The Problems And Countermeasures Of Internal Control On Revenue And Collections Cycle For Qingdao H Group

With the financial crisis broke out and globalization of world economy, it become more and more difficult to develop for an enterprise when facing lots of competitors. With more and more new technology and new sciences come into force and violent development for information technology, a company which want to develop rapidly and smoothly must strength internal control system to enhance core competitive ability. Revenue and Collection cycle which is the source of revenue for a company become more and more important in such a situation. This article point out the weaknesses in the Revenue and Collection Cycle of Qingdao H Group with using internal control theory and propose reasonable solutions to resolve such problems. This article will help a company to ensure the completeness of revenue record, ensure reasonable accounting information, perfect internal control system on revenue and collection cycle, and enhance sales revenue and market share.The main issues in Revenue and Collections Cycle internal control system of Qingdao H GroupQingdao H Group was founded in 1984. During 20 years continuous development, Qingdao H Group has become an international group with good reputation.Generally speaking, Qingdao H Group has established a series of internal control system. However, there are still some weaknesses in revenue and collection cycle:1. The sales rebates were calculated by finance departments of headquarter of Trading Company and Sales Company based on the sales data extracted from sales branches. Mistakes and frauds will occur during the calculation process, for example, the staff responsible for the calculation colluded with sales dealers to adjust the amount of sales rebate which will harm the benefit of the Group. 2. Invoices not match with distribution voucher, the logistics of goods not match with vouchers and the internal transactions not been eliminated in time during the executing for purchase by headcounter sales by branches policy.3. Sales promotion policy did not achieve the goals to increase sales volume for the fraud occurred during the execution, which led to high stocks level. Moreover, the expense of building exhibition stands was not reasonable which led to waste of resources.4. Many disbursements were paid before returned goods were stored during the execution of sales return policy. Some of salespersons colluded with dealers to cook up return applications and cheated to obtain the disbursement for the returns.Analysis for the problems of internal control on Revenue and Collections CycleBased on the current situation of Internal Control on Revenue and Collections Cycle of Qingdao H Group, this article analyzed the problems systemically by using internal control theory:1. analyzed the weaknesses of group structure and HR policies based on the control environment;2. analyzed the pressure facing by financial staff and the risks of purchase by headcounter sales by branches policy based on the risk assessment;3. analyzed the shortage of sales data statistic information system and the block of communication channel based on information and communication;4. analyzed the disadvantage that the financial managers of sales branches did not concerned the internal audit by using monitoring;5. analyzed the shortage of key control points on revenue and collection cycle by using control activities.The countermeasures of internal control on Revenue and Collections Cycle for Qingdao H GroupAccording to the above analysis, this article proposed the following countermeasures to resolve the problems: 1. point out the objects and basic principles for the internal control system on revenue and collection cycle, which is the direction of the internal control system construction.2. for the control environment, the group construction should be optimized, establish accounting center to manage the business of sales companies, perfect HR policies, enhance the competence of the finance staff, enhance the training program for finance staff, urge finance managers of sales companies to enhance the consciousness of internal control on revenue and collection cycle.3. for the information and communication, increase the investment to develop a sales rebate calculation system which connected with ERP system as soon as possible. The new sales rebate calculation system can improve the efficiency and accurateness for the calculation. For the monitoring, the finance manager must improve the consciousness of internal audit and pay more attention to sales data reported to headquarter. The calculation of sales rebate is not only the responsibility of headquarter, the finance manager of sales companies must monitor the whole process of the calculation.4. for the control activities, the key control points among the day-to-day operating business should be paid more attention. Proposed more specific control measures on sales rebate calculation, internal transaction elimination, and sales promotion approval according to the actual situation of Qingdao H Group.The application of Control Self-assessment (CSA) fro strengthening the internal control on Revenue and Collections CycleThis article only proposed countermeasures according to current situation of Qingdao H Group. In order to realize dynamic assessments of the internal control to resolve the new problems and new situations encountering in the future, this article introduces the application of Control Self-assessment on revenue and collection cycle internal control system. Control self-assessment (CSA) is a way to achieve the goals of the companies to control the risk of the effectiveness of internal control systems and the appropriateness of self-assessment methodology. In this article, corresponding meeting which based on the procedures is proposed for Qingdao H Group based on the procedures to inspect the execution of revenue and collection cycle internal control system. This method would be conducive to the application for the revenue and collection cycle internal control system.Through the study of the current situation and problems of Internal Control on Revenue and Collections Cycle for Qingdao H Group, this article proposed constructive countermeasures, which can make sure all the operating activities approved before executing, reduce the risk of mistakes and frauds, enhance the management efficiency, make sure the preparation of financial statements in line with the general accepted accounting principles, and assure the quality of financial reports. At the same time, the study of this article will also benefit other companies which in the same industry with Qingdao H Group. On the other hand, the study of this article also makes a useful research. In order to gain more profit and maintain a stable development, an enterprise must establish integrated internal control system.