Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsManaging ReceivablesSales income is a cash fl ow driver of all businesses and converting the salesinto cash is one of the most important processes in any business. Where salesare offered on credit, fi nancial systems will refer to the amount outstanding as“receivables”. Managing the payments due from receivables can consume alot of time and efforts if proper controls and procedures are not put in place atthe outset. Your customers are your key to business success; however, untilyou receive the cash for the sale, effectively you have given a donation to yourcustomers! So it is important to manage all outstanding payments from yourcustomers and ensure that you have good procedures in place to encourageyour customers to pay the right amount and on time.Effi cient receivables collection procedures includethe followings:• Set up credit control• Establish payment terms• Managing customer relationshipsHINTEnsure thatyou have goodprocedures inplace to encourageprompt paymentThe following checklist can be used to compare your existing proceduresfor collecting outstanding amounts from your customers and help to identifypossible improvements:1. Set up Credit ControlActionRecordcustomercredit checkChecklist for Managing ReceivablesDescriptionHave a system in place that record credit check for all newcustomers to ensure that the process has been properlyundertaken.Rank allcustomersaccording tocreditriskSet creditlimitsThis could be in terms of the time they have been in business,the quality of the credit check, the credit limit allowed for eachcustomer etc.Set appropriate credit limit for each customer. The limit shouldbe set in accordance with the credit-risk rating as set outabove.60Chapter 2-5 p22-65 Eng.indd 608/15/11 5:01:59 PM