CREDIT & COLLECTION
Credit collection objective
-to obtain promptly at a minimum cost and to maintain goodwill to the customer at the same
time
Collection management we need to consider
DEAL(de ne,eliminate,automate,liberate)
1. De ne the problem (baka naman hindi sa customer ang problem kundi sa internal, ex. mali
ang encode sa ledger. pwede rin naman sa customer ang problema)
2. We need to eliminate (we need to focus on the important thing)
3. Automate (ano ba yung magpapadali, automatic, electronic, ex. may problem sa ling,
kailangan iautomate or use computer, it can be the solution for de ne)
4. Liberate (to improve the collection process, this will lead to the improvement of collection
process)
RCA-root cause analysis
-ano ba talaga ang problema
- shbone analysis
-why is there so many collectibles?
-clients were not properly evaluated during the credit evaluation
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November 30, 2023
Financing Installment Accounts
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Carrying your own accounts receivable
Selling of Accounts Recievable(AR Factoring)
- a nancial transaction in which a company sells its AR to a nancing company that
specializes in receivables at a discount
- Invoice Factoring or AR Financing
Parties in Factoring
- Financing Company (factor)
- Credit Business (seller)
- Person with Liability (debtor)
Bene ts of receivable factory
- Companies choose factoring if they want to receive cash quickly than waiting for the
generation of the credit terms
- Allows company immediately, build up their cash ow and pay any outstanding applications.
Therefore factoring help company free up capital that is tied up in accounts receivable
- Transfers the default risk associated with the receivables to the factor
FACTORING VS ASSIGNMENT
assignment of account receivable
- That involves the use of accountable as collateral for the loan
- Credit company still retain ownership as long as it make payment on time
- Customers never know that credit borrowed against the accounts receivable
- Lenders charged high fees, and interest
- collateral lang ang pinagkaiba ng assignment sa factoring
How accounts receivable are priced by factoring company
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Factoring if AR
The rate charged by factoring companies depends on:
- the industry that the company is in
- the volume of receivables to be factored
- the quality and credit worthiness of the company’s customers
- Days outstanding in receivables (average days outstanding) ve
- the rate also depends on whether it is extended recourse factoring.Factoring companies
charge for recourse factoring than it does for non-recourse factoring
Recourse Plan
- factory demand money back from the company that transferred receivables it cannot collect
from
Dec 7
Statement of Account
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-Monthly Statement(amount, kelan babayaran, saan)
-Detailed Statement (detalyado, beginning, nabayad, interest, hindi lang yung to be paid)
-Reconciled Statement (pag nagtatanong yung client kung baket ganon ang babayaran, tsaka
palang ginagawa to, pag may mali yung clerk)
Analysis Of Receivables
-Aging of AR
-AR Turnover Ratio
(net credit sales/average AR)
favorable pag mataas
-Accounts Collection Period
(365/AR Turnover)
favorable pag mababa
-Collection E ciency
(Amount Collected/amount available for collection)x 100
gaano kae ective yung collection by measuring magkano nakolekta this month vs magkano
dapat kolektahin
-Bad Debt Loss Ratio
(amount of bad debts/total AR)x 100
losses on the part of business
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Procedure
-litigation
-forclosure of collateral
-notice-/letter
-visitation
-tel. call -personal call
-dunning by fax/email
-reminder
12 types of problem customers
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January 4, 2024
Roles of Collector
-Marami nang job title(sales/account representative)
-naniningil ng utang pero nageevolve na din ang job nya
Collection Objectives
-to obtain payment promptly at a Yes minimum cost, and to maintain Goodwill of customer or
client at the same time
Other Jobs of a collector
-action man of his department
-after delivery credit investigator
-listening post of the customer’s business condition
-public relation
- nancial adviser
Good Quali cation of a collector
-honest
-alert
-good educational background
-good health
-persevering attitude
-presentable
Do’s and Don’t in receipting
do:
-clear and legible
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don’t
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Strategies and action plan the same account
1. curing or adjustments in case there, any problems and balances like reconciliation of
accounts, in order to put the account in proper perspective
2. extension of the term of the credit provided dishes within the policies of the company or
bank, provided further the collateral/securities position of the creditor is maintained, or
even strengthen
3. Restructuring, or rewriting the obligation. before a restructuring, or writing, considered
additional security, should be required, ordered to protect the interest of the creditor
4. Assumption of obligation, another rm or person is a good starting, is willing to assume the
obligation under acceptable terms and condition
5. Repayment adjusted to the debtor’s uctuating income. the amount of payments should be
at its speak also. For example, farmers should pay more during harvest time.
6. Settlement of arrears. Generally, if the arrearages are substantial, like substantial
“downpayment”
Terminologies
Charge-o - charge without the interest
Write-o - no loan at all
Settlement- lesser amount but with longer term
Balance in full- one time payment of balance
January 11, 2024
E ective Telephone Collection
-Pre-calling Plan
-The Collection Call
-Follow-up Calls
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In telephone collection…
-be speci c
-urgent
(should have not just remind but to obligate, dapat hindi request but a command)
Pre-call Planning
► Check whether your own company is at fault
► Check previous collection e orts
► Check the customer's payment record
► Find out who is the right person to talk with ►Prepare fact- nding questions
► Determine your preliminary proposal ►ldentify yourself and your company
►Give the reason for the call Make a strategic pause
Key Action in Good Call
► ldentify yourself and your company
► Give the reason for the call
► Make strategic pause
► Ask fact- nding questions
► Present your proposal
► Overcome objections
► Give the bene ts & consequences
► Obtain commitment from the customer
► Close the call
Remedial account management and Objectives of Remedial
Account Management
1. To nurse substandard doubtful accounts back to health.
2. To regularize credit and documentation de ciencies.
3. To strengthen weaknesses of the credit extension by way of addıtional collateral, secunty or
guaranty.
4. To locate missing customers.
5. To anticipate debtor's defenses.
Signs of delinquency
1. Delinqucncy (problem accounts)
2. Adverse trends (in demand ang product tas nagbago at hindi na in-trend, nagkakaroon ng
adverse
3. Fraudulent Infomatıon (nanloloko, iba ibang report ang binibigay)
4. Non-Cooperation of the Debtor (humihingi ka ng nancial documents pero ayaw magbigay)
5. Disapeance/Depreciation or Outnight Cannibaliztion of Collterals (pinapalitan yung parts ng
collateral/ nawawala yung sasakyan/ overused at gasgas na ang collateral —-dapat well-
maintained ang collateral)
6. Other Similar Causes (typhoons)
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Process of analyzing problem accounts
1. A review of the nancial statements of the debtor.
2. A review of the debior's account history.
3. A review of the sugporting documents to nd out if there are any defec's, that must be
corected.
4 An ocular inspection of the busines, and a re-appraisal of the collateral, security of the credit,
possbly also to include an apraisal of the debtor's ase's.
5. An interview of the debtors.
loss= nagiging bad debt expense, mababawas sa expense ng tax pag ni write-o kesa
Skip tracing
Basic Approaches
1. Subterfuge deceit (may gags and gimmicks)
2. Candid and straightforward
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Field Skip Tracing (laabas na sa o ce; lalapit at pupuntahan na sa employee, employment,
references. co-employees, punta sa meralco or water billing, gsis, pag-ibig, sss)
FINAL EXAM
Factoring-mga 6 lang daw
Monitoring of AR- aging, ratios, monitor
Collection Procedures
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