Case Study Description of Accounts Receivable Valuation
Accounts receivable (or trade receivable) are amounts owed by a firm's customers as a result of credit sales or services on account. Receivables are also originated by financial transactions such as the granting of loans. For example, most of the receivables on banks' balance sheets are loans receivable and interest receivable. Receivables are assets of a firm because it expects to convert them into cash in the near future, with a high degree of probability. Most receivables are due in less than one year and are classified as current assets in the balance sheet. Receivables with maturities exceeding one year are classified as noncurrent assets. This note explains how to account for receivables. The reader will learn the allowance method for uncollectible receivables and the way to record value added tax. The note covers concepts such as bad debt expenses, allowance for bad debt, write-offs, recoveries and the aging analysis for the estimation of bad debts.
Swot Analysis of "Accounts Receivable Valuation" written by Fernando Penalva, Marc Badia Castella includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Receivables Receivable facing as an external strategic factors. Some of the topics covered in Accounts Receivable Valuation case study are - Strategic Management Strategies, Corporate governance, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Accounts Receivable Valuation casestudy better are - – talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing energy prices,
there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Accounts Receivable Valuation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Accounts Receivable Valuation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Receivables Receivable, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Receivables Receivable operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Accounts Receivable Valuation can be done for the following purposes –
1. Strategic planning using facts provided in Accounts Receivable Valuation case study
2. Improving business portfolio management of Receivables Receivable
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Receivables Receivable
Strengths Accounts Receivable Valuation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Receivables Receivable in Accounts Receivable Valuation Harvard Business Review case study are -
Successful track record of launching new products
– Receivables Receivable has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Receivables Receivable has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Training and development
– Receivables Receivable has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Accounts Receivable Valuation Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– Receivables Receivable has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Receivables Receivable to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Receivables Receivable has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Accounts Receivable Valuation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Receivables Receivable in the sector have low bargaining power. Accounts Receivable Valuation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Receivables Receivable to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Receivables Receivable is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Receivables Receivable in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Receivables Receivable digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Receivables Receivable has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Ability to recruit top talent
– Receivables Receivable is one of the leading recruiters in the industry. Managers in the Accounts Receivable Valuation are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Receivables Receivable is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Fernando Penalva, Marc Badia Castella can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy in the Accounts Receivable Valuation Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Cross disciplinary teams
– Horizontal connected teams at the Receivables Receivable are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses Accounts Receivable Valuation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Accounts Receivable Valuation are -
High operating costs
– Compare to the competitors, firm in the HBR case study Accounts Receivable Valuation has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Receivables Receivable 's lucrative customers.
Slow to strategic competitive environment developments
– As Accounts Receivable Valuation HBR case study mentions - Receivables Receivable takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Receivables Receivable needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Aligning sales with marketing
– It come across in the case study Accounts Receivable Valuation that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Accounts Receivable Valuation can leverage the sales team experience to cultivate customer relationships as Receivables Receivable is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study Accounts Receivable Valuation, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Accounts Receivable Valuation, is just above the industry average. Receivables Receivable needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Products dominated business model
– Even though Receivables Receivable has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Accounts Receivable Valuation should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Receivables Receivable has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Receivables Receivable has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Accounts Receivable Valuation HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Receivables Receivable has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Receivables Receivable has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Receivables Receivable even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Opportunities Accounts Receivable Valuation | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Accounts Receivable Valuation are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Receivables Receivable to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Receivables Receivable to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Receivables Receivable can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Receivables Receivable is facing challenges because of the dominance of functional experts in the organization. Accounts Receivable Valuation case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Receivables Receivable can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Accounts Receivable Valuation suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Receivables Receivable can use these opportunities to build new business models that can help the communities that Receivables Receivable operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Receivables Receivable can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Receivables Receivable can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Receivables Receivable in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Receivables Receivable can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Accounts Receivable Valuation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Receivables Receivable in the consumer business. Now Receivables Receivable can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Receivables Receivable has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Accounts Receivable Valuation - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Receivables Receivable to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Receivables Receivable can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Receivables Receivable can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Learning at scale
– Online learning technologies has now opened space for Receivables Receivable to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats Accounts Receivable Valuation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Accounts Receivable Valuation are -
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Receivables Receivable needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Receivables Receivable has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Receivables Receivable needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Receivables Receivable with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Receivables Receivable demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Receivables Receivable can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Accounts Receivable Valuation .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Receivables Receivable in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Receivables Receivable.
High dependence on third party suppliers
– Receivables Receivable high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Receivables Receivable business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Receivables Receivable can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing wage structure of Receivables Receivable
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Receivables Receivable.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Weighted SWOT Analysis of Accounts Receivable Valuation Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Accounts Receivable Valuation needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Accounts Receivable Valuation is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Accounts Receivable Valuation is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Accounts Receivable Valuation is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Receivables Receivable needs to make to build a sustainable competitive advantage.
