Study On Credit Risk Management Of Account Receivable In Construction Industry

In the market economy, the competition among enterprises is growing tougher and tougher. In order to survive and achieve the goal of sustainable growth, all enterprises are forced to find ways to improve their competitiveness. Sales on credit became one of the most effective approaches to achieve the goal. Although Sales on credit help enterprises with obtaining bigger market share and increasing sales income it also brings risks to the business. As an important part of the assets of an enterprise, accounts receivable needs to be managed properly and the risks it brought to the business need to be minimized or it would result in great pressure on the working capital and even leads to a threat to its survival.In recent years, along with increasing sales and rapid growth of GH company, its accounts receivable has been growing at even a faster pace. Large amount of accounts receivable has brought negative impact on the company’s sustainable growth. This thesis studies the credit risk of GH’s accounts receivables based on its actual number and analyzes problems that exist in its credit risk management. Then compare the performance between before and after adopting new credit risk management which leads to a conclusion that establishing a proper and suitable credit risk management policy is necessary to ease the pressure of a company which is from tight capital and improve a company’s debt-pay ability and profitability.