up is the answer • Personal Follow-up • Tips for Sales Rep • Telephone Follow-up • Ten Commandments for Professional Telephone Collection • Debt Collection Letters • Some Letter-writing Tips • Specimen Letters • Collection—Telegram/Telex/Fax/E-mail • Other Aids • Paying Characteristics • Art of Collection • Dealer/Reseller and Credit Control • Certain Discipline • Handling a Project and Credit-Collection Management • 13. THE ART OF COLLECTION – THE DIFFICULT ONES: Some Basic Principles• Who is a Customer? One Who Pays on Time • What is a Sale? • What is an Order? • When is a Sale Complete? • What is a Customer? • Customer’s Expectations • Complaints • Dealing with Complaints • Complaints Management • Liquidated Damage (LD) • 14. THE ART OF COLLECTION – THE LEGAL PATH: Before the going Legal Points to Ponder with • Dishonour of Cheques • Rules for Taking Legal Action—Dishonour of Cheques • New Amendment under Section 138 of Negotiable Instrument Act • Summary Suits • Suit under the Penal Code • Winding up Petition • Enforcement Procedures • Suing an Overseas Debtor • 15. THE PERCEPTIONS AND THE FACTS: Management Information System and Credit Control• Monthly Reporting • Loan from Bank against Accounts Receivable • Aid to Cash-flow • Statement on Held-up/Disputed Payments • Measuring Performance of Credit Control Department • Credit Control Department as a Profit Centre • Cost of Slow Payments, Extended Terms & Incremental Contribution • Accounts Receivable Statistics for Comparison with Industry Standard • 16. THE LONG ARM OF THE LAW: AUDITS: Accounts Receivables and Statutory Requirements • Internal Audit • Internal Audit for Sales and Trade Receivables • External (Statutory) Audit • Audit Objectives for Sales and Trade Measurables • Income Tax & Accounts Receivables (Debtors) • Writing off Bad Debts • Provision for Bad and Doubtful Debts • Collection of Accounts Receivables Previously Written Off • 17. SERVICE INDUSTRY: ... SELLING THE INVISIBLE: Service Marketing • Special Characteristics of Services • Services: Both Productivity and Quality are of Key Importance • Consumer and Commercial Credit • The Various Forms of Consumer Credit • A Few Definitions • The Consumer • The Product • Commercial Credit • Customer Credit • What Credit Does for Consumers • What Credit Does for Retailers and Service Business • What Credit Does for Financial Institutions • Competition in Consumer Credit • Credit Policy • Activities of Consumer Credit Department • Terms of Sale • Setting Credit Limits or Credit Lines • Credit Checks • Pre-credit Sanction Stage • Collection Planning • Collection Problem with Consumer Credit • Follow-up of Debtors • Guidelines • Cost of Credit Operation • APPENDIX I: BANK GUARANTEES—THE AGONY FROM THREE YEARS TO THIRTY YEARS • Controlling/Monitoring of Bank Guarantees • APPENDIX II: HANDLING GOODS-IN-TRANSIT INSURANCE EFFECTIVELY• Transit Insurance—They Will Settle Only If . . . • With Regard to Rail/Road/Air Transit Insurance, a Credit Manager Must Understand the Following • APPENDIX III: SALES TAX—THE GOVERNMENT’S BOOTY • The Central Sales Tax Act, 1956 • Sales Tax Forms Follow-up Letters • APPENDIX IV: WHAT IS CREDIT INSURANCE?• Process Overview • Why Business Credit Shield? • Tailor Made Solutions • Partners in Your Risk • APPENDIX V: ABBREVIATIONS – THE LONG AND THE SHORT
About the Authors: A. K. Guha, Executive Director at Renoir Consulting, UK, has served in Sales and Marketing, Commercial and Finance, across industries for three decades. He is a life member of Bombay Management Association, a fellow of the Business Management Association, London, and also a life member of the Computer Society of India. Ajoy Guha and Dr. N.H. Atthreya, first co-authored a manual titled "Effective Credit Management", a first of its kind on Receivables Management for all types of Industries in an Indian context. It was Ajoy’s consulting work on re-engineering and turn-around processes that brought him together with Renoir Consulting, UK. He decided to team up with Renoir to facilitate changes being made, implemented, all-round performance being improved.
Cell: 09821341374 for any queries and discussion
N. H. Atthreya heads a post-experience education centre, MMC School, since 1955 and is a senior management consultant. He has a doctorate in business administration from Bombay University and is a Fellow of the Institute of Cost and Management Accountants, London. Dr. Atthreya has been invited to present papers at several international conferences and has been the editor of the monthly Management Ideas since 1963. A facilitator of learning for holistic well-being, he has published over twenty books on various aspects of management and leadership.