A Study On Risk Management Of Account Receivable For Export Enterprises

Since the adoption of the Refor m and Opening-up Policy, China has obtained tremendous achievements in her import and export industries, which have constituted a great contribution to the nation's economy. By 2004, China's import and export total had already risen to th ird place in worl d rankings, reaching the one trillion USD milestone for the first tim e in the nation's history. Then in 2010, with 1.5779 trillion USD in exports or 2.9728 trillion USD inimports and exports combined, China surpassed the United States and Germany and became the undisputed world leader in international trades.However, with exports growing rapidly, the amount of unpaid accounts receivables overseas also accumulated at unprecedented speeds. International trade is hallmarked with various risks, such as national politics risk s, credit risks, operations risks, transactions risks, exchange rate risks, etc., all of which jeopardize the survival and growth of export-based com panies. Therefore, how to collect paym ents in a safe and timely manner has become a critical issue for scholars and managers alike.This paper attempts to find, by means of deductive research and positivistic case analysis, an effective way to the tim ely and safe collection of overseas paym ents, putting into consideration all the operational details of the export industry . The following is a summary of main works which have been done in this paper.First, a prelim inary survey and evaluati on mechanism, or Pre-Process Forecast System, must be established to control foreign trade risks. Being able to forecast risks is a prerequisite for the effective prevention of said risks. We must use the advanced, scientific c redit-management system to assess the risks of importers and their respective countries, so that the riskiness for future transactions can be systematically analyzed and predicted, thereby allowing ri sk-bearers to make the right choices and take necessary precautions.Secondly, a control system that prevents foreign trade risks during the entire transaction, namely, a During-Process Control System, should be established. Credit management tasks should always be taken throughout the exportation process, and all these steps must be strictly controlled in order to prevent any possible problems.Thirdly, an accounts receivable management and collections mechanism, or After-Process Remedial System, ought to be set up and perfected. It is true that for as long as the industry exists, accounts receivables, and consequently the risk o f uncollectible debts, will be present. But should debts become overdue, we must take decisive actions to minimize losses.Studies in this paper serve as a systematic guide for China's expo rt-based enterprises in their attempts to collect overseas payments. Depending on their distinctive business traits and unique situation, these companies may be able to establish a risk-proof system that covers every loop and phase of their operations, so that they can predict risks beforehand, eliminate risks during the process, and minimize losses afterwards.