Let us imagine the following situation. The company has cash in the amount of 1 000 000 y. e. These goods are purchased goods, which are further sold for 1 200 000 y. e. That is, the margin is 20%. Having received from customers a cash settlement for the delivered goods, our company has already 1,200,000 USD. i.e., for which the goods are again purchased. Having made the goods with the previous mark-up of 20%, we have inventories in selling prices already by 1,440,000. e., which we sell, we again receive money. It turns out a constant interconnected turnover.
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But the situation described here is too ideal. If in practice everything was solved so simply, then the life of many companies and, accordingly, their financiers, would become very easy.
- In reality, everything turns out differently. It is possible that the goods are sold, but the buyer has not paid for it yet. Or the conditions of settlements with suppliers are such that you need to pay without waiting for the receipt of money from buyers, or you need to purchase some office equipment, or … Such “or …” may be a lot. It remains to wait or wait for the money to come from the buyer, effectively closing the company, since there is nothing more to trade, or to look for some additional financial resources somewhere, so that, before the payment is received from the buyer, it is already necessary to purchase a new product and continue operations. For accounts receivable financing you will need to know more.
- As we know, they distinguish between own and attracted (borrowed) sources of financing. To its own sources include the share capital and retained earnings of the company. This is one of its own sources of financing, own accounts receivable can act. Of course, receivables alone will not finance anything; moreover, it will not even be required by itself if there are problems with its repayment. However, in taking appropriate measures to recover it, it can quite help out the company.
- Experience suggests that on a large number of domestic firms, the level of work with debtors is “out of the blue”. Buyer with a deferred payment can become even without any minimum control. Figuratively this disorder can be called sales “to everyone who knock on the door.”
Competition compels to meet the client, promising every possible concessions, discounts, indulgences, in order to win it, to sell their products. But let’s ask the question: “What is the point of winning a client who does not pay?” Of course, you can make almost any papers, submit a bunch of very serious documents to get your products from you.