accounts receivable management & credit policy.pdf

8/17/2019 Accounts Receivable Management & Credit Policy.pdf

1/12

Accounts Receivable Management Credit Policy

Energypac Electronics LimitedNovo Tower, 270 Tejgaon I/A, Dhaka-1208

Bangladesh


2/12

Table of conTenT

SL No Items Page No.01.00 Purpose 1

02.00 Policy Statement 1

03.00 Factors Involving In Receivable Management 1

04.00 Who Should Know this Policy 1

05.00 Definition 1

06.00 Regulations 2

Classification 2

Rules 3

06.01 Customer Assessment 3

06.02 Approval of Credit Limit 306.03 Security of Credit Limit 3

06.04 Application for Credit 3

06.05 Receivables, Reporting and Its responsibilities 3

06.06 Category of Receivables on the basis of Customers 4

06.07 VAT & TAX Deduction at sources 4

06.08 Deduction from Salary 4

06.09 Authentication of Accounts Receivable 5

06.10 Allowable Structure for Credit Sales 5

06.11 Category of Accounts Receivables 5

06.12 Audit of Accounts Receivables 5

06.13 Collection through Post Dated Cheque 5

Schedule-I 6

Schedule-II 6

Schedule-III 7

Annexure-I

Annexure-II


3/12

Accounts Receivable Management & Credit Policy 2015

nergyp c Electronics Limited Page 1

nergyp c

lectronics Limited

Accounts Receivable Management & Credit Policy(Enforceable from the 1

st day of July, 2015)

01.00 Purpose

A major activity of the Energypac Electronics limited (EELL) is the generation of Revenue through

the Sale of goods and services which enhance promote or support its Production, Trading, Project

Implementation and Govt. Regulatory functions. Revenue Generated from sales are credited to

various departments to support their ongoing operations. The EELL Accounts receivable

Management and/or Credit policy has been developed to prescribe the proper methods by which

such revenue shall be collected and recognized. ………………............................................................I

02.00 Policy Statement

Revenue generated by the EELL shall be recognized & collected in one of two ways: Cash basis orAccrual Basis. The Cash basis shall be used whenever payment for goods or services is to be received

in advance of their provision. If payment is due anytime during or after the provision of goods &

services, the accrual basis shall be employed. Variations of this

03.00 Factors involving in Receivable management:

The terms of credit granted to customers ;The policies and practices of EELL in determining which customers are to be approved

for credit.

The paying practices of credit customers.The vigor of the sellers, collection policies and practice.The volume of credit sales.

04.00 Who should know this Policy?

Budget Area Administration

Management Personnel

Head of the Departments

Supervisors

05.00 Definitions

For the purpose of this policy, the terms used are defined as follows:

a)

“Accounts Receivable” means receivable against all credit sales of goods and services except

non trading intercompany transactions.


4/12



b)

‘’Benefit’’ amount or product or gift or incentives offered to the sales persons or distributors

or dealers or retailers or any other person during various occasions or promotions.

c)

“Customer” means a person or any proprietorship organization or any company or local

authority or any NGO or GOB department who purchase goods & services form Energypac

Electronics Ltd

d)

“Credit Sales” includes all sales except cash sales.

e)

‘’Credit Limit” a ceiling amount upto which credit sales may be allowed.

f)

“Due” the date when payment should be received by the company. receivable includes the

aggregate amount of unpaid sales.

g)

“Sales person’’ includes any person directly transect with customers.

h)

“Immediate Supervisor” is he, who supervises a sales person’s sales accounts.

i)

‘’Individual users’’ are who purchase goods directly from the company.

j)

“Retailers” are those groups of customers, who directly purchase goods from the company

and sale to final consumers.

k)

“Dealer/Distributors” are those groups of customers who are engaged in business with the

company under a dealership or distributorship agreement.

l)

“Corporate’’ are those group of repeated customers who procures goods or services from

the company through Work Order or Purchase Order or under Corporate Agreement/Deal in

the “Business to Business” principle.

m)

“Inter-company” are companies sister concern under the umbrella of Energypac.

n)

“Commission” includes commission on sales and collection at different rates at different

stages.

o)

“Enrolled shop” are those shops having business transactions in the company both as

present and regular customer. Others are Non-enrolled shop.

06.00Regulations

Classification:Regulations are classified into two major categories:

I.

General Sales

a)

Corporate;

b)

Retail;

c)

Distribution; and

d)

Show room


5/12



II.

Project Sales

a)

Professional Lighting Engineering & Compliance Audit;

b)

Renewable Energy; and

c)

Green Divisions.

Rules:

06.01 Customer Assessment:

Before allowing credit sales the concerned sales person will assess the customer and

the concerned manager will approve it on the basis of Category of business, Length

of Business History, Strength of Solvency, personal integrity & security against credit.

(Assessment Form Annexure-I & II)

06.02 Approval of Credit limit:

After assessing the customer, as well as on the basis of recommendation by theimmediate supervisor and vetting from Head of Finance & Accounts or Nominated

person by him, the concerned person will have to get approval of a credit limit from

the management of the company. Credit limit to be restricted in Software and it has

to be followed strictly.

06.03 Security of Credit Limit:

Credit limit is allowable upon receipt of any security in the form of:

a) A Security Cheque (Verified by the Finance & Accounts Department)

b) Irrevocable Bank Guarantee (issued by a scheduled bank)

c) Irrevocable Standby Letters of Credit or local LC.

06.04 Application for credit:

Every Customer (Retail, Distributor & corporate customer except those are issuing

Purchase/Work Order mentioning terms of payment) should approach on letter head

pad for enjoying any credit from the company for a specific period. Credit period shall

not exceed the period stated in the Schedule-I.

06.05 Receivables, Reporting and its Responsibilities

06.05.01: The Concerned sales person and immediate supervisor will be jointly

responsible for recovering the receivable against every single invoice before the

expiry of Credit period allowed.


6/12



06.05.02: The Concerned supervisor will report any overdue receivable to the Head of

Sales, COO, and Accounts department within 3 (three) working days after expiry of

credit period with justification.

06.05.03: Head of Sales will submit an overall receivable aging report with justification

within 5 working days to CEO/COO on month closing basis.

06.06 Category of credit on the basis Customers

06.06.01: Retail (Credit against sales directly to shop owners)

06.06.02: Distributors & Dealers (Credit against sales to the customers who are under

dealership/distributorship agreement

06.06.03: Corporate (Companies, NGOs, Local authorities & Government

Departments)

06.06.04: Inter-companies (Companies under the umbrella of Energypac)

06.06.02: Individuals users (employees of Energypac group, individual customers,

etc)

06.07 VAT Deduction at Sources & Tax Deduction at Sources:

Following conditions to be met in the case of VAT or TAX deduction at sources:

a)

Corporate and project division’s customers are only allowed to deduct VAT

and TAX against payment;

b)

Treasury Challan for VDS(VAT Deduction at Sources) must be submitted tothe EELL accounts to adjust the amount within 15 days from such deduction;

and

c)

Treasury Challan for TDS(Tax Deduction at Sources) must be submitted to

the EELL accounts to adjust the amount within 45 Days from such

deduction.

06.08 Deduction from salary:

The management may deduct (if thinks fit), any amount from gross salary, until full

settlement, will be deducted to adjust Accounts Receivable from the concerned sales

person in case of receivable exceeding 90(sixty) days overdue.

For any uncollectible credit then salary, TA/DA, Incentives or any other benefits

entitled by the employee to be held up until customer’s confirmation/clearance on

such credit.


7/12

Accounts Receivable Management redit Policy I

2 15

06.09 Authentication of Accoun

ts

Receivables:

Where any dispute arises between party's own account and company sales account,

Company's Accounts department will check the transaction history and duly intimate

the

actual amount.

06.10 Allowable Structure for Credit sales

Schedule-1( one) of this policy categorizes customers in terms of Credit Limit, Credit

Period and Required Security.

06 11 Category of Accounts Receivables

Schedule-2(two)

of

this policy categorizes Accounts Receivable status grading A-E.

06.

12

Audit of ccoun

ts

Receiv

able

Company's internal audit Department or

the

accounts department, on its own

interest, w i

ll

audit

the

customers' accounts directly

at

any

time for

confirmation

of

balance wit h

out

any prior notice

to

any

party

06.

3

Collection through post dated c heque

No cheque will be accounted s collection according to date of cheque, Cheque will

be treated

s

collection upon clearing only.

06.14 Non enrolled customers

For non-enrolled customers minimum

of

6 months cash transaction

to

be conducted

to

make

them

enrolled.

06.14 mendment

The policy may be amended time

to

time

s

the management thinks necessary.

By

Engr Nurul

Aktar

CEO Director

nergypac

Electroni

cs

Limited

Page 5


8/12



Schedule: I

Allowable Structure for Credit Sales

Category of

CustomersCredit Limit

Credit Period

(days)Security Required

Approving

Authority

Non enrolledshops

N/A N/A N/A N/A

Enrolled shops 30,000/=Closure of the

monthSecurity Cheque/PDC Head of Sales

Distributors50% of

monthlysales

Closure of themonth

1. Bank Guarantee2. Post Dated Cheque

COO

Dealer

50% ofProven

monthly

sales

Half yearlyClosure

1. Post dated Cheque2. Bank Guarantee

COO

EnrolledCorporate

As peragreement

As per agreement(Maximum of 45

days)

1. Post Dated Cheque2. Bank Guarantee

3. Irrevocable StandbyLetters of Credit

COO

Non EnrolledCorporate&IndividualCustomers

50,000/= Maximum 21 days1. Post Dated Cheque2. Bank Guarantee

COO, In specialcases CEO may

recommend for anycredit limit.

Inter-company N/AMaximum 30

daysPost Dated Cheque N/A

Schedule: II

Category of Receivable

Period of Receivable Status of Receivable Grade of Receivable

Within allowed Credit Period Very Good A

1 to 15 days overdue Good B

16 to 30 days overdue Excellent C

31 to 60 days overdue Bad D

Overdue above 60 days Very bad E


9/12



Schedule:

Set of documents for creating new customers’ account

Sl Documents Status Comments

1 Trade License

02 VAT Registration Certificate

03 TIN Certificate

04 Photographs

05 Bankers’ Certificate & Statement

06 Own Transport list

07 Manpower List

08 Guarantors’ Certificate

09 Business Address

10 Solvency / Credit Facility

11

1213


10/12

Annexure-I

Assessment Procedures for distributor

Initial Offer to the probable

Dealer/Distributor

Written Application to be

submitted by Interested

Distributor/Dealer

Assessment form to be fill up by

the Concern ZSM/RSM and

initially it is to be assessed by

ZSM/RSM (Schedule-4)

3 months observation period

with advance cash business upon

approving from Head of Sales

and Head of RnD

Recommendation from HOS and

HoRnD for distributorship with

the current transaction ledger

and assessment form

Agreement to be signed by the

COO


11/12

1

Annexure-II

GbvwR© c¨vK B‡jKUª wbKª wjwg‡UWcwi‡ekK wb‡qvM msµvš— Z_¨vejx

1 cwi‡ekK Gi aibt □

m¤c~Y© bZz bGjvKv I bZz b cwi‡ekK

□ cz ivZb GjvKvqcwieZ© xZ bZzb cwi‡ekK

□ GKBGjvKvq

wØZxq bZz b cwi‡ekK

□ Ab¨vb¨

2 eëmv cÖ wZôv‡bi bvg t

3 wVKvbv t

4 gvwj‡Ki bvg t

5 eZ© gv‡b Ab¨ ‡h mKj †Kv¤úvbxi cwi‡ekK t

6 eëmvi †gqv`Kvj t

7 eZ© gvb wVKvbv (c~Y© v½) t

8 ’̄ vqx wVKvbv t

9 eZ© gvb eëmvi aiY t

10 cwi‡ekbv Kv‡R AwfÁZv t

11 ‡jb‡`bK… Z e¨vsKmg~‡ni bvg t

12 wK cwigvb UvKv cywR wewb‡qv‡M B”Qy K Ges wewb‡qv‡Mi Drm

t

13 cwi‡ekbv GjvKvi we¯ — vwiZ weeiY t

GjvKv t

‡UwiUix t

wiwRqb t

‡jb‡`b t

‡MÖW t

14 ‡dvb bv¤^ vi t wUGÛwU t †gvevBj t d¨v· t


12/12

2

Annexure-II

15 Av‡e`bKvixi eëmvq eënviK… Z Uª vÝ‡cvU© I g¨vbcvIqv‡ii weeiY t

Uª vÝ‡cvU© g¨vbcvIqvi wcK-Avc gvB‡µv

‡eexf¨vb /†Uw·f¨vb

Uª vB f¨vb Ab¨vb¨ ‡gvU g¨v‡bRvi ‡óviwKcvi GKvD›U¨v›U ‡mjm& g¨vb Wª vBfvi

16 Av‡e`bKvixi eëmvqxK Awdm I†MvWvD‡bi weeiY

t AwdmtaiY t

mvBR t ‡jv‡Kkb t Uª vÝ‡cvU© myweav t

‡MvWvDb taiY t

mvBR t ‡jv‡Kkb t Uª vÝ‡cvU© my weav t

17 eZ© gv‡b Av‡e`bK… Z GjvKvi gvwmK fwjDg

fwjDg wm Gd Gj wUDe jvBU e¨vjv÷

my BPÑm‡KU mvwK© U ‡e« Kvi Ab¨vb¨ ‡gvU

eZ© gvb †gvU fwjDg

eZ© gvb wbR ^̄ weµq

cwi‡ekK c` cÖ vwßi 3 gv‡mi g‡a¨ cÖ Z¨vwkZ wbR ^̄ weµq

18 mshy w³

t□ `yB Kwc cvm‡cvU© mvBR Qwe

□ ‡Uª W jvB‡mÝ Gi d‡UvKwc

□ b¨vkbvj AvB.wW KvW© Gi d‡UvKwc

□ wUb mvwU© wd‡KU Gi d‡UvKwc

□ e¨vsK mj‡fÝx mvwU© wd‡KU

□ cwi‡ekK wb‡qvM msµvšÍ Z_¨vejx dig

□ ‡jUvi ‡nW c¨vW

Av‡e`bKvixi ^̄ v¶i I mxj

☼ Only for official use Designation Decision Name, Signature & Date

Verified By SE/MO/SMO □ YES □ NO

Checked By AM/DM/RSM □ YES □ NO

Recommended By Head of Sales/R&D □ YES □ NO

Approved By COO □ YES □ NO