Discussion On Risk Management Of Accounts Receivable

Accounts receivable delinquency is one of the important reasons that many enterprises are being dragged down.

Therefore, the risk of accounts receivable should be strictly managed.

The reasons for the risk of accounts receivable are: 1, enterprises lack the sense of competition.

Under the fierce competition mechanism in modern society, in order to expand market share, enterprises should not only work hard at cost and price, but also must use commercial credit promotion in a large amount.

However, some enterprises do not have a strong sense of risk prevention. In order to expand their sales, in the absence of in-depth investigation of the creditworthiness of the payers, they blindly adopt the credit sale strategy to compete for the market, paying attention only to the high profits of the books, and ignoring the problem of whether a large number of liquid funds which are defaulted by the customers can be recovered in time.

2, corporate internal control is lax.

In some enterprises which are linked to the total wage and economic benefits, salesmen are only concerned about the completion of sales tasks for their personal interests, and sell commodities by credit sale and rebate, so that accounts receivable has increased substantially. For this part of accounts receivable, enterprises do not have to ask relevant departments and distributors to take full responsibility to recover funds, resulting in a large number of accounts receivable deposited.

3, corporate accounts receivable management misconduct.

Factors such as unreasonable formulation of enterprise credit policy, unstandardized daily control, and failure to recover arrears, may lead to risks and losses.

Two, strengthen the risk management measures of accounts receivable. First, formulate a reasonable credit policy. The so-called credit policy refers to the principle of corporate receivables management, including three aspects of credit standards, credit conditions and credit lines.

1, determine the correct credit standard.

Credit standard is the minimum standard required by an enterprise to decide the granting of customer credit, and it is also a basic criterion for enterprises to provide acceptable risks.

Strict credit standards may reduce the loss of bad debts, but it will not be conducive to expanding sales.

Conversely, if the credit standard is wider, although it is conducive to stimulating sales growth, it may increase the loss of bad debts.

It can be seen that whether the credit standard is reasonable or not has great impact on the profits and risks of enterprises.

When determining the credit standard, the enterprises usually use the comparative analysis method to calculate the sales profit, opportunity cost, management cost and bad debt cost under different credit standards respectively, and take the maximum profit or the lowest credit cost as the middle selection standard.

2, adopt the correct credit terms.

Credit terms are some conditions for the customers to postpone payment when they sell goods on credit, mainly including credit terms and cash discounts.

The credit term is the longest payment period stipulated by the company for the customer.

Extending the credit period appropriately can increase sales volume, but the long credit period will also increase the opportunity cost of accounts receivable and increase the risk of loss of bad debts.

In order to prompt customers to pay at an early date, enterprises often have a cash discount condition at the same time as the credit period is stipulated, that is, if customers can pay within the stipulated discount period, they can enjoy the corresponding discount.

However, the discount should be based on the cost that the proceeds are greater than the cost of cash discount.

3, establish the right credit line.

The credit limit is the maximum credit limit granted to an enterprise based on the solvency of the customer, but it is actually the maximum risk that an enterprise is willing to bear on a client. The determination of the appropriate credit limit can effectively prevent the enterprise from losing due to excessive credit sales exceeding the actual payment ability of the customer.

In the case of changes in market conditions and changes in customer credit, enterprises should make necessary adjustments to keep them within their own risk range.

(two) to strengthen internal control, 1, to make good credit investigation.

Enterprises should collect information about customers' credit status extensively, and then use qualitative analysis and timing analysis to evaluate the credit quality of customers.

Customer information can be obtained by direct access to the customer's financial statements or by the customer's credit information provided through the bank, or by exchanging relevant credit information with other contacts of the customer.

In practice, we usually use the "5C" evaluation method and credit evaluation method to analyze the data obtained. After analyzing the result, we should pay attention to or reduce the credit behavior of the customers with bad credit, and strengthen the supervision of customers who have large amounts of money or large risks.

2, formulate a reasonable credit sales policy.

Enterprises can draw lessons from Western understanding of commercial credit and formulate a suitable credit sale policy that can prevent risks.

Such as: (1) secured credit sale.

The enterprise may stipulate in the contract that the customer shall provide guarantee during the credit period, and if the credit is overdue, he shall bear the corresponding legal liability.

(2) conditional sale.

The risk of bad debts that accounts for a longer period of credit is generally greater than the risk of bad debts which is short in the credit period. Therefore, an enterprise can sign a conditional sales contract with the customer. During the credit period, the ownership of the goods is still owned by the seller, and the customer can only acquire ownership after the total settlement of the goods is cleared.

If the debt is not paid, the enterprise has the right to recover the goods and make up for some of the losses.

3, establish credit approval system.

Within the enterprise, the credit sales quota which can be approved by the personnel of the business department and the chief of business shall be separately stipulated. The above limit must be reported to the superior or the manager for examination and approval.

This hierarchical management system ensures that the credit sale business must be authorized by relevant personnel, which is conducive to controlling it within a reasonable limit.

4, strengthen the single account management and total management of accounts receivable.

Enterprises should have separate management of customers who have regular business contacts with them, and decide whether there is a default in individual accounts through payment records, age analysis tables and average receivables.

If the credit sale business is busy, it is impossible to manage all customers individually, then it can focus on total control.

Credit managers should regularly calculate the turnover rate of accounts receivable, average receivables, the ratio of receivables to sales and the rate of bad debt losses, and draw up an aging analysis table to estimate potential risk losses according to age classification, so as to correctly estimate the value of accounts receivable and adjust the policy accordingly.

5, establish a sales responsibility system.

In order to prevent sales personnel from selling blindly in order to pursue sales tasks unilaterally, enterprises should clearly claim that accounts receivable is not the responsibility of financial personnel but salesmen.

At the same time, we must draw up a strict assessment system for funds withdrawal, so as to receive the actual amount of payment as the assessment index of the sales department. Each salesperson must be responsible for every sales business from signing contracts to collecting funds.

This will enable salesmen to clarify risk awareness and enhance the recovery of goods.

Three, the prevention of accounts receivable risks. In order to prevent debtors from indefinitely arrears of payments, the following measures can be taken: 1, convert accounts receivable into receivables.

Because the notes receivable have stronger recourse and can be endorsed or discounted before maturity, to a certain extent, it can reduce the risk of bad debt losses. Therefore, when the customer fails to repay the loan, the enterprise may ask the customer to issue a acceptance bill to offset the accounts receivable.

2, accounts receivable mortgage and sale.

Enterprises can reallocate accounts receivable through mortgage or sale business.

Accounts receivable mortgage is a company's receivables as collateral, and all financial institutions obtain payment in advance, and when they receive payment from customers, they are then pferred to financial institutions as part of their loans.

However, once a customer refuses to pay, the financial institution has the right to recover from the enterprise, and the enterprise must repay all the loans.

Accounts receivable are sold by enterprises to sell accounts receivable to agencies engaged in this business to obtain funds and sell accounts receivable without recourse.

The customer pays the agency directly to the agency when the repayment is made, and the company will not be liable for any bad debts.

This business can enable enterprises to pfer all risks.

This is prevalent in the West.

Some financial institutions in China can gradually establish such financial businesses for well creditworthy enterprises, which is conducive to the division of labor and healthy development of the market.

3, credit insurance.

Although credit insurance is only limited to abnormal losses, insurance companies usually restrict the insurance finance to a certain extent, requiring the insured enterprises to bear part of the bad debt losses, but this way can still pfer the risk that the enterprises can not expect to lose to the insurance company, so that the loss rate of accounts receivable will be reduced to the minimum.

Four, strengthen the collection management and improve the credit mechanism of our market.

If the policy of collection is stricter, though it can reduce the loss of bad debts and the opportunity cost of accounts receivable in arrears, it will also increase the cost of account collection. On the contrary, it can generate less account receivable, but it will increase the opportunity cost and the bad debt loss of accounts receivable.

Therefore, enterprises should formulate the best policy of collecting money, and increase the cost of collecting accounts and reduce the loss and opportunity cost of bad debts, so that the cost of collecting accounts is the lowest and the benefit of enterprises is the largest.

At the same time, we should pay attention to the skills of collecting accounts. We should take different debt collection strategies for insolvency and delinquency, as well as enterprises with different arrears, such as sending letters, calling, sending people to collect, and negotiating with each other. With the help of authoritative third party mediation, arbitration agencies shall arbitrate, and appeal to judicial organs to strengthen the enforcement of judicial organs.

In short, we should gradually establish and improve the credit mechanism of China's market.