Financial Accounting

Posted by Melda Research on May 15th, 2019

10From the examination of Thompson Toys Inc. Account receivables, there is adequate evidence that there are significant challenges in the department. Debts owed to the company are not paid in times, with the delays lasting months, an attribute that that resulted in the company resulting in other strategies to resolve their cash issue (Thompson Toys Inc, n.d). One of the issues that have resulted in the complexities that are faced in the company’s account receivables is the evident human resources challenges. Other than Thompson’s eldest daughter who comes later on in the company and who graduated with finance major, there is no indication of possession of skills needed to work in the accounts receivable department. Issues of accessing systems and skills necessary in streamlining their processes increase the inefficiencies that are found in the department (Michalski, 2012). The problem with this situation is that issues as delays in sending invoices and bad data in the invoice will result in the delays in receiving the payments.

The goal on how the challenge can be resolved is in recruiting competent staff to work in the account receivable department. The assertion, in this case, is that the accounts receivable department is one of the most important departments in a company considering the role it plays in ensuring there is continuous access to funds (Michalski, 2012). Thus by ensuring that there is the effective recruitment of skilled personnel, it will be possible to ensure that there has been the introduction of systems and platforms that streamline the department’s duties and consequently ensuring that there is overall effectiveness in the company’s accounts receivable.

The short-term solution to the identified issues encompasses ensuring that there has been the recruitment of an adequate staff in the department and that they have access to the resources they need to be effective furthermore efficient in their duties (García‐Teruel & Martínez‐Solano, 2010). Through this, the company is going to ensure that its clients receive the invoices on time and without errors, ensuring that they get paid time.

The long-term solution will encompass the implementation of a penalty system for the cases of late payments in the accounts receivable department. While many reasons can do business to fail to make timely payments as cash flow challenges to issues of turnover in their accounting department, lack of a penalty system in the accounts receivable leads to an increase in the case of late payment. The system for penalties designed by the accounts receivable team can entail an assortment of strategies as for late fee charge to stopping credit to the defaulting businesses until they make their payments in full (García‐Teruel & Martínez‐Solano, 2010). In some cases that fall under the classification of extreme, it may make it imperative that the company ceases offering credit to the defaulting company.

The main reason that Thompson Toys Inc has been compelled to use loans to finance its operations is that there are significant inefficiencies in the accounts receivable leading to payment delays by even months. By ensuring that they address these challenges faced in their accounts receivable department, they do not need to take short-term loans (Michalski, 2012). Ensuring that they have funded and ensured that the accounts receivable department enjoys the utmost efficiency, Thompson Toys Inc will have continuous access to finances and thus will not have to keep on paying interest on loans that eat into their profitability.

References

García‐Teruel, P. J., & Martínez‐Solano, P. (2010). A dynamic approach to accounts receivable: a study of Spanish SMEs. European Financial Management, 16(3), 400-421.

Michalski, G. (2012). Accounts receivable management in nonprofit organizations. Zeszyty Teoretyczne Rachunkowości, 68(124), 83-96.

Thompson Toys Inc (n.d). Cash budgeting and financial planning.

Sherry Roberts is the author of this paper. A senior editor at MeldaResearch.Com in Top Cheap Essay Writing Services. If you need a similar paper you can place your order from cheap reliable essay writing service services.