I. Overview of accounts receivable

(i) The concept of accounts receivable

Accounts receivable refers to the enterprise in the normal course of business due to the sale of goods, products, the provision of labor services and other business, should be collected from the purchasing unit. Accounts receivable includes taxes that should be borne by the purchasing unit or the unit receiving labor, packaging costs advanced on behalf of the purchaser of various transportation and miscellaneous expenses, etc. [1], in the case of sales discounts, should also consider factors such as commercial discounts and cash discounts. Accounts receivable is a claim formed along with the occurrence of sales behavior of the enterprise. Accounts receivable includes claims that have already occurred and those that will occur in the future. The former are claims that have already occurred and are clearly established, while the latter are claims that have not occurred in reality but will certainly occur in the future.

(ii) Characterization of accounts receivable

First, accounts receivable is of strong credit nature, accounts receivable is a claim arising from the provision of goods or services by an enterprise to its customers, which is of strong credit nature. Secondly, accounts receivable is risky, there are certain risks in the collection of accounts receivable, such as customer default, bankruptcy and other situations, resulting in the enterprise can not collect the accounts receivable. Thirdly, accounts receivable have a long term, the term of accounts receivable is long, usually 30 days, 60 days, 90 days or longer. Fourth, accounts receivable are large: the amount of accounts receivable is usually large, which is related to the scale of business and the volume of business. Fifth, accounts receivable is highly transferable: accounts receivable can be realized by discounting and transferring, which is highly transferable. Sixth, accounts receivable have a greater impact on the operating funds of an enterprise, and accounts receivable have an important impact on the liquidity and financing ability of an enterprise's operating funds.

(iii) Accounts receivable risk

Firstly, the increasing accounts receivable is prone to cause the high gearing ratio of enterprises. The increasing balance of enterprise accounts receivable, on the one hand, makes the liquidity shortage. On the other hand, it forces enterprises to raise debt to operate. In order to maintain operations, the enterprise in the high debt ratio operation, to a large number of debt for life. This not only increases the financial cost of the enterprise, resulting in a decline in economic efficiency, but also make the enterprise towards the edge of insolvency. Second, the cash recovery rate is low, high discount cost. Enterprises in order to timely recover the payment of goods, a large number of absorption of promissory notes become possible. Some enterprises cash recovery rate of less than 10%, promissory notes accounted for more than 70%, in order to liquidate the emergency in a timely manner, had to bear a high discount interest.

Thirdly, bartering against each other's debts, costs rise and benefits decline. Bartering with each other against the accounts, erase the accounts to clean up the accounts receivable is a helpless move between enterprises, most of the price of the debt in kind are higher than the current market price of more than 40%. The enterprises, on the one hand, offset the real thing at a high price, on the other hand, according to the need for production or the current market price of compensation for sales, the result is that the enterprises have obtained the funds needed to maintain the basic production, but bear a huge loss, there is a loss of both sides of the embarrassing situation.

Fourthly, the posting of points for money came into being. Nearly a period of time since the high accounts receivable, some monthly average balance even reached 60% of annual sales revenue, in order to survive, enterprises (especially state-owned enterprises) have to take advantage of some of the private sector's "flexible" means of accounts receivable to 15% to 25% of the huge losses in exchange for the so-called sticker points! Exchange money. Although this move temporarily relieved the urgent needs of enterprises, but its bad consequences can not be ignored. The first is to disrupt the normal business order. The second is to promote the wind of corruption. The third is to cause the loss of state-owned assets.

II. Elements of accounts receivable management

(i) Ex ante management of accounts receivable

The ex ante management of accounts receivable includes rating credit, establishing customer credit files and developing credit policies.

(ii) Ex-ante management of accounts receivable

Management of accounts receivable in progress includes strengthening contract management, implementing an accounts receivable pending approval system and a ledger system, as well as performing regular reconciliations and confirmations of claims.

(iii) Ex post facto management of accounts receivable

Ex post facto management of accounts receivable includes the establishment of a performance appraisal system for the collection of accounts receivable and a collection system, as well as the improvement of the liquidity of accounts receivable. In addition, the management of accounts receivable also includes the establishment of accounts receivable accounting methods, determining the best opportunity cost of accounts receivable, formulating scientific and reasonable credit policies, strictly managing credit sales procedures, adopting flexible marketing strategies and collection policies, and strengthening the daily management of accounts receivable. In conclusion, the management of accounts receivable is a comprehensive work, which needs to start from many aspects in order to improve the recovery rate of accounts receivable and reduce the risk of bad debts.

III. Causes of accounts receivable

(i) Business competition

Commercial competition is the main reason for the occurrence of accounts receivable. Under the conditions of market economy, there exists intense commercial competition, and the role of competition mechanism forces enterprises to expand sales by various means. In addition to relying on product quality, price, after-sales service, advertising and other means, credit sales is also one of the important means to expand sales. For the same product price, similar quality level, the same after-sales service, the implementation of credit sales is more conducive to the enterprise to win customers, and credit sales and other preferential ways to solicit customers, and thus give rise to accounts receivable. Accounts receivable arising from competition is a form of commercial credit.

(ii) Sales and collection time gap

Inconsistency between the timing of the sale of goods and the receipt of payment also leads to the creation of accounts receivable. Cash sales in practice are common in retail businesses. Enterprises with large quantities of wholesale and production, which are settled uniformly through banks, will inevitably produce differences in time. The more backward the settlement means, the longer the collection time. This kind of accounts receivable formed due to backward settlement means does not belong to commercial credit. With the development of e-commerce and the improvement of bank settlement methods, accounts receivable due to such reasons will be greatly reduced.

(iii) Socio-historical reasons

As a result of the impact of the planned economy model, enterprises lack of autonomy and a sense of competition, all activities in accordance with the plan, the abnormal delinquency between enterprises is commonplace, in the long run, so that enterprises are overburdened. Entering the market economy, enterprises must follow the laws of the market, but also to implement government regulations, some receivables will be difficult to collect.

(iv) Low level of management and inadequate systems

Some business leaders are not proficient in finance, economic awareness is weak, low management level, coupled with the lack of a sound accounts receivable management system, or chapter does not follow, or the financial sector and other business departments can not reconcile accounts in a timely manner, the lack of effective accounts receivable clean-up measures, accounting and sales disconnect can not be exposed in a timely manner and reasonably resolved, resulting in the age of the enterprise receivable aging, the amount of money increased year by year.

(v) Poor risk awareness and blind credit sales

In order to expand sales, in the absence of a prior in-depth investigation of the creditworthiness of the customer, the accounts receivable risk assessment, blindly adopt the credit sales strategy, resulting in high profits on the books, while the customer defaulted on a large number of liquidity occupied by the difficult to recover, to the enterprise to bring about a false profit and a real loss.

(vi) Irrational incentives

In order to encourage the sales staff to complete the sales task, some enterprises usually will complete the sales task and my salary compensation linked, but not to the accounts receivable accounting into the assessment index. Some sales staff in order to exceed the sales target, often take credit sales, rebates and other means of forced sales of goods, resulting in a substantial increase in accounts receivable and deposition, to the enterprise operation of a heavy burden, affecting the development of enterprises and reproduction of the normal.

(vii) Other reasons

Such as hidden investment, adjusting profits, etc. These accounts receivable are mostly due to the formation of enterprises through improper means. Enterprises in their own capital turnover permits the conditions, sometimes will intentionally conditional to give customers a longer repayment period, so that the enterprise can be through this fund to obtain much higher interest income than bank deposits. Sometimes the enterprise will also transfer the receivables to other aspects of the short-term investment to obtain income, and in the books do not make corresponding adjustments, still retain the accounts receivable balance, so as to form the extracorporeal circulation of funds.

IV. How enterprises can effectively control and manage accounts receivable

(i) Problems in the management of enterprise accounts receivable

1. Lack of corporate risk awareness

In the management of enterprise accounts receivable, many enterprises have the problem of poor risk awareness. The development process of the enterprise is bound to produce accounts receivable, if the enterprise does not do a good job of analyzing accounts receivable, it is difficult to achieve the predetermined development goals, or worse, it will affect the development of the enterprise. In terms of the current status of enterprise accounts receivable management, the problem of weak enterprise risk awareness is the most common problem, because most of the enterprises in order to gain a foothold in the fierce market competition, the blind use of credit sales means, making the enterprise frequent bad debts, bad debts, which seriously threatens the survival and development of enterprises, greatly reducing the viability of enterprises.

2. Problems with credit policy development

Enterprises want to maximize the role of credit means, must establish a reasonable and effective credit policy, in order to make the development of enterprises better, and vice versa, will affect the normal operation of enterprises. From the current form of view, enterprise credit policy is unreasonable mainly exists in these three aspects, first, in the development of credit policy, not according to the characteristics of the current customers to formulate a separate category. Secondly, there are limitations in the application of credit policy, such as the unreasonable application of credit policy when the market situation is bad, and blindly relax the requirements for customer credit. Thirdly, the credit repayment policy is not perfect, due to the failure to provide customers with certain repayment incentives, resulting in customers do not take the initiative to repay the awareness of the customer, and the longer the customer repayment time, the greater the risk of the enterprise, the enterprise's liquidity is also the more nervous.

3. Slip-ups in contracting

In the course of business, in order to increase product sales, enterprises often reach oral sales agreements with customers, and do not put into practice the details of time, amount, preferential policies and so on in the form of contracts, which leads to the phenomenon of overdue accounts receivable occurs frequently. Moreover, it is also common for companies to sign contracts without scrutinizing the contractual terms and conditions. This leads to the details of the goods such as variety, price, time, place, payments and other errors, the emergence of these errors make the later collection work more difficult, aggravating the difficulty of accounts receivable management. What's more, the enterprise may also fall into the crisis of contract trap because of the contract mistakes, the old bad customers can use it as an excuse for not repaying, so that the enterprise accounts receivable recovery is more and more difficult, more and more accounts receivable, which will take up a large part of the enterprise's cash flow, affecting the development of the enterprise.

(ii) Effective measures to strengthen enterprise accounts receivable management

1. Raising risk awareness in enterprises

In order to ensure the sustainable development of enterprises, enterprises should improve their own risk awareness, so as to ensure that the management of accounts receivable in a more reasonable and effective, the economic interests of enterprises can also be greater protection. In this regard, we can start from the following three aspects to improve enterprise risk awareness, first, business leaders can not be arbitrarily implemented due to the development needs of credit sales, should be in the development of the market and the actual situation of the enterprise, a comprehensive scientific and reasonable analysis, in order to avoid the increase in accounts receivable caused by incorrect credit sales means. Second, business leaders must be clear about the principle of buying and selling, the buyer delivers all the money of the purchased products, the transaction is considered complete, so as to strengthen the enterprise's management of receivables, so that the risk of the transaction is reduced. Third, timely in the enterprise to the enterprise staff propaganda accounts receivable for the enterprise risk, so that the enterprise staff can understand the existence of credit transactions and the advantages and disadvantages of the impact of enterprise development, by improving the staff personal risk awareness, strengthen enterprise management, so as to protect the economic interests of enterprises.

2. Establishment of a rational and effective credit policy

Enterprise credit policy not only affects the development of credit transactions, if the enterprise completely disable the credit mode, then the enterprise will certainly not be able to meet the requirements of the expected development plan, therefore, appropriate credit transactions are necessary. Companies can evaluate the credit rating of their customers by developing a credit policy as a way to improve the effectiveness of accounts receivable management. Therefore, in order to be able to better promote the sustainable development of enterprises, enterprises should fundamentally formulate reasonable and effective credit policies, and pay attention to the following three points in the formulation of credit policies. First, in accordance with the market development and the actual situation of the enterprise, formulate a credit policy that meets the market as well as the requirements of enterprise development. Second, in accordance with the characteristics and performance of the production of products, the development of credit policies that can better help product sales and market expansion, in order to ensure that the enterprise maximize economic benefits. Third, enterprises in the development of credit policy should pay attention to both uniformity and relevance, that is to say, not due to poor market conditions and reduce the requirements of the credit policy, to unify the credit policy, at the same time, the enterprise should be developed for different customers to meet their credit policy, so as to make the credit policy better for the service of credit transactions, in order to ensure that the credit transactions successfully completed.

3. Do a good job of gatekeeping sales contracts

Signing a contract is to protect the interests and rights of both parties to the fair and equitable implementation of the transaction process, the signing of the sales contract is a very important part of the transaction process between the enterprise and the customer, especially when trading on credit, the enterprise should pay more attention to the development of the sales contract of the various treaties, the detailed development of the details on the varieties, prices, time, location, payment on behalf of the item, because this will directly lead to the receivable Whether the accounts receivable can be collected in time, whether it will affect the economic interests of the enterprise. Contract formulation and signing of the following three main points of attention, first, correct the attitude of signing, both sides to sign the contract attitude should be good, not due to cumbersome processes using verbal agreements, because the verbal agreement does not have the effect of the contract before the contract is signed to the details of the contract should be repeatedly checked and verified, so as to achieve the details of everything. Secondly, when reviewing the contract, once a problem is found, no matter it is an invisible problem or any other problem, both parties should communicate in time to make sure that the problem is solved perfectly, so as to carry out the subsequent communication and cooperation in a better way. Third, after the conclusion of the contract, the enterprise should do a good job in the custody of the contract, records and other work, in the subsequent transaction process, all must be based on the contract, in accordance with the contract to fulfill the corresponding responsibilities and obligations.