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 - – challanges to central banks by blockchain based private currencies, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, technology disruption, there is backlash against globalization, increasing household debt because of falling income levels, geopolitical disruptions,
central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
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.
Diverse revenue streams
– Receivables Receivable is present in almost all the verticals within the industry. This has provided firm in Accounts Receivable Valuation case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
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.
Ability to lead change in Finance & Accounting field
– Receivables Receivable is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Receivables Receivable in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Learning organization
- Receivables Receivable is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Receivables Receivable is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Accounts Receivable Valuation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
Effective Research and Development (R&D)
– Receivables Receivable has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Accounts Receivable Valuation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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 -
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.
Low market penetration in new markets
– Outside its home market of Receivables Receivable, firm in the HBR case study Accounts Receivable Valuation needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Receivables Receivable supply chain. Even after few cautionary changes mentioned in the HBR case study - Accounts Receivable Valuation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Receivables Receivable vulnerable to further global disruptions in South East Asia.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Accounts Receivable Valuation, in the dynamic environment Receivables Receivable has struggled to respond to the nimble upstart competition. Receivables Receivable has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Receivables Receivable is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Accounts Receivable Valuation can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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 -
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.
Better consumer reach
– The expansion of the 5G network will help Receivables Receivable to increase its market reach. Receivables Receivable will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Low interest rates
– Even though inflation is raising its head in most developed economies, Receivables Receivable can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Creating value in data economy
– The success of analytics program of Receivables Receivable has opened avenues for new revenue streams for the organization in the industry. This can help Receivables Receivable to build a more holistic ecosystem as suggested in the Accounts Receivable Valuation case study. Receivables Receivable can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
Loyalty marketing
– Receivables Receivable has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
Leveraging digital technologies
– Receivables Receivable can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Developing new processes and practices
– Receivables Receivable can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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.
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.
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 -
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.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Receivables Receivable in the Finance & Accounting sector and impact the bottomline of the organization.
Environmental challenges
– Receivables Receivable needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Receivables Receivable can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Shortening product life cycle
– it is one of the major threat that Receivables Receivable is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Receivables Receivable will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
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.
Stagnating economy with rate increase
– Receivables Receivable can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Accounts Receivable Valuation, Receivables Receivable may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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 .
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.
Regulatory challenges
– Receivables Receivable needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
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.