Analysis of the Operation and Financial Condition of the Enterprise

Analysis of the Operation and Financial Condition of the Enterprise sales limits for specific groups or series of goods are established; the terms for collection of debtors’ debts are developed; a system of contractual penalties used in cases of delays in payment isestablished.From the practical point of view Enterprise N does not have any financialpossibilities for selling of goods on credit. However, this possibility can be found on theaccount of the trade credit or post-payment of the suppliers. In this case the suppliers ofgoods are forced to instead of waiting for the payment due for the goods according to thepro-forma invoices wait rather for any payments received by Enterprise N from thebuilding contractors for the works performed in which the materials of the suppliers havebeen input. Starting from Quarter 2 of 2XX9 this situation is improving due to the use ofthe services from the factoring companies in the course of project realisation.By taking into account the order and specifics prevailing in the constructionindustry, when the policy on trade credit or payment for goods and services is drafted,there is no need for the following three steps in the development of the said policy: the maximum amount to be channelled into accounts receivable is established; the list of goods available for sales on credit is prepared; sales limits for specific groups or series of goods are established, due to the termsof payment for the projects being established by the building contractors.Irrespective of the fact that the building contractors impose the terms of paymentEnterprise N should develop a system of collection of debtors’ debts together with asystem of applicable fines that can be imposed by the enterprise in cases of delays inpayments.There is a procedure introduced in Enterprise N for collection of debtors’ debts:1) On the date of payment of a debtor’s debt there is a call made to the accountingdepartment of the debtor in question during which it is being clarified whetherthe debtor has transferred the payment or not. If yes, it is requested to send thepayment order by fax, but if the amount due has not been transferred yet, thereason is found out as well as the date when it expects to pay for the debtoverdue.2) If the reason for the failure to pay the debt is substantiated, the promised date ofpayment is awaited.3) If the reason for the failure to pay is not satisfactory to the enterprise, areminder is issued with the request to pay the debt within the next days.4) If the debt is not paid for during this time there is another reminder sent withthe request to pay for the debts outstanding within the next days.5) If the invoices are not paid for even within this time there is a claim being sentfor the outstanding invoices including the warning that if this debt is not paidfor within the five next days the debt will be collected by a court procedure.6) If the debt is not paid for even within this time a second claim is being sent tothe debtor for the outstanding invoices including the warning that if this debt isnot paid for within the five next days the debt will be collected by a court. Inthe second claim the amount of debt is already made up of the principal amountof the debt, i.e., the amount of the invoice outstanding, and the contractual115