| Credit management has a long history and exerts an even more importance to companies with the wide application of selling on credit business. Many companies take the advantages of selling on credit business. While the risks created by selling on credit business are often ignored by sellers. Chinese companies still lag far behind of western companies in the field of accounts receivable(AR) management, a necessary evil produced by selling on credit business. Accounts receivable(AR) causes great losses to Chinese companies as they pay little attention to AR management in selling on credit business. The speed of collection of AR directly affects capital turnover and cash flow, even poses threat to the survival of those companies. Advanced credit theory and management knowhow have been introduced in recent years, resulting in improvements in credit management in Chinese companies. However, Chinese companies apply same credit management modes in different industries. Thus, great dangers are created by this crude mode of credit management.With the arrival of internet era, companies have gradually accept electronic commerce. While the special characteristics of electronic commerce industry exert challenges to companies in handling credit management with both traditional brick-stone companies and electronic commercial companies.This paper generalizes current financial analysis applied to enterprise credit management, and, then points out their deficiencies. It suggests that proper credit management modes should be applied to different industries. Through the marriage of current financial analysis system with suggested modified cash flow statement analysis, an effective credit evaluation system could be set up in selling on credit business, form preventive and process control to post-event control. This method will reduce risks brought by selling on credit business, sharpen competitive edge of Chinese companies, and ultimately promote economy development in China.. |
PDF Full Text Request