ANALYSIS OF RECEIVABLES OF 20 COMPANIES IN ACCOUNTING SERVICE X FOR THE YEAR 2006

The author examined liquidity and solvency in greater detail in the diploma thesis. A company's liquidity means its short-term solvency, for which the company must usually have sufficient cash or highly liquid resources. In the research part, she analysed the receivables of 20 companies in accounting service x for the financial year 2006. To determine why customers do not pay on time, she used the short-term solvency ratio to arrive at results showing whether customers are solvent or insolvent. It was recognised that the concepts of liquidity and solvency must be distinguished.

Problem

The author examined liquidity and solvency in greater detail in the diploma thesis. A company's liquidity means its short-term solvency, for which the company must usually have sufficient cash or highly liquid resources. A solvent company is one that has cash resources available that are greater than or equal to those needed to satisfy matured obligations.

The author also addressed payment indiscipline in the thesis, which is understood as non-compliance with agreed amounts, agreed deadlines and methods of settling obligations. Debt collection is an important factor in every company today. Since non-payment has become commonplace, we can resist this in various ways.

These methods are: written, telephone, personal and judicial collection.

Solution and Method

In the research part, she analysed the receivables of 20 companies in accounting service x for the financial year 2006. She analysed by presenting the age structure of receivables from customers for each individual month of 2006.

Results

To determine why customers do not pay on time, she used the short-term solvency ratio to arrive at results showing whether customers are solvent or insolvent. It was recognised that the concepts of liquidity and solvency must be distinguished. Liquidity expresses the transformation of a company's assets into monetary form, whilst solvency means its ability to settle obligations when they fall due.

The concepts are related because the transformation of assets is the most common source of cash for settling matured obligations. We distinguish between short-term and long-term solvency. A company is solvent in the short term when it has liquid resources available to settle matured obligations.

Long-term solvency means that the company has liquid resources available in the long term, which it achieves through growth in financial strength and maintaining and establishing long-term financial equilibrium. The Slovenian economy is characterised by chain non-payment, which is a consequence of both payment indiscipline and company insolvency. We speak of payment indiscipline when a company has sufficient cash resources available but nevertheless does not settle its obligations within the agreed deadlines, whilst in the case of insolvency the company does not have sufficient cash resources to cover its obligations, which usually leads to greater indebtedness.

Companies, including the company under study, face the problem of non-payment and its resolution, so the first necessary step is regular monitoring of receivables and early reminders of payment delays. It is also necessary to emphasise the importance of keeping records of actions and documents for debt collection, as these can later serve us for successful judicial collection. Written reminders are one of the most effective means of collection, as they politely remind the debtor of unsettled obligations.

If payment does not follow the written reminder, it makes sense to telephone the debtor at the company and enquire why settlement of the obligation has not yet occurred. In her diploma thesis, she analysed the receivables of 20 companies in accounting service x for the financial year 2006. She analysed overdue receivables that business entities do not settle by the maturity date and found that not a single business entity paid its obligation by the payment deadline.

She analysed by presenting the age structure of receivables from customers for each individual month of 2006. Why do customers not pay on time? Using the short-term solvency ratio, she arrived at results showing whether they are solvent or insolvent.

She thus classified them into two groups. For those companies that are solvent, the reason is most likely payment indiscipline. For the other companies that are not solvent, it is primarily important that they find the most favourable financing option as quickly as possible and thereby attempt to reduce delays in settling their obligations.