Analysis Of Accounts Receivable

Accounts receivable refers to the amount of money that an enterprise receives from purchasing or receiving labor units for selling goods and providing services. It is a creditor's right formed by business activities such as selling goods and providing services. It mainly includes the price charged by the debtor and the incidental expenses paid by the buyer.

Generally speaking, when companies sell goods, they prefer to provide cash discounts to recover cash sales rather than credit sales.

However, with the gradual establishment and improvement of the market economy and the intensification of market competition, most enterprises have to provide commercial credit for each other, sell goods in credit sales and generate accounts receivable.

The increase in accounts receivable also has its disadvantages: first, it will slow down the speed of capital turnover; two, it will inevitably produce some bad debts that can not be recovered.

This requires enterprise managers to attach importance to the analysis of accounts receivable.

Minimize losses caused by unrecoverable accounts receivable.

Accounts receivable analysis mainly includes the following aspects: first, the total receivables and turnover analysis. (1) accounts receivable are the factors that affect the size of accounts receivable in the normal pactions of enterprises. The factors that affect the size of accounts receivable are as follows: 1. competition in the same industry.

Every enterprise in order to make itself win in the fierce competition, expand the sales of goods and achieve better economic benefits, we have to attract customers with certain preferential conditions.

Credit sale is an important means to achieve this goal.

As a sales person, in order to attract customers and expand sales, they are willing to provide commercial credit to purchasers.

Therefore, the fiercer competition between enterprises, the more widely used credit sales, the more credit the sales units provide, and the greater the amount of assets they occupy in accounts receivable.

2. sales scale.

The size of accounts receivable depends largely on the sales scale of enterprises.

The more goods sold in the market every day, the greater the asset will occupy in the various stages of the turnover of the current assets, because accounts receivable is an important stage of the turnover of the current assets, so it will increase with the expansion of the sales scale.

3. enterprise's credit policy.

The credit policy of an enterprise mainly refers to the credit standard and credit term of an enterprise.

When the credit period is longer and the discount rate is lower, the amount of assets occupied by the enterprise accounts receivable will increase and sales will increase. Conversely, the shorter the credit period and the higher discount rate, the less the amount of assets that will occupy the accounts receivable, but the sales volume will be affected.

In addition, the demand for products in the market, product quality and seasonal changes will also affect the amount of accounts receivable.

Analysis of the turnover of accounts receivable (two) can be done by calculating the turnover rate of accounts receivable. The turnover rate of accounts receivable refers to the ratio of net sales to average accounts receivable.

It can determine the ability and speed of a company's recovery of credit sales for a specified period.

The formula is as follows: accounts receivable turnover rate two net sales account / average accounts receivable.

In the upper form, the element should be the net sales of credit sales, that is, the balance of the sales revenue of the goods after deducting the sales income, the sales discount and the discount.

Because accounts receivable are caused by credit sales, the average accounts receivable in denominator accounts for the balance of accounts receivable at the beginning of the year and the balance of accounts receivable at the end of the year.

The higher the index value, the greater the number of accounts recovered in one year, which means that the shorter the average time to withdraw accounts, the quicker the accounts receivable will be recovered.

Otherwise, the working capital of the enterprise is too much in the accounts receivable, affecting the normal capital turnover.

Because the number of credit sale and sale figures is seldom reflected in the external accounting statements of general enterprises, it is often necessary to further collect relevant information in order to calculate net credit sales when analyzing accounts receivable.

In addition, in order to understand the trend of accounts receivable turnover in a certain enterprise, the trend analysis table of comparative accounts receivable turnover can be worked out in the calendar year (see table below).

The above statement shows that the turnover rate of accounts receivable in the enterprise is rising steadily, increasing from 3 times five years ago to 5.2 times in 1999. It shows that its credit policy and account receivable policy have improved notably, and the turnover rate of accounts receivable has been quickened.

Accounts receivable turnover days are also one of the indicators of accounts receivable turnover.

It indicates the time required for an enterprise to recover its funds and convert it into cash from the acquisition of accounts receivable.

The formula is: accounts receivable turnover days =360 days / accounts receivable turnover rate, generally speaking, accounts receivable turnover days do not have certain standards, and it is difficult to establish an ideal basis for comparison, but the less the number of days needed to turn around, the better.

The less the number of days required, the more times the receivables turnover will take place in a year.

It is appropriate for an enterprise to calculate the turnover days of accounts receivable. It should be formulated according to the policy of the enterprise and the standards set by the same industry.

In addition, the receivable turnover rate or average turnover days of an enterprise may also be due to some special factors, such as the change of sales conditions, the impact of the current or installment sales policy on normal credit sales, competition in the same industry, price level changes, credit or receivables policy changes, and the development of new products, all of which will affect the change of accounts receivable turnover or average turnover days.

Strictly speaking, accounts receivable turnover or average turnover days only mean an average value of all accounts receivable. It is really impossible to fully understand the customers' overdue conditions in accounts receivable.

In order to strengthen the management of accounts receivable and improve the turnover rate of accounts receivable, the enterprise should promptly clean up and prepare the bad debts for the accounts receivable in two.

According to international accounting standards, the amount of receivables that are over 2 years old should be regarded as bad debts.

The financial system of domestic enterprises stipulates that accounts receivable which have not been recovered for more than 3 years are regarded as bad debts.

At present, it is generally accepted in western countries, and the most commonly used credit term is 30 days. Once the term of credit is determined, both parties must strictly enforce it.

In China's enterprises, although the two sides agree on the credit term, but due to the phenomenon of serious delinquency among enterprises and insufficient liquidity of enterprises, there are not many enterprises that can actually keep their credit.

The age analysis method can be used to estimate the loss of bad debts on the basis of the length of accounts receivable in arrears.

The analysis method can be seen in the following table.

By analyzing the age of accounts receivable, we can determine the ratio of bad debts to different arrears.

If the time is short, the proportion can be lower. If the time is long, the proportion will be higher. More than three years can be mentioned.

In addition, when clearing accounts receivable, for the larger accounts receivable balance, the principle of old accounts better than new accounts can be used to determine the repayment object, that is, the first occurrence, first repayment.

Through the above methods, enterprises can be encouraged to take effective measures.

(two) adopt the method of accounts receivable balance percentage to make provision for bad debts. According to the current financial accounting system of sub sectors in China, the provision of bad debts can be made according to the 3%o 5%o of the accounts receivable balance at the end of the year.

Under this method, the balance of bad debt reserve and the balance of accounts receivable at the end of each year should be matched, and a certain rate of withdrawal should be maintained, and the total amount of assets in net assets should be calculated in the balance sheet.

But there are also some shortcomings: first, the cost of bad debt losses in each year is neither corresponding to the bad debts actually occurring in enterprises, nor is it corresponding to the credit sales income that happened in that year.

Secondly, we can not avoid the fluctuation of bad debt losses caused by the contingency of bad debts, which directly affects the stability of business results in different years.

(three) the credit sales percentage method focuses on the correctness of the profit and loss account, and the ratio of bad debt losses in each year is proportional to the current income. The starting point is that the loss of bad debts is directly related to the credit sale business, and the estimation of bad debt losses should be calculated on the basis of the net value of credit sales by a fixed ratio.

Therefore, the credit sales percentage method is based on the net credit sale. It reflects the figures of a period, and the estimated amount of bad debts calculated on the basis of it is also the period, that is, the amount of allowance for bad debts to be prepared in the current period.

The advantage is that no matter how bad the actual bad debts happen every year, as long as the income of credit sales fluctuates little, the cost of bad debt losses will remain stable.

This method is simple and easy to understand, but there are also some shortcomings. First, we should account for the amount of bad debt preparation, the actual loss of bad debts and the recovery of the bad debts before the end of the term. We can not reflect the amount of bad debts in each period, so that the balance of the account is difficult to understand and even make the users of the balance sheet misunderstand.

Secondly, the starting point of the credit sales percentage method is the volume of credit sales occurring during the current period, rather than the follow-up of credit sales.

If a credit sale business has been withdrawn in the current period, there will be no risk in the business. However, the credit sales percentage method does not take into account the situation, and it still raises certain reserve for bad debts at the end of the term.

Three, how to reduce the loss of accounts receivable. Under the market economy condition, there is bad debt risk when there are goods sold on account.

In order to minimize the risk of bad debts and the difficulties arising from the occurrence of bad debts, it is necessary to extract the reserve for bad debts in advance according to the prescribed proportion, and write off the provision for bad debts when the bad debts actually happen.

The analysis of bad debt preparation is mainly to know whether the allowance for bad debts is extracted according to the prescribed extraction ratio.

Therefore, accounts receivable is an important item in current assets, and its amount directly affects the capital turnover of enterprises.

The important responsibility of the accounting department is to recover accounts receivable as early as possible by analyzing accounts receivable, reduce the occurrence of bad debts and minimize the loss of accounts receivable.

The first is to establish reasonable credit conditions according to market conditions, competitors' capabilities and product quality; two, strict management of accounts receivable and better debt collection policy.

The most ideal way to collect accounts is to recover the loan and maintain good relationship with customers and reduce the cost of collection.

This is difficult to do in practical work, but business managers can make progress in this way through correct and scientific analysis of accounts receivable, so as to accelerate the turnover rate of accounts receivable, reduce the loss of bad debts, and create better economic benefits for enterprises.

Accounts receivable are accounts receivable from enterprises that sell goods or provide services and so on, which should be charged to purchase or receive labor service units. They are the claims formed by business activities such as selling goods and providing services, etc., which mainly include the price charged by the debtor and the incidental expenses paid by the buyer.

Generally speaking, when companies sell goods, they prefer to provide cash discounts to recover cash sales rather than credit sales.

However, with the gradual establishment and improvement of the market economy and the intensification of market competition, most enterprises have to provide commercial credit for each other, sell goods in credit sales and generate accounts receivable.

The increase in accounts receivable also has its disadvantages: first, it will slow down the speed of capital turnover; two, it will inevitably produce some bad debts that can not be recovered.

This requires enterprise managers to attach importance to the analysis of accounts receivable.

Minimize losses caused by unrecoverable accounts receivable.

Accounts receivable analysis mainly includes the following aspects: first, the total receivables and turnover analysis. (1) accounts receivable are the factors that affect the size of accounts receivable in the normal pactions of enterprises. The factors that affect the size of accounts receivable are as follows: 1. competition in the same industry.

Every enterprise in order to make itself win in the fierce competition, expand the sales of goods and achieve better economic benefits, we have to attract customers with certain preferential conditions.

Credit sale is an important means to achieve this goal.

As a sales person, in order to attract customers and expand sales, they are willing to provide commercial credit to purchasers.

Therefore, the fiercer competition between enterprises, the more widely used credit sales, the more credit the sales units provide, and the greater the amount of assets they occupy in accounts receivable.

2. sales scale.

The size of accounts receivable depends largely on the sales scale of enterprises.

The more goods sold in the market every day, the greater the asset will occupy in the various stages of the turnover of the current assets, because accounts receivable is an important stage of the turnover of the current assets, so there will be no exception.