SME LOGIX: Volume 1, Issue 4 DEBTOR 21 October, 2013 This is CURRENT SALES (revenue, fee or income) LATER CASHed*. It is current resources issued/lent out for later recovery (or conversion to cash). For instance, you sold goods worth N1,300,000 to a customer in September 2013 and this customer will not pay until April 2014. If your accounting period ends 31 December, this customer will be reported as debtor at 31 December 2013. Accounting Implications: although cash will be received in April 2014, the N1.3 million will be included in your sales for the current year, thereby considered in arriving at your profit for the year 2013. To Do: Create a list of all the entities or people that owe you (i.e. debtor schedule). Update the schedule regularly for increases (in amounts owed by existing debtors or fresh sales/debt by a new customer). Compare the total amount on the debtor schedule with the value on your liability schedule (it shows how cash-buoyant or cash-stranded you are or will be shortly). Compare current debtors with current sales/income – it shows the soundness of your credit policy. Create a realistic recovery plan. Improve on your credit policy. Update the schedule regularly for decreases (i.e. recovery). Remember: “If you cannot measure it, you cannot manage it.” *At Educologix, we relate professional jargons in layman words.
Posted on: Mon, 21 Oct 2013 08:51:20 +0000
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