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FINANCIAL
MANAGEMENT IN EDUCATION
By:
Samson C. Quanico
(M.A.Ed. –Educational Management
Pasig Catholic School
School of Graduate Studies
MANAGEMENT OF
ACCOUNTS
RECEIVABLE
BY:
SAMSON C. QUANICO
M.A.Ed, Educational Management
Pasig Catholic School
School of Graduate Studies
When a business extends credit to its
customers, it records a revenue transaction at
the time it provides its customer with goods or
services. The transaction results in a revenue
account increase and an increase in an asset
account. Since no cash is received, the asset
account that is increased is Accounts
Receivable.
What is an account receivable?
Example. When SCQ Ventures made its December
delivery the Pasig Grower’s Co-op did not pay the
balance owed until January. When the delivery was
completed the Co-op had an obligation to pay SCQ
Ventures for its services. SCQ Ventures completed the
$50,000 delivery on December 20. Recall that the Co-
op had already paid $5,000 on the delivery, so on
December 20 the following journal entry would be
made:
Primary reasons for increases:
1. Increasing sales
2. Inflation
3. Extended credit terms during
recessions.
A. Accounts receivable as a percentage
of total assets almost doubled for the
typical U.S. corporation
1. Investment in accounts receivable
should generate a return equal
to or in excess of the return
available on alternative
investments.
A. Account receivables are
an investment
Three primary variables for
credit policy administration
1. Credit standards
a. The firm screens credit applicants on the basis of prior record
of payment, financial stability, current net worth, and other factors.
b. 5 C’s of Credit: character, capital, capacity, conditions, collateral.
C. Dun & Bradstreet Information Services (DBIS)
1. Business Information Report
2. Commercial Credit Scoring Report
3. Industry Credit Score Report
d. D-U-N-S Data Universal Number System is a unique nine digit code used
globally and accepted by the United National and other international agencies as
global business identification
2. Terms of trade
Terms of trade is an index of the price of a country's exports in
terms of its imports. The terms of trade are said to improve if that index
rises. (Obstfeld and Rogoff, p 25)
Not the contractual conditions of sale between a buyer and a
seller, but the quantity of foreign goods and services (imports) that a
country can purchase from the proceeds of the sale of its goods and
services (exports) of a given quantity. It is a measure of a country's
trading and is expressed as the ratio of an index of export prices to an
index of import prices. Terms of trade of a country improve when the
prices of its exports rise in comparison with the prices of its imports,
vice versa.
3.Collection policy
Procedures a firm follows in attempting to
collect accounts receivables.
Collection Policy
The steps that a company follows in ensuring
timely payment of its accounts receivable. Collection
policies vary by company. An example of the steps a
company can takes involves a friendly phone call to make
sure payment is made on time, followed by a firm phone
call when a payment is late, followed by a threatening
letter, and finally turning the client over to a collection
agency. Companies may deviate from their collection
policy for long-standing or otherwise trusted customer.
Measures to asses collection
a.Average collection period
b.Ratio of bad debts to sales
c.Aging of accounts receivable
a. Average Collection period
The approximate amount of time that it
takes for a business to receive payments owed,
in terms of receivables, from its customers and
clients
b. Debt Ratio
A financial ratio that measures the extent of a company’s
or consumer’s leverage. The debt ratio is defined as the
ratio of total debt to total assets, expressed in percentage,
and can be interpreted as the proportion of a company’s
assets that are financed by debt.
The higher this ratio, the more leveraged the company and
the greater its financial risk. In the consumer lending and
mortgage businesses, debt ratio is defined as the ratio of total
debt service obligations to gross annual income.
A periodic report showing all outstanding
receivable balances,
broken down by customer and month due.
c. Aging of accounts receivable
The process of investigating a
company's accounts receivable according to how
long individual invoices have been outstanding.
Analysts can use aging to identify bad debt and/or
problems with the company's credit policy.
Inventory Management
Two basic costs associated with
inventory
The first step toward achieving
minimum inventory costs is determine of the
optimal order quantity. This quantity may be
derived by use of the economic order
quantity formula
Where:
S= sales
O= the cost to process an order
C annual carrying costs per unit in dollars
Minimum total inventory costs will result if the
assumptions of the model are applicable and the firm’s
order size equals the economic ordering quantity.
Just-in-Time Inventory
Management (JIT)
End
References:
http://financial-dictionary.thefreedictionary.com/Collection+policy
Read more:
http://www.businessdictionary.com/definition
/terms-of-trade.html#ixzz2yUoc1HXI

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Financial Management in Education

  • 1. FINANCIAL MANAGEMENT IN EDUCATION By: Samson C. Quanico (M.A.Ed. –Educational Management Pasig Catholic School School of Graduate Studies
  • 2. MANAGEMENT OF ACCOUNTS RECEIVABLE BY: SAMSON C. QUANICO M.A.Ed, Educational Management Pasig Catholic School School of Graduate Studies
  • 3. When a business extends credit to its customers, it records a revenue transaction at the time it provides its customer with goods or services. The transaction results in a revenue account increase and an increase in an asset account. Since no cash is received, the asset account that is increased is Accounts Receivable. What is an account receivable?
  • 4. Example. When SCQ Ventures made its December delivery the Pasig Grower’s Co-op did not pay the balance owed until January. When the delivery was completed the Co-op had an obligation to pay SCQ Ventures for its services. SCQ Ventures completed the $50,000 delivery on December 20. Recall that the Co- op had already paid $5,000 on the delivery, so on December 20 the following journal entry would be made:
  • 5. Primary reasons for increases: 1. Increasing sales 2. Inflation 3. Extended credit terms during recessions. A. Accounts receivable as a percentage of total assets almost doubled for the typical U.S. corporation
  • 6. 1. Investment in accounts receivable should generate a return equal to or in excess of the return available on alternative investments. A. Account receivables are an investment
  • 7. Three primary variables for credit policy administration 1. Credit standards a. The firm screens credit applicants on the basis of prior record of payment, financial stability, current net worth, and other factors. b. 5 C’s of Credit: character, capital, capacity, conditions, collateral. C. Dun & Bradstreet Information Services (DBIS) 1. Business Information Report 2. Commercial Credit Scoring Report 3. Industry Credit Score Report d. D-U-N-S Data Universal Number System is a unique nine digit code used globally and accepted by the United National and other international agencies as global business identification
  • 8. 2. Terms of trade Terms of trade is an index of the price of a country's exports in terms of its imports. The terms of trade are said to improve if that index rises. (Obstfeld and Rogoff, p 25) Not the contractual conditions of sale between a buyer and a seller, but the quantity of foreign goods and services (imports) that a country can purchase from the proceeds of the sale of its goods and services (exports) of a given quantity. It is a measure of a country's trading and is expressed as the ratio of an index of export prices to an index of import prices. Terms of trade of a country improve when the prices of its exports rise in comparison with the prices of its imports, vice versa.
  • 9. 3.Collection policy Procedures a firm follows in attempting to collect accounts receivables. Collection Policy The steps that a company follows in ensuring timely payment of its accounts receivable. Collection policies vary by company. An example of the steps a company can takes involves a friendly phone call to make sure payment is made on time, followed by a firm phone call when a payment is late, followed by a threatening letter, and finally turning the client over to a collection agency. Companies may deviate from their collection policy for long-standing or otherwise trusted customer.
  • 10. Measures to asses collection a.Average collection period b.Ratio of bad debts to sales c.Aging of accounts receivable
  • 11. a. Average Collection period The approximate amount of time that it takes for a business to receive payments owed, in terms of receivables, from its customers and clients
  • 12. b. Debt Ratio A financial ratio that measures the extent of a company’s or consumer’s leverage. The debt ratio is defined as the ratio of total debt to total assets, expressed in percentage, and can be interpreted as the proportion of a company’s assets that are financed by debt. The higher this ratio, the more leveraged the company and the greater its financial risk. In the consumer lending and mortgage businesses, debt ratio is defined as the ratio of total debt service obligations to gross annual income.
  • 13. A periodic report showing all outstanding receivable balances, broken down by customer and month due. c. Aging of accounts receivable The process of investigating a company's accounts receivable according to how long individual invoices have been outstanding. Analysts can use aging to identify bad debt and/or problems with the company's credit policy.
  • 14. Inventory Management Two basic costs associated with inventory
  • 15.
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  • 17. The first step toward achieving minimum inventory costs is determine of the optimal order quantity. This quantity may be derived by use of the economic order quantity formula Where: S= sales O= the cost to process an order C annual carrying costs per unit in dollars
  • 18. Minimum total inventory costs will result if the assumptions of the model are applicable and the firm’s order size equals the economic ordering quantity.
  • 20.
  • 21.
  • 22.
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  • 24. End

Editor's Notes

  1. inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.[1] When the general price level rises, each unit of currency buys fewer goods and services.
  2. of the model