Operating a Cash Management and Credit Control System
Unit summary
This unit is concerned with the management of cash and credit. The unit involves the management of cash balances as well as the granting of credit and the collection of outstanding debts.
Unit details
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15 Business, Administration and Law
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15.1
Accounting and Finance
Assessment Methodology: Centrally set skills test of a minimum of 3 hours taken under high control conditions, or, if NVQ, work-based evidence.
You must have knowledge and understanding of: The Business Environment: 1. The main types of cash receipts and payments: regular revenue receipts and payments; capital receipts and payments; drawings/dividends and disbursements; exceptional receipts and payments; 2. The basic structure of the banking system and the money market in the UK and the realtionships between financial institutions; 3. Bank overdrafts and loans; terms and conditions; legal relationship between bank and customer; 4. Types of marketable security (Bills of exchange, certificates of deposit, government securities, local authority short term loans); terms and condidtions; risks; 5. Government monetary policies; 6. Legal issues: basic contract; terms and conditions of contracts relating to the granting of credit; Data Protection legislation and credit control information; 7. Sources of credit status information; 8. External sources of information: banks, credit agencies and official publications; 9. Legal issues: remedies for breach of contract; 10. Legal and administrative procedures for the collection of debts; 11. The effect of bankruptcy and insolvency on organisations. Accounting Techniques: 12. Form and structure of cash budgets; 13. Lagged receipts and payments; 14. Basic statistical techniques for estimating future trends: moving averages, allowance for inflation; 15. Computer models to assess the sensitivity of elements in the cash budget to change (e.g. price, wage rate changes); 16. Managing risk and exposure; 17. Discounts for prompt payment; 18. Interpretation and use of credit control information; 19. Methods of collection; 20. Factoring arrangements; 21. Debt insurance; (continued below)
Simple Merge:
NOS: (continued from above)
22. Methods of analysing information on debtors: age analysis of debtors; average periods of credit given and received; incidence of bad and doubtful debts; 23. Evaluation of different collection methods. Accounting Principles and Theory: 24. Cash flow accounting and its relationship to accounting for income and expenditure; 25. Liquidity management; 26. Understanding that the accounting systems of an organisation are affected by its organisational structure, its administrative systems and procedures and the nature of its business transactions; 27. Understanding that recording and accounting practices may vary in different parts of the organisation; 28. An understanding that practice in this area will be determined by an organisation's specific financial regulations, guidelines and security procedures; 29. An understanding that in public sector organisations there are statutory and other regulations relating to the management of cash balances; 30. Understanding that practice in this area will be determined by an organisation's credit control policies and procedures; 31. An understanding of the organisation's relevant policies and procedures.
Based on AOSG Level 4 in Accounting Unit 15
Other: no text found
FSSC have formally supported this qualification (please see letter of support attached in the qualification need / support section).
| Learning Outcome |
Assessment Criteria |
| 1. Monitor and control cash receipts and payments statements |
15.1.A Monitor and control cash receipts and payments against budgeted cash flow
15.1.B Consult appropriate staff to determine the likely pattern of regular revenue receipts and payments over the accounting period and to anticipate any exceptional receipts or payments
15.1.C Consult appropriate staff to determine the likely pattern of capital receipts and payments over the accounting period and to anticipate any exceptional receipts or payments
15.1.D Consult appropriate staff to determine the likely pattern of drawings or dividends and disbursements over the accounting period and to anticipate any exceptional receipts or payments
15.1.E Ensure forecasts of future cash payments and receipts are in accord with known income and expenditure trends
15.1.F Prepare cash budgets in the approved format and clearly indicate net cash requirements
15.1.G Identify significant deviations from the cash budget and take corrective action within defined organisational policies |
| 2. Manage Cash Balances |
15.2.A Arrange overdraft and loan facilities in anticipation of requirements and on most favourable terms available
15.2.B Invest surplus funds in marketable securities within defined financial authorisation limiits
15.2.C Ensure the organisation's financial regulations and security procedures are observed
15.2.D Ensure account is taken of trends in the economic and financial environment in managing cash balances
15.2.E Maintain an adequate level of liquidity through the management of cash in line with cash forecasts
15.2.F Maintain an adequate level of liquidity through the management of overdrafts in line with cash forecasts
15.2.G Maintain an adequate level of liquidity through the management of loans in line with cash forecasts |
| 3. Grant credit |
15.3.A Agree credit terms with customers in accordance with the organisation's policies
15.3.B Identify and use information from the analysis of accounts to evaluate the current credit status of customers and potential customers
15.3.C Identify and use information from colleagues in regular contact with customers, potential customers customers and clients to evaluate their current credit status
15.3.D Identify and use information from credit rating agencies to evaluate the current credit status of customers and potential customers
15.3.E Identify and use information from supplier references to evaluate the current credit status of customers and potential customers
15.3.F Identify and use information from bank references to evaluate the current credit status of customers and potential customers
15.3.G Open new accounts for those customers with an established credit status |
| 4. Monitor and control the collection of debts |
15.4.A Monitor regularly the age analysis of debtors relating to the current state of debtors' accounts and take appropriate action
15.4.B Monitor regularly the average periods of credit given and received relating to the current state of debtors' accounts and take appropriate action
15.4.C Monitor regularly the incidence of bad and doubtful debts relating to the current state of debtors' accounts and take appropriate action
15.4.D Send information regarding significant outstanding accounts and potential bad debts promptly to relevant individuals within the organisation
15.4.E Ensure discussions and negotiations with debtors are conducted courteously and achieve the desired outcome
15.4.F In accordance with the organisation's procedures, and in circumstances appropriate to individual cases, collate information and make recommendations for action to the appropriate individual within own organisation
15.4.G In circumstances appropriate to individual cases contact debtors and make arrangements for the recovery of debts in accordance with the organisation's procedures
15.4.H Base recommendations to write off bad and doubtful debts on a realistic analysis of all known factors |