Beltline Pharmaceuticals, Essay Example

The receivable plan is the sell to drug wholesalers in the Northeast particularly those interested in non-prescription drugs. The sales are expected to be high in the Spring months because of pollen production by plants and are expected to taper off in the Winter months. The Summer months will be slow but the Fall months will rise because of the ragweed production. Kathleen does not foresee any bad debt losses because most of the customers pay within the first two months after delivery and the latter 20% within the third month. Kathleen estimates that 20% of receivables will go to profit with 80% going to cash costs. Financing will costs approximately 10% annually which is included in the 80% cash costs. She estimates approximately $2 million in sales between the months of January through June for the first year and $2.7 million in sales for the second year of operation. Each package of medication will contain 12 tablets and sell for $5.

First Year Data for Annual Conference

Projected Days Sales Outstanding is Calculated as Follows:

Accounts Receivable/Total Credit Sales * Number of Days

• A low DSO means that a company takes fewer days to collect its accounts receivable. A high DSO means a company is selling it’s product on credit.
• Accounts Receivable=Money owed by customers that has not been paid for but services or goods have already been delivered.
• Total Credit Sales=A contractual agreement where a customer agrees to pay for goods or services but has not paid the amount in full. Further credit can mean the borrowing capacity of a buyer.

Discussion of Analyses

It appears the first year will be stable in terms of the accounts receivable as long as the credit going out to customers remains at a minimum and the projected collection remains at a maximum three month collection period.

Uncollected Balances for March and June 2009

Total for January-May=$300,254 plus uncollected for April and May

It appears that the projected plan is not going according to plan because the customers on credit are higher than the cash payment received. A suggestion may be to stop supplying the credit customers until they make payment in full. They can either option to go to a new supplier or pay their bill. Of course it will be a lot wiser to attract customers that make payments within 3 months of delivery since this is a smaller business. The business cannot afford to extend credit for long and exhaustive periods of time since the bottom end cost of the product is very small. When expenditures become too high there must be a change in the accounts payable system to support the structure of the business. The original plan was most efficient for the long haul productivity of the business.

References

Taro Pharmaceuticals (2009) Retrieved October 15, 2009 from, http://www.thefreelibrary.com/Taro+Pharmaceutical+Industries+reports+fourth-quarter+and+year-end+…-a019137083

Proposed New Bank Balance Sheet (2009) Retrieved October 15, 2009 from, http://ww2.sjc.edu/archandouts/apatitlepage.pdf

Accounts Receivable Level Retrieved October 15, 2009 from, http://www.faqs.org/copyright/accounts-receivable-runbook-ibm-system-36-manufacturing/

Introduction to Personal Financial Management (2009) Retrieved October 15, 2009 from, http://managementhelp.org/prsn_wll/finance.htm