Development of Accounts Receivable Management in Russia

Abstract:

Accounts receivable arise from almost all company’s transactions with its customers, except in cases where payment is made on the day when goods are received and services are rendered. Receivables can have a negative effect on cash flows. A significant increase in accounts receivables and their percentage of total assets may be caused by: risky credit policies; a sharp increase in sales volume without advance payment; insolvency and bankruptcy of some customers, etc. Written off bad debts are expenses that decrease company’s profits. In Russia the amount of business entities’ accounts receivable, including past due receivables, has increased in absolute terms recently. In our research we propose a grading system that would help classify customers based on scoring by risk categories. We also propose ways to manage receivables in order to prevent an unjustified increase in debtors and the amount of their debts, especially high risk ones. The results of our research may be useful in reducing the risk of non-payment, preventing bad debts and improving Russian companies’ financial position.