Shenzhen JIT technology: Account receivable management issues

In March 2012, the president of Shenzhen JIT Technology Co., Ltd., a small electronics manufacturing company in Shenzhen, China, was facing a problem with the company's uncollected accounts receivables (AR). The company had a high level of AR, and the time it was taking to settle these accounts was much longer than the industry average, which had led to financial difficulties. The company had formalized its sales commission structure to include a system of rewards and penalties related to the collection of outstanding AR payments, but these new rules had not solved the AR problem. The president needed answers: What was the main reason for the company's high AR and receivable turnover? What was wrong with its AR policy? What specific approach for quantity management of AR would resolve these issues?

Suggested questions

Q1: Why did Li become distressed when he read the figures describing the company's increased profit and increased AR?

Q2: How did JIT Technology manage its AR before revisiting the policies and procedures for the marketing staff at the end of 2009? What is wrong with the company's AR management?

Q3: What problems did JIT Technology face in revisiting the policies and procedures for the marketing staff?

Q4: What kind of quantitative analysis approach do you think should be used by JIT Technology to assess its marketing staff's AR collection performance?

Q5: What measures can JIT Technology take to speed up the collection of AR? What should JIT Technology do in the future?