FNSACC302A Administer Subsidiary Accounts and Ledgers 1. A new client has approached you and provided promising income statements for the past few years. They have expressed interest in buying large quantities of your product and have asked for a 60 day payment term. Since your average payment term is 30 days, your finance manager has concerns and asks for your advice. What source of information can you use as a cost effective way to assess this new client’s credit rating? An agency such as Veda or Dun and Bradstreet can be employed to conduct a credit history check though they do charge a small fee. Someone can conduct their own credit history check on a potential new client by requesting and analyzing Credit card statements/Bank account statements - go through and review any items such as loan repayments or bill payments that have been rejected or have "bounced" due to insufficient funds. This may confirm cash flow problems. Other ways of of assessing the credit rating of a new client is to ask them to provide bank references, client references or check their business registration details on the Australian Business Register. 2. After conducting credit rating research, you have decided the new client is a trustworthy business and have agreed to a 45 day payment term. What actions should you take if they breach the agreed trading terms and your credit policy? Recommend the steps you would take and the evidence you would gather. In the first instance I would recommend that both parties agree to the payment terms and a regular billing cycle (in this case 45 days) in writing. I would also suggest having an early payment incentive such as a discount worked in to the terms to encourage payment on time. If the terms are breached then any work or supply of goods should be suspended until payment is received. 3 © MWT Institute RTO #6954 FNSACC302A Administer Subsidiary Accounts and Ledgers CAT 1 v1.0 August 2014 FNSACC302A Administer Subsidiary Accounts and Ledgers 3. You are planning to make a phone call to investigate the reason why the client is not paying. Plan your call in detail and have a guess at what the client may tell you. The conversation flow would include: * Asking the client whether there has been any problems with the service/supply of goods. If there has been an issue then the business should sort out the issue by either completing the service or resupplying the goods. * If there has been no problems then state that payment has not been received and ask if they are having difficulty paying the amount. If there are problems with payment due to financial difficultly then suggest a payment plan. * If there are no problems with paying the amount then ask when the payment will be made and agree to a date. If the client states that they don't know when payment will be made the business should suggest to the client that they will contact them the following day once they have had the chance to investigate. 4. You have made numerous phone calls to the client communicating the outstanding payment against the agreed 45 days payment term. You have since sent a letter of demand but there is still no response from the debtor. Describe the next available legal actions you may take. If the business ignores the letter of demand an option would be to invite them to go to mediation (ACCC/VCAT) to try and sort out what monies are owed and sort out any potential issues. This is a good option to consider before going to court as it can be an expensive and time consuming process. 5. You have been asked to prepare a spreadsheet report of customers who have overdue accounts. Those customers are East Trading $4,000 - 30 days overdue, JD International $5,000 60 days overdue and One Trade $6,000 - 90 days overdue. When preparing the report, make sure 4 © MWT Institute RTO #6954 FNSACC302A Administer Subsidiary Accounts and Ledgers CAT 1 v1.0 August 2014 FNSACC302A Administer Subsidiary Accounts and Ledgers you include the overdue balance, possible cause of the overdue balance and your debt recovery plan. When the report is finished how and to whom will you distribute the report? How will you file the report so it is easily located for future reference by any staff member? (Draft an Excel spreadsheet and include the instructions for the distribution process; the distribution process may include the personnel involved and the credit rating policy). 6. When a company cheque is drawn for monthly rent payment from the general ledger, which legislative requirement regulates this transaction? How do you make sure the rent payment made to the landlords is accurate? All rental payments are governed by the signed Commercial Tenancy Agreement between a tenant and landlord. Ultimately any rental transaction is regulated by this act for the state the rent is being paid in. 5 © MWT Institute RTO #6954 FNSACC302A Administer Subsidiary Accounts and Ledgers CAT 1 v1.0 August 2014
