Accounts Receivable Management of SMEs _11580.doc

accounts receivable management of smes abstract: the accounts receivable is an important component of corporate liquid assets, with the increasing business competition, accounts receivable critical to the survival of enterprises. especially smes, in order not to be eliminated in the competition to maintain our competitiveness, we must strengthen the accounts receivable management, improve capital utilization, reduce business risk. small and medium enterprises through the analysis of the current accounts receivable management problems and their causes, propose appropriate management of policy recommendations. keywords: smes; accounts receivable; for bad debts; managementfinancial management 1, sme receivables management problems in smes are essential to chinas economic development one of the engines, not only to economic growth made a significant contribution, but also for peoples livelihood is also of great significance, is that we should always pay attention to the economic growth momentum. compared with large enterprises, smes, small, simple structure, strong adaptability, but its rules and regulations are not sound, thinking backward, and inefficient resource allocation, risk prevention awareness of the weak, which makes the existence of smes in financial management a number of issues, in particular, accounts receivable turnover is slow, the recovery of funds difficult, large amount of bad debts, resulting in insufficient cash flow, cash flow problems, limiting the rapid development of smes. specifically, of the following major problems: 1. the internal control system is not perfect internal control is to prevent risks, improve the overall efficiency of a powerful guarantee. enterprises should be strictly in accordance with the policy of credit standards and credit requirements to control the occurrence of corporate credit business. occurred in accounts receivable should be timely bookkeeping, cleaning, collection, and reconciliation with each other on a regular basis to verify. identified uncollectible accounts receivable should be timely processing. in practical work, many smes lack the necessary pre-sale during the credit of the internal controls are not on the customers credit rating and credit critical review of the extent of the credit sales were often determined by administrative intervention or the leaders subjective preferences, accounts receivable section of the management system exists in name only. 2. credit rating methodology behind the many small and medium enterprises blindly, passively adopt the traditional 5c approach, namely, through the character (character), capital (capital), solvency (capacity), collateral (collateral), periodic situation (cycle condition) assessed five aspects of customer credit while ignoring the adaptability of small and medium enterprises 5c law. there are many small and medium enterprises in order to capture the market, non-selective product on credit to the customer, the customers credit rating, ability to pay, financial condition and so lack the necessary scientific analysis and assessment, so that their accounts receivable average collection extended, increasing the amount of funds used, bad debt rate of increase, cash flow impeded, causing significant economic losses to the enterprise. 3. targeting of inaccurate credit lead to blind smes usually profit-maximization as a financial management objectives, and to assess it as an important indicator of business leaders. this is easy to create a misleading sales staff easy to improve performance, blind to seize the market, the expansion of commercial credit, a large number of business to take credit approach, the pursuit of high-income, high-profit, ignoring long-term interests, eventually leading to corporate liquidity flow problems. and forced by pressure from the increasingly fierce market competition, often a buy favors run selling the phenomenon of credit business only increase rather than decrease, corporate cash flow difficulties getting worse. 4. dunning receivable difficult first, the phenomenon of corporate loans in arrears between the more serious, resulting in a normal working capital by the amount of accounts receivable by the crowding. there is no stronger collection measures, the significant increase in bad debt rate has exceeded the rate of corporate bad debts can bear. second, the governments current lack of complete legal support system for smes, and the cumbersome judicial proceedings, legal advisory services to smes are also not up to the interests of small and medium enterprises can not be guaranteed. accounts in arrears in the enterprise suffered a malicious, because of the high cost of legal proceedings, ruled that the implementation of results are not satisfactory, it is difficult to use legal means to defend the right. in desperation, or recourse to the private sector debt collection agency through some illegal means forced to debt, or instead rely on other companies in arrears account the gaps, creating a vicious cycle, companies can not solve the problem, returned to the community does not stability factor. second, there is cause of the problem analysis taken together, resulting in accounts receivable management efficiency of enterprises is relatively low because in the following areas: 1. information-gathering capacity of low - accounts receivable management, inefficiency or not, the decisive factor was the level of customer credit evaluation is correct. this medium-sized businesses the ability to collect customer information often fail to correctly judge the requirements. the reason for the shortage of talent on the one hand small and medium enterprises, not to build their own information institutions, and relevant business personnels quality is not high. plus be able to bear the cost of very limited access to information of its own power is very weak; the other hand, is the enterprise caused by external causes. the lack of specific information on statistics agency responsible for smes, the lack of basic information of enterprises, such as the production scale, financial status, credit information and other knowledge, as well as smes, the lack of understanding of cooperative enterprises from outside the channel. 2. the daily management was not standardized, risk prevention awareness is not strong total receivables of smes remain high, the rising proportion of bad loans, mainly within the enterprise of the system is not perfect, weak risk awareness. some enterprises have not established receivables management responsibility system. the accounting department and sales department responsibilities are not clear, a lack of communication, marketing and financial information is not coherent, after problems between departments prevarication. another appraisal system is unreasonable. at present, most small and medium enterprises in order to expand sales and implement sales staff payroll and sales-related practices. this prompted the sales staff for personal interest, other than sales of completion of the task to take credit, rebates and other means strong sales of goods, ignoring the collection after the work, which is part of the sales of a much greater risk of bad debts. day to day management of accounts receivable is not standard practice not to build customer profiles or file incomplete, failure to develop the actual situation in credit standards, usually without aging analysis, and many other management deficiencies have led to inefficient management of accounts receivable. 3. fierce market competition pressure the face of increasingly fierce market competition, small and medium enterprises in order to avoid being washed out of the need to find their competitive edge, maximize market share. but the small and medium enterprises because of the small-scale, brand low credit factors, limited ability to expand sales, companies often want to expand business with credit sales, increased market share. the other hand, consideration of small and medium enterprises for low-cost production, product development less low-skilled, unstable quality, the buyer unit out of precaution, tend to adopt the trial of the purchase method, that is no problem with re-payment, there is no doubt that in this way to increase the enterprises credit operations, resulting in the enterprise credit operations only to rise predicament. 4. legal rights for protection awareness is weak small and medium enterprises to use legal means to resolve the debt widespread awareness of the dispute is not strong issues. both objective and subjective reasons. objectively speaking, from the prosecution, to receive, investigate, collect evidence to the trial, ruled there is a time and implementation process that requires businesses to invest in a lot of manpower, material and financial resources. subjective, individual countries, there is local protectionism, many enterprises lack the use of legal means to safeguard their legitimate rights and interests of the confidence and courage to face unreasonable and unlawful bad debts only submit to humiliation. in general, small and medium enterprises through legal proceedings to seek creditor protection, the road is difficult. reposted elsewhere in the paper for free download http:/ third, strengthen the management of accounts receivable policy recommendations for 1. strengthen the internal controls of smes as the relatively small size of smes is limited to the cost constraints, under normal circumstances can not be set up by hand or by a special department management of accounts receivable, but the enterprise can be used as internal control and finance, sales and other flat-class independent content to understand the and treatment. to implement the responsibility system of accounts receivable management, and various enterprises according to the characteristics of the industry plan, made a detailed plan form, issued to the relevant person in charge, clear power and responsibility to strengthen the sales staff a sense of responsibility and risk awareness, responsibility for the implementation of collection. accounts receivable are more stringent verification system, accounts receivable have been done on each clear, accurate aging analysis, due to the quality, quantity, delivery time, contract disputes, accounts receivable have not been addressed accounts set up a separate account management, and provision for bad debts, strengthen internal controls, in order to accounts receivable management to lay a solid foundation. 2. to ensure smooth communication of information, optimize the credit assessment tools only through strengthening the scientific management of accounts receivable in order to reduce business due to credit and operational risks arising from the maximum extent to ensure the realization of economic interests. assessment of customer credit quality of five areas: quality, capacity, capital, collateral and conditions, although the process of the application in the small and medium enterprises have certain limitations, but the basic idea is you can learn from them. first, should ensure that the enterprises internal sales and financial personnel, information communication and smooth, timely billing and timely feedback. the conditional nature, the establishment of enterprises own specialized information body related businesses to improve the professional quality and technical level and improve customer credit evaluation system, and to adapt to the fierce market competition, enterprise information quality requirements. at the same time, but also learn to clever to seek the protection of society and government for the realization of corporate accounts receivable thickened cushion. 3. correct positioning of business development goals, enhance awareness of risk prevention smes should be changed only see the short-term interests of neglect, pure profit-maximizing ideology, it should also focus on maximizing corporate value. to fully understand the accounts receivable bad debt risk, awareness of its dangers, not just to gain market share and the blind expansion of credit volume. a reasonable credit policy should be developed to determine the proper credit standards and credit conditions in the formation of credit receivables, we must be cautious, reduce business risk, accelerate their liquidity and improve capital efficiency. 4. strengthen the management of accounts receivable after the reason why accounts receivable bad debt loss rate remains high, largely because of accounts receivable after the control is not strict, so in order to ensure recovery of accounts receivable should be strengthened after the management. first, make reasonable collection procedures. accounts receivable collection procedures are generally as follows: notification letters, telegraph or telephone fax collection, send someone to interview, take legal action. however, the credibility of different customers in varying degrees, in the course of a specific accou