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Accounts Receivable Management & Credit Policy

Energypac Electronics Limited


Novo Tower, 270 Tejgaon I/A, Dhaka-1208
Bangladesh

Table of content

SL No
01.00
02.00
03.00
04.00
05.00
06.00

06.01
06.02
06.03
06.04
06.05
06.06
06.07
06.08
06.09
06.10
06.11
06.12
06.13

Items
Purpose
Policy Statement
Factors Involving In Receivable Management
Who Should Know this Policy
Definition
Regulations
Classification
Rules
Customer Assessment
Approval of Credit Limit
Security of Credit Limit
Application for Credit
Receivables, Reporting and Its responsibilities
Category of Receivables on the basis of Customers
VAT & TAX Deduction at sources
Deduction from Salary
Authentication of Accounts Receivable
Allowable Structure for Credit Sales
Category of Accounts Receivables
Audit of Accounts Receivables
Collection through Post Dated Cheque
Schedule-I
Schedule-II
Schedule-III
Annexure-I
Annexure-II

Page No.
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Accounts Receivable Management & Credit Policy 2015

Energypac Electronics Limited

Accounts Receivable Management & Credit Policy


(Enforceable from the 1st 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 or
Accrual 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.

Energypac Electronics Limited

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Accounts Receivable Management & Credit Policy 2015

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 persons 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.
06.00 Regulations

Classification:
Regulations are classified into two major categories:
I. General Sales
a) Corporate;
b) Retail;
c) Distribution; and
d) Show room

Energypac Electronics Limited

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Accounts Receivable Management & Credit Policy 2015

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 the
immediate 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.

Energypac Electronics Limited

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Accounts Receivable Management & Credit Policy 2015

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
Departments)

(Companies,

NGOs,

Local

authorities

&

Government

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 divisions customers are only allowed to deduct VAT
and TAX against payment;
b) Treasury Challan for VDS(VAT Deduction at Sources) must be submitted to
the 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 customers confirmation/clearance on
such credit.

Energypac Electronics Limited

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Accounts Receivable Management & Credit Policy

I 2015

06.09 Authentication of Accounts 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 Accou nts Receivable


Company's internal audit Department or the accounts department, on its own
interest, w ill audit the customers' accounts directly at any time for confirmation of
balance wit hout any prior notice to any party.

06.113 Collection through post dated c heque


No cheque will be accounted as collection according to date of cheque, Cheque will
be treated as 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 Amendment
The policy may be amended time to time as the management thinks necessary.

A~prQved

By;

Engr. Nurul Aktar,


CEO & Director

Energypac Electron ics Limited

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Accounts Receivable Management & Credit Policy 2015


Schedule: I
Allowable Structure for Credit Sales

Category of
Customers
Non enrolled
shops

Credit Limit

Credit Period
(days)

Security Required

Approving
Authority

N/A

N/A

N/A

N/A

Enrolled shops

30,000/=

Closure of the
month

Security Cheque/PDC

Head of Sales

Distributors

50% of
monthly
sales

Closure of the
month

1. Bank Guarantee
2. Post Dated Cheque

COO

Dealer

50% of
Proven
monthly
sales

Half yearly
Closure

As per
agreement

Enrolled
Corporate
Non Enrolled
Corporate
&
Individual
Customers
Inter-company

1. Post dated Cheque


2. Bank Guarantee

COO

As per agreement
(Maximum of 45
days)

1. Post Dated Cheque


2. Bank Guarantee
3. Irrevocable Standby
Letters of Credit

COO

50,000/=

Maximum 21 days

1. Post Dated Cheque


2. Bank Guarantee

N/A

Maximum 30
days

Post Dated Cheque

COO, In special
cases CEO may
recommend for any
credit limit.
N/A

Schedule: II
Category of Receivable
Period of Receivable
Within allowed Credit Period
1 to 15 days overdue
16 to 30 days overdue
31 to 60 days overdue
Overdue above 60 days

Energypac Electronics Limited

Status of Receivable
Very Good
Good
Excellent
Bad
Very bad

Grade of Receivable
A
B
C
D
E

Page 6

Accounts Receivable Management & Credit Policy 2015

Schedule: 3
Set of documents for creating new customers account
Sl
1
02

Documents
Trade License
VAT Registration Certificate

03
04
05
06
07
08
09
10
11
12
13

TIN Certificate
Photographs
Bankers Certificate & Statement
Own Transport list
Manpower List
Guarantors Certificate
Business Address
Solvency / Credit Facility

Energypac Electronics Limited

Status

Comments

Page 7

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

Annexure-II

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Only for official use

Designation

Decision

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

Name, Signature & Date