Research On Risk Management Of Accounts Receivable In Jinbei Automotive Company

Accounts receivable is an important item in financial statements, meanwhile, it isa kind of asset that is occupied by others. Highly effective and scientific riskmanagement system on accounts receivable can help corporations control the size ofaccounts receivable and accelerating the speed of accounts receivable turnover, thusalleviating the pressure of cash demand, refining effectiveness of operation,especially for the corporations who have large amount of accounts receivable andthirsty for cash.Since2001, Jinbei automotive company has suffered from large quantity ofaccounts receivable, cash received from credit sale is far away from the book value ofaccounts receivable. The company are facing that difficulty in recycling accountsreceivable, rise on bad debt ratio and accelerating risk on accounts receivable, thecrucial cause is the absence of risk controlling. Thus the company must pay attentionto analyze the risk, refine the work flow of risk management on accounts receivableand better control the risk.This thesis analyzes on the state of form and recycle of accounts receivable inrecent five years to discover bad performance in risk management of Jinbeiautomotive company. This thesis uses accounts receivable related indices of Jinbeiautomotive company and compare them with average and excellent standard ofindustry in order to develop discrepancy and excavate existing problems in accountsreceivable risk management. In the aspect of sale and recycle, high price per unit,large quantity characteristics of products, order form selli ng and installment paymentof selling method is the characteristics of automotive company. In regard to accountsreceivable management, the company lack of credit management departments, strictcontrol of accounts receivable from related parties, and asses sing repayment ability ofthe customer, thus risk on receivables cannot be distributed and controlled. Inaccording to the current problems such as mechanism shortage of risk management onaccounts receivable, bad performance in recycle accounts receivable from relatedcompanies and short of effective means in wariness of risk, we construct riskmanagement work flow of accounts receivable. For the aspects which JinbeiAutomotive Company has neglect in accounts receivable risk management, we extractthe control points. Including customer credit risk rating, the ratio of accounts receivable to operating income, ratio of allowance for bad debt and turnover as mainfactor and build the risk control and efficient recycle system which is suitable to therisk management aim of the company.