Research On The Improvements On Internal Control For Accounts Receivable Of Borun Co. Ltd

Facing the increasingly fierce market competition, most companies will loose ntheir credit policy in order to win more customers, expand their sales and occupy themarket as much as possible. However, using credit sale also leads to the rapid growthof accounts receivable, which rises management cost, opportunity cost and bad debtloses of accounts receivable, further eroding the profits of companies and increasingmanagement risks. Credit sale is influenced by the external credit environment. Butthere are some reasons for the majority of companies to choose credit sale more andmore, which is putting more emphasis on sales than risk management. Therefore,companies should strengthen the management of accounts receivable, perfect theinternal control of accounts receivable and reduce credit risks to the acceptable levelof enterprises.Borun is a coal washing equipment manufacturing company. Affected by longproduction cycle and seasonal effects of coal industry, accounts receivable’scollection speed is quite slow. This company has made up business expansion strategyin recent years. Credit sale is largely used to seize more market share, which causesthe expanding scale of Borun’s accounts receivable. A great deal of financing isoccupied by accounts receivable, so company has to rely on bank loans to expandproduction and manufacturing,which makes company’s asset-liability ratio keep highand affect the capital chain. Therefore, how to accelerate the company’s accountsreceivable collection and strengthen the management of accounts receivable controlhas become the main point of Borun company’s management.Firstly, this paper reviews relating literature from two views: the evolution ofinternal control theory and the theory research of internal control of accountsreceivable. Secondly, it expounds the basic concept and theories.Then paper choosesShandong Borun Industry Technology Co. Ltd. as the case and analyzes the presentsituation of internal control of accounts receivable of the company from the internalenvironment, risk assessment, control activities, information and communication andsupervision. At the same time, the problems of internal control of accounts receivableare pointed out. Lastly, this paper gives some suggestions on the improvement of thecompany’s receivable account internal control system. To a certain extent, this studyis not only for Borun company’s credit sales and receivables of the key control points, but also puts forward the rectification measures with the current existing practicalproblems. I hope it would have a certain model function, and I believe there will besome reference to the related companies in similar circumstances.