In all parts of the world, companies work to guarantee the sustained growth of their profit levels, for this it is not enough to produce and sell, nowadays technological development makes it possible to carry out commercial transactions from any part of the planet, at any scale and in minimal time.
For these reasons, economic contracting gains strength, a document prepared before the operations are carried out that reflects the agreements of the parties involved and guarantees compliance with them before national or international institutions.
This work was carried out in the Furniture Company X and its purpose is to evaluate the difficulties that economic contracting presents in the furniture company X from the review of this activity and analyze in what measures these affect the economic result of the organization.
During the preparation of the work, materials related to the topic under study were reviewed, consultations were made with specialists in this matter and analyzes were carried out that reveal the non-compliance with the clauses of the economic contract and its impact on the economic result of the Company.
The information revealed by the work carried out contains important elements that can contribute to the improvement of the economic contracting activity, provides arguments for subsequent analysis in the higher organisms and with it, obtain decisions at that level that allow the current financial situation that the Company may reverse. presents.
Introduction
Economic contracting is an activity of universal scope. Companies around the world use it when carrying out commercial transactions without discriminating their type or magnitude. The contract is considered an economic phenomenon consisting of a voluntary action of the interested parties where it is revealed by mutual agreement under what conditions a business will be carried out.
The Cuban State requires businessmen to develop commercial relations on the basis of contracts that define by mutual agreement the conditions for the conduct of commercial operations and serve as a legal instrument before the competent bodies when non-compliance occurs in what he settles down.
This work was carried out in the Furniture Company X subordinate to the Ministry of Light Industry, which is dedicated to the manufacture and marketing of furniture for tourism investments, foreign currency recovery stores, Social programs.
The objective of the same is to identify the difficulties that economic contracting presents in the furniture company X from the review of this activity and analyze in what measures these affect the economic result of the organization.
As research techniques for data collection, the interview with specialists from the company and other institutions in the province and the observation of the entire hiring process that takes place in the company under study were used.
The information produced in said investigation can contribute to the improvement of the Company's economic contracting activity and with it to revert to some extent the negative effect that aspects analyzed here today cause.
Development
1.1 Theoretical Foundation
The economic contract is the legal means by which economic, patrimonial, cooperation and non-patrimonial relations are established between the economic organizations that operate in the national economy. The economic contract, more than a formal instrument, is a legal relationship, an agreement of wills, from which rights and obligations arise, between two or more economic subjects. The establishment of economic economic relations, through economic contracts (including those that respond to centralized requests by the state), should serve as a basis for economic organizations to establish for themselves a real economic plan, legally supported.
The contracts influence the fulfillment of the plan and its non-compliance, by some of the parties, affects the economic results of the organizations; in the observance of the quality required for products and / or services; in the technological discipline, etc. To achieve all of the above, there must be legal guarantees for the effectiveness of contractual liability.
The establishment of economic contracts, by economic organizations, and the use of everything derived from this institution, constitutes a necessity for economic subjects, who avoid formalities and therefore, must be an important part of the economic system. It is an autonomous institution, which depends, once agreed, only on the will of the contracting parties.
1.2 Fundamental characteristics of economic contracting:
1. All entities with legal personality and base business units, expressly authorized to sign contracts by the organization that creates them, which are applying business improvement, are obliged to materialize their relationships through economic contracts of different types (services, supplies, labor, buying and selling, insurance, leasing, consignment, execution of works, transportation, etc.)
2. The object of the contract must be drawn up in such a way that the services that comprise it and the requirements that these must meet for its fulfillment are clearly formulated.
3. The starting point for the production of goods and services in business management will be the demand made in contractual relationships.
4. Approval ranges must be established, allowing the decentralization of this activity, with a more agile level of approval, especially in new investments.
5. Grant autonomy to the parties in the establishment of the clauses of the contract, seeking above all, the terms of delivery and quality are met. In this order, mutually advantageous forms of payment and delivery terms are established, which allow the initiative between the parties to develop and the seriousness in the fulfillment of the obligations, as long as there are legal guarantees for this activity.
6. In this sense, certain bank guarantees and loans for productions can be established; penalties for non-compliance with quality parameters or other causes or bonuses for prompt deliveries, which allow for greater efficiency.
7. In the event of non-compliance, you must provide yourself with the power to negotiate or reconcile certain measures and / or compensation and reserve the judicial route, established as the last alternative. If this is used, the effectiveness of its acts must be ensured.
8. For international commercial contracts, this power must be centralized in the authorized entities.
The contract of sale is the most important document that is used in commerce, giving rise to the transfer of property, possession or possession and the use and enjoyment of the goods. It arises through the consent of two natural or legal persons, bilaterally because it is a document signed by said persons and delimits the responsibility of both.
Contracts are onerous because they give rise to costs and expenses that are monetarily covered, commutative because there are two mutual responsibilities and obligations, and transfer of ownership because it implies the transfer of ownership. When closing a negotiation, first of all it must be taken into account that the parameters of the accepted offers must appear in full in the letter of the contract, establishing among its main clauses:
- The subjects, the object and the causes that give rise to the contract. The faculty of the subjects in the signing of the contract, as well as their particular characteristics such as the personality, domicile and generalities of each one. Requirements that the object must meet such as: goods, furniture, or real estate, etc. Prices, form and method of payment, currency, risks, expenses and responsibilities during the delivery and transportation of the goods, which must be agreed, taking into account that the risk falls on the owner of the merchandise or product. A clause that must always be agreed is the force majeure, fortuitous event, due to the importance of defining when the breaches are intentional and when they are not.
2.1 Economic Contracting in the Furniture Company X
Different types of contracts are made in the Company, among them are employment, service, supply and purchase-sale contracts.
The contract gives the possibility to both parties to agree on all the details related to the commercial operation: rights, obligations, responsibilities are required, terms, conditions and terms are agreed for the fulfillment of all the obligations of the parties. The contract also includes form, means and payment opportunity.
To carry out this work, 30 Purchase Sales contracts signed by X were reviewed during 2007, these represent 20% of the total contracts signed in that period. It was observed, in most cases that contracts comply with the requirements regarding contracting, they include the aspects that a document of this type must technically contain. It was also known that no sales are made in the Company if a contract to protect this commercial operation has not been previously prepared.
Some aspects that were evident during the review carried out should be pointed out:
- In the place and conditions of delivery clause, the times, the places, the places of destination and under which circumstance the delivery will be made are not always established. In the Clause that defines the quality of the product, the responsibility assumed by the buyer for have subjected the product to use or practices not compatible with its characteristics. When defining the forms of payment, it must be specified whether the payments will be divided, the payment instrument that will be used, and the percentage of surcharge in case of Non-payment.According to the revised contracts, no other payment instruments are used other than the nominal check (bills of exchange, transfer) that could facilitate the collection of the production sold.
During the exchange made with the specialists of the Directorate of Economy, it was learned that the Furniture Company X is going through a difficult financial situation, for that reason the Financial Statements were requested and the veracity of the information revealed by the specialists was verified.
In the review of the Single Audit File it was also observed that on several occasions the acting auditors reflect the indisciplines in the management of collections and payments given the high amount that exists in accounts receivable.
In this situation, the contracts were resumed and it was detected that the clause of the contracts that is most frequently breached is the one related to the forms and conditions of payment. It defines the credit days granted by the supplier to the customer for the payment of the delivered products, as a rule they should not be more than 30 days. Repeated breaches by customers cause a serious financial situation for the Company.
2.2 Negative effect on the Company's Economic Result.
The Financial Statements reveal that at the end of the first quarter of 2008 the Company closed with a total of 2,137.5 MP in accounts receivable and of them 1,849.5 MP out of term, with a collection cycle of more than 60 days and the availability of cash in $ 0.18 when the optimal value is between $ 0.30 and $ 0.40, which reveals the impossibility of fulfilling the short-term obligations since the money resulting from its management appears in accounts receivable. The biggest debts are registered in sales destined for social programs, these represent 80% of the total accounts receivable.
This situation results in:
- Lack of liquidity. Breach of obligations contracted with suppliers of raw materials. Penalties. Increase in payment for interest. Need to request loans from the bank for the purchase of raw materials. Additional expenses associated with collection management.
2.3 Measures taken by the Company
The Company has adopted a series of measures in order to solve the problem created, among them are:
- The reconciliation of accounts receivable out of term with the debtor clients, establishing the payment commitment. The negotiation of the debt with the management of the debtor companies. Presentation of the demand before the corresponding courts. Analysis of the financial situation in the Boards of Directors. The presentation of each business to the Contracting Committee for its analysis before signing the contract.
So far this year, 20 lawsuits have been filed in the courts, of which the company has received a response in 5 cases, all of which have been declared admissible, 76.5 MP have been recovered through this route. The rest of the cases are still in process.
Despite the use of the mechanisms established in the country, the use of the current Legislations, the preparation of contracts with all its elements before each commercial operation, to keep the Company updated and available financial information for analysis and decision-making and having drawn up several strategies, the results do not improve.
2.4 Other observations made.
When reviewing the Company's Business Plan for 2008, it is observed that approximately 80 percent of planned sales are destined for Social programs and, coincidentally, it is in this destination that the largest debtors appear during 2007. The Company He continues to invoice and deliver most of his productions to whom appears reflected in his accounts as the largest debtor.
The management of the Company proposes that the figures that appear planned for 2008 destined for the programs of the revolution are directives by the higher body, which is aware of the situation caused by the non-payment of the works of the social programs, however, the measures taken by the MINIL leadership have also had no effect. It is further argued that, unlike other clients where the corresponding court gives legal tender to the demands presented, in these cases where the productions are destined for the programs of the revolution, the claim before the court does not proceed.
Bibliography
1. Microsoft® Encarta® 2004 Reference Library. © 1993-2003 Microsoft Corporation.
2. Collective of authors. Contract Law. YOU; I Edition.
3. General Bases for Business Improvement.
4. Commercial Code of the Republic of Cuba.
5. Resolution 297/2003 of the Ministry of Finance and Prices.
