Help! Question for Unit 15

coin99

Hello, I have a question regarding unit 15, can anyone give me some advise? Thank you!

Details is as the following:

Debt collection plicy for Beesly Ltd
1) a reminder letter is sent when the debt is 28 days overdue
2) When the debt is 35 days overdue a telephone call will be made and the account will be put on stop
3) The debt will be placed in the hands of a debt collection agency company if the customer does not respond to calls after 42 days
4) When debt si over 60 days old, a provision for bad debts is normally made.

Customer Current 31-60 days 61-90days
Croome 7000 7000 1000

*Croome is a well established customer and their managing director is a family friend of Beesly's Managing Director.

The quesition ask me to give the suggested action and recommendation as to any provision need to set up for bad debts.

I'm not sure whether I should strictly follow the company's policy? or I need to consider the relationship with this customer? For example, regarding the amount £1000, should I set up a provison for this amount?

Could you please tell me how you will answer this question? Thanks so much for your help!

coin99

Anyone can help? It is part of my practice simulation, desperate for your advise. Thank you in advance.

sdv

coin99 wrote: »

The quesition ask me to give the suggested action and recommendation as to any provision need to set up for bad debts.

I'm not sure whether I should strictly follow the company's policy? or I need to consider the relationship with this customer? For example, regarding the amount £1000, should I set up a provison for this amount?

1 You Must Follow The company's Policy

2 A polite and curtious telephone call should be made - giving full details of outstanding invoices; Inform that an account is put on STOP. This information must also sent in writing and demading immediate payment.

3 Look at the debt chasing notes and if the debt collecting policy has been followed; then the debt collection agency should be employed for any debt ober 42 days old (£8000). However, looking at the history this debtor is slow payer and is taking full advantage of a special relationship. It may be that our managing director may have given a prefrential credit terms to this customer. Therefore, the company's managing director must be consulted before taking this action.

4 Provision for bad debt of £1000 should be provided because the debt is over 60 days old.

coin99

Thanks so much SDV. It really help!