Ineffective accounts receivable management and solution in case of Hai Son Construction Material Company Limited

Abstract

Working capital management is very important for a company, especially for manufacturing, trading and distribution companies, because it has a significant impact on the profitability and liquidity of the company (1). As one of the three main elements of working capital, receivables also have an impact on the performance of the business. This is the most important source of ex ternal financing of enterprises (2) and also a source of support for buyers (3). As a result, managers can use accounts receivable as an instrument to increase the revenue profitability, and customer relationship. However, the amount of receivables that are too high can lead to many downsizing effects on the company (4). So, keeping receivables in optimum amounts is an important financial issue. Management of accounts receivable is also management of trade credit (8). Therefore, a specific and efficient trade credit policy is an important factor to improve the management of accounts receivable and working capital of the company. The thesis is about Hai Son's inefficient account receivable management, in which specification of the ineffective trade credit policy. This leads to inefficient cash conversion cycles and working capital management has a negative impact on the profits. Research will show the factors that make this inefficiency as well as its financial results. After considering all the aspects that lead to the problem, the thesis then aims to find and advise on possible alternatives and practices to improve the company's management of receivables.